Silicon Valley start-up mentor downplays fears of US tech bubble but says new firms may face higher expectations

Late-stage start-ups may find it harder to list, while venture capitalists may demand quicker and bigger returns on their investment, says 500 Startups partner.

PUBLISHED : Thursday, 15 October, 2015, 10:12am
UPDATED : Thursday, 15 October, 2015, 6:32pm

Fears of a technology bubble in the United States may be overblown, but while the prospects of new stock listings there be winding down, cash rich big players will continue to buy up smaller companies, according to a Silicon Valley venture partner.

Robert Neivert at venture capital seed fund and start-up accelerator 500 Startups said concerns that flared at the end of August over falling stock prices for tech firms in both China and the US did not signal trouble ahead in terms of start-up funding.

“There’s a lot of people who that say as the tech [stocks] come down and the initial public offering prospects come down, then the funding will ebb and basically flow back out, but a large part of tech is actually acquisition. In fact, there’s only a handful of IPOs,” said Neivert.

Neivert pointed to the vast cash reserves of big names such as Apple, Google and Facebook, which allowed them to keep actively acquiring other tech firms.

Apple reported in July that it held US$203 billion in cash reserves, while Google has US$90 billion stashed away. In July 2014, Facebook closed a deal to buy virtual reality gaming company Occulus Rift for US$2 billion.

Neivert, a serial entrepreneur who has already built eight companies, said the large inflow of capital into tech start-ups in the past few years would lead to higher expectations, which may demand a number of adjustments from those on the receiving end of funding.

One area start-ups might feel the pinch would be from venture capitalists starting to demand firms reduce the speed at which they spend cash, as well as requiring companies to become profitable more quickly and generate more revenue in proportion to the amount of funding given.

Neivert was in Hong Kong to conduct workshops and give talks on funding and pitching for start-ups to support Swire Properties’ start-up accelerator Blueprint.

Rui Ma, 500 Startups partner for Greater China, said Hong Kong start-ups could be affected by conditions in the US.

“Hong Kong wasn’t a super established eco-system to begin with, and didn’t have a lot of locally established capital, so relatively speaking any sort of external shock will be felt more keenly,” said Ma.

She said that tech media on the Chinese mainland keeps a close eye out for bubbles overseas, but that valuations of the country’s tech start-ups could be supported by government intervention if it chose to support what at present still represents a small part of the national economy.

500 Startups is planning to hold an event in Hong Kong next year to help match international investors, including those from Silicon Valley, with local start-ups to encourage the development of the city’s start-up ecosystem, it said.

Ma and Neivert said the local ecosystem had grown significantly over the past three years with the opening of more accelerators and co-working spaces, which have served to create a community.