Marc Andreessen: 'We're in a long-term tech bust,' not a bubble
On one side of the ring, Benchmark investor Bill Gurley, who was an investor during the dot-com bubble, has been sounding the alarm that companies are over-valued.
In a few years, Gurley has predicted we'll have a lot of dead unicorns on our hands. ("Unicorn" is the current Silicon Valley term for a startup valued at more than $1 billion.)
On the other side is Netscape founder Marc Andreessen, who cofounded his venture firm, Andreessen Horowitz, in 2009, right after the bursting of the debt bubble sent the economy into a tailspin.
In an appearance at the Fortune Global Forum, Andreessen reiterated that tech is not in a bubble. Rather these valuations are still startingly low for the potential of some of these companies.
"I think we're in a bust. We're in a long term technology bust. I think technology has been undervalued since 2000, and we're still undervalued," Andreessen said. "The entire basket of unicorns is worth half of Microsoft."
In Silicon Valley, people are excited about new tech companies, whereas outsiders - especially the stock market - are still depressed, following the equity bust and then the economic downturn, according to Andreessen.
"The public market just doesn't like tech," Andreessen said.
That's created the situation we see now, Andreessen says, where we have a lot of companies staying private.
For one, there's no incentives to go public because a lot of shareholder bases don't allow companies to continue innovating and evolving who they are. The exceptions are companies like Google (or, Alphabet) and Facebook.
The lack of a warm embrace from the public markets has created three paths to exit. Some will go public, some will get acquired, but some will create more inventive private trading so investors can cash out and other investors can come in.
"The innovation is going to have to come from the private side," Andreessen said.
Andreessen is not the only tech investor calling the current situation a tech bust rather than a tech bubble. Y Combinator president Sam Altman made a similar argument in his own blog post on the tech bust. Altman's argument is similar - just ask Box or Twitter if there is a tech bubble and they'll laugh you out of the room. He also said these humongous late-stage rounds are really more like debt dressed up as equity, so the valuations can become a recruitment tool.