Y Combinator's Sam Altman made a gutsy bet with critics 5 years ago to prove there wasn't a startup bubble. The reason he lost shows a disconnect between public and private markets.

• Former Y Combinator president Sam Altman bet TechStar's Michael de la Maza that all the talk of a startup investing bubble in 2015 was overhyped.
• The wager consisted of three parts, including his predictions for where certain mature, middling, and young startups would be by 2020. To win, all three predictions would have to be correct.
• Although Altman's ambitious targets were easily cleared on two predictions that covered private startups, his prediction about public startups was a clear miss. As per the bet, Altman will donate $100,000 to a charity of de la Maza's choice.
• In an interview with Business Insider, Altman said he doesn't feel as strongly in 2020 that bubble talk off base, but he is interested to see how startups like Airbnb and SpaceX perform as they prepare for public offerings rumored for this year.
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Depending on who is speaking, the tech industry is in a bubble, has been in a bubble, or is growing perfectly normally for an innovative industry. Bubble talk, like Teslas and Patagonia vests, is inescapable in Silicon Valley.

Back in 2015, a heyday even by Silicon Valley standards, then-Y Combinator president Sam Altman found the bubble talk deafening. As the head of a prominent startup accelerator, Altman had a front-row seat to some of the hottest startups coming out of its Mountain View program, and he thought the bubble talk was way overblown.

"That was back in a time when it was really nonstop," Altman told Business Insider. "Every other article was about a bubble or said we were in a bubble. I felt very strongly that startup investing was not, but I didn't have the specific numbers so it was hard to say who was right and who was wrong."

So Altman publicly proposed a bet with the first VC willing to take the other side, that fears of the bubble were overblown. The wager consisted of three separate predictions about startup valuations over the next 5 years, and Altman would have to get them all right to win.

Michael de la Maza, a mentor with early-stage investment firm TechStars, took Altman's action.

The first part of the bet was that the top six high-profile, high-growth startups would be worth at least $200 billion in aggregate, double the 2015 valuations. The second was that some of the top Y Combinator alumni would be worth at least $27 billion in aggregate from just under $9B in 2015. And last was perhaps Altman's most ambitious prediction. He thought the current cohort of startups at Y Combinator in the Winter 2015 class would be worth at least $3 billion in 5 years.

"They were quite dramatic," Altman now says of his 2015 predictions. "If anything, I would have scaled them back. It wasn't a bubble, it was the opposite."

When the clock struck midnight and the world welcomed a new decade, Altman started crunching the numbers to see how his predictions panned out.

"Sometimes the TechStars guy would email me about one startup or another, but other than that I wasn't really thinking about it," Altman said of the bet over the last 5 years.

By New Years Day, it was clear Altman had easily cleared the last two predictions. Stripe, one of the startups called out specifically in his second prediction, was most recently valued at $35 billion alone, but other breakout hits include Coinbase, Instacart, Optimizely, and Docker. Five years on and the Winter 2015 YC cohort is also faring well, with $2.75 billion GitLab leading the pack that includes RazorPay, Atomwise, and Chariot.

But public markets weren't as bullish on the tech companies Altman was tracking, and the top six in 2015 were worth at least $30 billion less than Altman had predicted. Part of that is due to the poor public performances of Uber, Pinterest, and Dropbox in 2019, but Altman also said there was a timing issue that dragged down the collective valuation of the group.

"If everything in the public market had been recently priced, if Airbnb were now public or SpaceX was public, it might be different," Altman said. "They are public-like, but not public yet." Both startups are widely rumored to go public in 2020, but relied on substantial late-stage capital to close out the decade.

As per the bet's terms, Altman will donate $100,000 to an as-of-yet undisclosed charity of de la Maza's choice but still counts the predictions as mostly victorious given the strength of private valuations over the second half of the decade. The next 5 years, though, are tougher to predict.

"I'm not as sure this time," Altman said. "The thing that made me want to do that last time around was this feeling that everyone was saying we were in a bubble and I thought that was wrong and disingenuous for a couple of reasons. This time I don't feel that way."