High private tech valuations the result of investors betting against doomed public incumbents unable to innovate
Bubble, My Ass: Some Unicorns Might Be Overvalued, But All Dinosaurs Gonna Die. — Summary: pundits argue billion-dollar startups are overvalued, but few realize … Tweets: @mdudas , @mitchellharper , @valaafshar , @zack and @abatalion Tweets: Mike Dudas / @mdudas : 15-20x public P/E multiples too high, as waves of tech Unicorns are going to eat public Dinosaurs: https://t.co/RsGzBZ9cU6 via @davemcclure Mitchell Harper / @mitchellharper : An interesting post by @davemcclure on Unicorns and the S&P 500 dinosaurs: http://medium.com/... Vala Afshar / @valaafshar : Dear dinosaur companies, startups are going to eat your lunch and here's why: http://medium.com/... http://twitter.com/... Zachary Rosen / @zack : Epochal technology booms are more massive than we can comprehend but take longer than investors like to play out https://medium.com/... Aaron Batalion / @abatalion : Another great @davemcclure post. Innovation is indeed accelerating. http://medium.com/... Also thankful @medium allows only 1 font color. Expand More For Next 2 Unexpand More For Next 2
Context & Ripple Effects
This Medium essay is the bull pole of the 2015 unicorn-bubble fight: Dave McClure's argument is that billion-dollar private marks look sane once you price in the death of the public incumbents they displace — hence his cited comparison of 15-20x P/E multiples against the S&P 500 'dinosaurs.' It landed mid-debate: weeks earlier Bill Gurley had flagged the sell-off and warned the cycle 'where growth is valued more than profitability' may end (his unprofitable-unicorn warning), while Forbes countered months later that sustainable businesses meant the boom had just begun.
What makes the piece worth revisiting is how its core bet — private valuations as short positions on incumbents — aged into a liquidity question rather than a bubble verdict. A decade on, CB Insights counts a record 1,200 VC-backed unicorns still unexited, with fewer than 30% of 2021 vintage raising again in three years.
First-order effects
- Public-market investors holding S&P 500 tech incumbents are implicitly underwriting the other side of McClure's trade — if the displacement thesis is right, their multiples compress while private holders capture the upside.
- VCs setting private marks at disruption premiums face immediate mark-to-market risk whenever public comparables fall, exactly the pressure Gurley identified in the 2015 sell-off.
Second-order effects
- When the bet wobbles publicly, exit windows close first: Fortune reported floundering tech stocks raised questions about the IPO process itself, stranding IPO-bound unicorns whose valuations assumed the displacement premium.
- Non-tech public companies get a cheaper hedge: 500 Hats argued incumbents would increasingly buy unicorns outright (acquisition as disruption insurance), converting the bear case into an M&A bid floor.
Third-order effects
- If the pattern holds, growth-stage value structurally migrates to private markets — companies stay private through the years public shareholders would once have owned them, and the 'bubble' resolves as an exit backlog rather than a crash.
- The unresolved decade-long experiment means neither camp has been vindicated: the incumbents did not all die, but the private-public valuation gap became permanent infrastructure, forcing every subsequent funding cycle to price illiquidity explicitly.
The trend: Private markets have absorbed the pricing of technological disruption that public exchanges used to carry, turning unicorn valuations from a bubble question into a standing liquidity problem.