RudeVC: There’s a party goin’ on [not] here

Mar 25, 2014
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.megadeals_ao

There’s a party goin’ on right here
A celebration to last throughout the years
So bring your good times, and your laughter too
We gonna celebrate your party with you

Kool & The Gang probably did not have the stock market in mind when their hit song reached #1 on the Billboard Hot 100 exactly 33 years ago last month. But apparently, Celebration is booming on trading floors and conference rooms in many of the world’s financial hubs.

Last month I wrote about the eerie similarities between 2013 and 1998 (record-breaking venture financings, slow growth in the emerging economy, loose credit). The implication, if history follows a pattern, is that 2014 may come to resemble 1999.

Evidently, we’re in a period of financial celebration in the tech sector. Whether the word ‘bubble’ is the appropriate term is a debate for the experts, but it’s certainly not a normal valuation environment. M&A activity is heating up, both in quantity and in eye-popping headlines (doesn’t the acquisition of Instagram seem whimsical compared to WhatsApp now?).

Euphoria appears to be returning to tech IPOs too. Just the other day, AO World went public on London’s AIM stock exchange. AO World, which stands for Appliances Online and was founded on the back of a pub dare, is an online retailer that — surprise — sells applicances online. It’s basically the UK’s version of Darty.com. Nothing ground-breakingly innovative, but the company undoubtedly excels in its operational execution. The eye-popping part is AO’s meteoric rise in its stock price on IPO day, soaring 44% up to nearly £1.7 billion in valuation. In fiscal 2013, AO generated 8.95M£ of Ebit on 275M£ of total turnover, so the AIM valued AO at a whopping 190 times trailing EBIT.

Has FOMO (Fear Of Missing Out) come to stand for France Often Missing Out ?

If today’s celebratory financial climate is news to you, you are not alone. Many of my professional contacts working in France’s financial sector reacted with astonishment when I recounted the story of AO World’s IPO.

No, we have other topics on our mind here these days, like the municipal elections, the government’s meddling in the sale of SFR, and the confusion surrounding the launch of the PEA-PME (the panacea meant to cure the capital scarcity for French SMEs which is rapidly becoming a political imbroglio). Meanwhile, while software is bringing disruption to every sector of the economy, funding for the ambitious French sovereign cloud endeavor is doled out to consortiums of incumbents rather than to agile startups, as Tariq Krim reminded us in his scathing piece in Le Point last week.

To borrow from Fred Wilson’s insightful musings on the tech bubble question, this year may well be a great time to be in the VC and startup business globally. I just hope France gets invited to the party before it’s over.