Reply to post: Surplus capital has to go somewhere

'$5bn for Slack?! I refuse to pay!' You don't pay – and that's its biggest problem

Naselus

Surplus capital has to go somewhere

Unicorn valuations have nothing to do with the company itself beyond the fact that it's in 'tech'. Tech is presently where surplus capital gets dumped.

Basically, we have Unicorns because everyone outside the C-suite hasn't had a serious pay rise in 20 years. This means there's tons of floating capital desperately seeking a return. The low-risk returns are mostly already taken, but there's still a lot of cash left over looking for someone to borrow it. Tech startups meanwhile desperately want to borrow lots of money, because they don't care about building a profitable company - they just want to get known enough to be sold to Google.

Basically, Slack or Uber's massive 'on paper' valuations are a result of no-one outside the C-suite has had a proper pay rise in 25 years (and you can see the same things happening in the 1880s and 1920s, too).

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