Startup technology companies blessed with billion dollar valuations better buckle up. It’s going to be a bumpy ride in the coming months for the so-called ‘unicorn’ set, said Kevin Kinsella, founder of Avalon Ventures. ‘I think the valuations of those companies have become so outlandish given the businesses that they have that I don’t think it’s sustainable,’ said Kinsella. Avalon specializes in the formation, financing and development of early-stage companies. Some of the companies Kinsella has backed include Onyx Pharmaceuticals, Vertex Pharmaceuticals, Synaptics, and Vocera Communications. Kinsella was also the founding chairman of Athena Neurosciences, Aurora Biosciences, Landmark Graphics, NeoRx, X-Ceptor and Sequana Therapeutics. Kinsella said hedge funds and private equity shops are stuffing capital into private companies like Uber and Airbnb because they ‘don’t have interesting alternative investments to make.’ Furthermore, many of the fund managers investing in these overvalued non-public companies are doing it despite being fully aware of the collapse of the Internet bubble over a decade ago. ‘If you can time momentum and get in and get out at the right time then God bless. But if you can’t do it, you may wind up in the bottom of a pit,’ said Kinsella. ‘I think it’s highly speculative.’ As to what pops this particular bubble, Kinsella said it will likely be a number of factors including the recent Chinese devaluation of its currency and higher interest rates in the United States.
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