Microsoft co-founder Bill Gates has advised investors to err on the side of caution when investing in start-up technology, urging investors to change tack and actually look at the company instead of just throwing money at it.
Speaking in an interview to the Financial Times, Gates said: ‘It never should be a case of closing your eyes and saying ‘Oh, it’s a tech company, just throw money at it’. That strategy worked for about two years; now you actually have to open your eyes and look at the company."
The Microsoft co-founder’s comments come in the wake of an apparent cooling in Silicon Valley start-up funding, with the valuations of unicorns – companies that have been valued at more than $1bn – coming under pressure after disappointing flotations from companies such as Box.
Gates told the FT that he expects that the valuations of unicorns to fall over the next two years, but venture capital would remain an attractive long-term asset class – especially with current ultra-low interest rates.
"If you gave me a basket of unicorns, I wouldn’t know right now whether to go long or short. I might go short in the two-year timeframe, but not in the longer timeframe because all it takes is for one or two of those to join the pantheon and your short would make you go bankrupt." Gates said.
"Something that has a chance of 10 per cent-plus returns, even if it comes with a lot of variance, is very attractive in a period where the German long bond has a 1.2 per cent return."
According to the FT, Gates is joining forces with other billionaires to take on the climate change fight. Along with Mark Zuckerberg, Jack Ma, Mukesh Ambani and others, Gates plans to invest in energy start-ups and fund high-risk ventures which would otherwise fall between government funding and traditional venture capital.
