July 25, 2016
NEW YORK, NY – Matthew Stack, founder of the Stack Family Office and a co-founder of XLP Capital, presented at the Opal Financial Group’s Family Office and Private Wealth Management Forum held in Newport, RI on July 18-20. Designed as a meeting ground for some of the most prominent business families in the U.S., Opal Financial Group’s Family Office and Private Wealth Management Conference series focuses on investment trends, opportunities, and collaboration among attendees. On a panel titled “Investing in Technology,” Mr. Stack discussed his extensive experience as an angel and early stage investor in prominent technology companies in the early 2000s. His comprehensive overview of the current state of the private market in technology included discussing its cyclical nature, and his conviction that the technology industry is in a bubble. According to Mr. Stack “angel investing was profitable 10 years ago. Right now, the only way to make wise investments in technology is either through vigorous internal due diligence on the venture side, or through shorts on the public side. We don’t invest in anything that has a website or an app.”
Mr. Stack explained XLP Capital view that technology companies are overvalued. Unicorns are meant to be rare, maybe even unheard of, yet the last two years have seen the emergence of more venture-funded companies with pre-IPO valuations >$1 billion than the previous decade. Mr. Stack, and the investment team at XLP Capital, believe that such valuations are unsustainable and stultifying to public and private funds. Overvaluation of startups practically bars investor exits. The prospect of several multiples on investment that used to characterize the return on venture investing is gone. Nevertheless, unicorns have become abundant.
Mr. Stack also discussed the effects that high valuations of privately-held technology companies have had on family offices. Many family offices are early investors in unicorns. Those who have decided not to exit until the unicorn goes public, now face a challenge. As more and more unicorns choose to remain private due to the vast discrepancy between private and public market valuations, family offices and other seed / early stage investors are forced to hold on to their investments. Many families are concerned about the value of these shares going forward and are looking for ways to hedge their potential losses if said unicorn were to fail. Mr. Stack discussed investing in short only funds as one available method of risk hedging. He discussed in detail the effort and time dedicated by the XLP team to identifying overvalued companies and analyzing their impact on XLP’s existing portfolio of private investments. Mr. Stack also discussed his decision to significantly reduce the number of venture investments as a direct consequence of the hyper-valuation of technology startups. Despite reducing the number of venture investments, XLP will continue to focus on incubation, in-house technology development, and proprietary tool innovation.
About XLP Capital
Headquartered in Boston, MA with offices in New York, NY, XLP takes an engineering-based, hands-on approach to strategic technology investment and advisory work. For XLP, effective business strategy requires a hands-on, deal-driven approach to technology investment, one that applies a management science as advanced as the technologies under management. Whether via the application of high-throughput computational science techniques, rapid prototyping or advanced technology landscaping and analytics, XLP focuses on creating value and wealth through its technology investments. These investments take multiple forms, including venture investing and corporate innovation programs. For more information, please visit www.xlpcapital.com or contact us at firstname.lastname@example.org