There's 'blood in the water' in Silicon Valley and Goldman Sachs is excited about it (GS)
Reuters/ Ueslei Marcelino
The demise of startups with billion-dollar valuations has been the talk of the town all week at the World Economic Forum in Davos.
But, swimming against the tide as usual, Goldman Sachs sees opportunity.
Many companies that have reached that coveted "unicorn" status are now struggling to raise funds as investors worry about valuations.
Venture capitalist Jim Breyer, for example, expects to see "blood in the water" this year, while Salesforce CEO Marc Benioff predicted "a lot of dead unicorns."
Then there's Goldman Sachs.
"We think this is a great opportunity for us," said President and COO Gary Cohn in a Bloomberg TV interview on Friday.
He said that 2016 "may not be as easy" for startups looking to raise cash, and "that's an opportunity for us at Goldman Sachs — we'll go out and raise capital for them."
Goldman Sachs has been a leader among Wall Street banks looking to adapt to the evolving needs of tech companies.
Last year the bank's global head of tech, media, and telecom banking, Dan Dees, told Business Insider his firm is developing new teams to work with tech companies at multiple "touch points," or stages, in their development — especially early on.
That can mean helping companies go global or brand as private players — and, of course, it means helping them raise capital in private funding rounds, not just in initial public offerings.
"The need for a broader set of services in their lifetimes prior to the IPO is evolving," Dees said at the time. "We have all the capabilities of the firm to connect the dots."
Goldman also invests its own money in tech startups, and has backed companies like Uber, Dropbox, and Pinterest.
A shakeout coming
The big question Wall Street is now trying to answer is how many unicorns — and which ones — are destined to fail in 2016.
Breyer predicted only 10% would survive.
The New York Stock Exchange president Tom Farley on Friday told CNBC that a shakeout is coming for highly valued Silicon Valley startups.
"There's the unicorns, many of whom are here in Davos, that are just fantastic companies. They're generating profits, their growth is explosive, and they're changing the way we live our lives," he said.
"Those companies are going to be fine. It's that next batch that you have to watch — the ones that are losing a lot of money and don't have access to capital. They're are going to have to be clever in how they fund themselves and get ultimately to the public market."
Cohn wouldn't make an exact prediction but said, "the marketplace will separate the winners from the losers. They will fund the winners more efficiently than they'll fund the companies whose business model is less secure."
Here's Cohn's full interview with Bloomberg TV:
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