Billionaire Ray Dalio Criticizes Venture Capitalists Who ‘Push Money’ Onto Startups That Don’t Need It

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Capitalism has been good to hedge fund billionaire Ray Dalio. But “the system of making capitalism work well for most people is broken,” he argues in a LinkedIn post.

He began publicly speaking about capitalism’s flaws in April, saying that the current wealth gap should be declared a national emergency. The lengthy post he published yesterday throws shade at private companies flush with capital.

First, he points to the importance of profitability:

“Because investors have so much money to invest and because of past success stories of stocks of revolutionary technology companies doing so well, more companies than at any time since the dot-com bubble don’t have to make profits or even have clear paths to making profits to sell their stock because they can instead sell their dreams to those investors who are flush with money and borrowing power.”

Next, he talks about the danger of raising more capital than you need. Two years ago, I wrote about how SoftBank was largely responsible for pumping hundreds of millions of dollars into startups that don’t necessarily need it. In November 2017, SoftBank was behind each of the largest financings in Silicon Valley, including WeWork, DoorDash, and Uber. As Uber’s CEO Dara Khosrowshahi famously said, “Rather than having [SoftBank’s] capital cannon facing me, I’d rather have their capital cannon behind me, all right.” In other words, he was hyper-aware of the possibility that if Uber was to decline, SoftBank could fund its rival instead.

Here’s what Dalio had to say about this push of capital:

“There is now so much money wanting to buy these dreams that in some cases venture capital investors are pushing money onto startups that don’t want more money because they already have more than enough; but the investors are threatening to harm these companies by providing enormous support to their startup competitors if they don’t take the money.

“This pushing of money onto investors is understandable because these investment managers, especially venture capital and private equity investment managers, now have large piles of committed and uninvested cash that they need to invest in order to meet their promises to their clients and collect their fees.”

You mean cheap capital, skyrocketing valuations, and excess is maybe not a good thing? Dalio ends his post by saying that the world is approaching a big paradigm shift in which capitalism will look much different from how it did in 2008. He says:

“Because the ‘trickle-down’ process of having money at the top trickle down to workers and others by improving their earnings and creditworthiness is not working, the system of making capitalism work well for most people is broken.”

UBER LOCKUP: Uber’s post-initial public offering lockup expires today, which means this is the first chance for most of the company’s early investors to sell stock since the company’s IPO six months ago.

Analysts have been predicting doom and gloom. Wedbush analysts warned that the lockup expiration could “cause an avalanche of selling as early investors and insiders hit the bid,” making Uber’s “horror show” of a debut even worse.

But some investors are staying the course. Menlo Ventures investor Shawn Carolan led Uber’s Series B round in 2011 with a $20 million investment at a $322 million post-money valuation. Menlo invested again in 2012 and 2014. In 2018, Menlo sold less than half of its shares to Softbank, receiving just under $1 billion in proceeds through the sale.

Carolan announced that Menlo will hold its Uber shares when the lockup is lifted. He tweeted:

Still, Uber shares closed at $28.02 on Tuesday, which is down nearly 40% since the IPO. The pressure to prove long-term value for the public investor is more important now than ever.

A HUMBLED SOFTBANK: SoftBank reported its first quarterly loss in 14 years this Wednesday. The company took a massive hit to the tune of $8.9 billion as a result of Masayoshi Son’s bold bet on WeWork. “My investment judgment was poor in many ways and I am reflecting deeply on that,” Son said during a news conference. Although Son has spoken confidently about raising a second Vision Fund, it’s looking less promising given the current predicament of the first. Read more.

Polina Marinova
Twitter: @polina_marinova
Email: polina.marinova@fortune.com

VENTURE DEALS

- Coveo, a San Francisco-based provider of an intelligent enterprise search platform, raised $227 million in funding. OMERS Growth Equity led the round, and was joined by investors including Evergreen Coast Capital, FSTQ, and IQ.

- HomeLight, a San Francisco-based real estate company, raised $109 million in funding. Zeev Ventures led the round, and was joined by investors including Group 11, Menlo Ventures, Crosslink Capital and Stereo Capital.

- Papaya Global, a New York-based payroll and payment management platform, raised $45 million in funding. Insight Partners led the round, and was joined by investors including Bessemer Venture Partners, New Era Capital Partners and Dynamic Loop Capital.

- FirstVet, a Sweden-based startup which provides pet owners with on-demand video consultations with veterinarians, raised €18.5 million ($20.5 million) in Series B funding. OMERS Ventures led the round, and was joined by investors including Creandum.

- Senreve, a San Francisco-based luxury handbag brand, raised $16.75 million in Series A funding. Norwest Venture Partners led the round.

- Chronosphere, a New York-based platform for monitoring complex technology stacks at large scale, raised $11 million in Series A funding. Greylock led the round, and was joined by investors including Lux Capital.

- Mooala, a Dallas, Texas-based producer of organic, dairy-free beverages and creamers, raised $8.3 million in Series A funding. Sweat Equities led the round, and was joined by investors including M3 Ventures.

- Verto Education, a Berkeley, Calif.-based a freshman year abroad college program, raised $6.3 million in funding. Investors include First Round Capital, GSV Ventures, 10xImpact, and Box Group.

- FamePick, a Redwood City, Calif.-based platform for business-minded creators, raised $4.6 million in Series A funding. InterVest led the round, and was joined by investors including Mirae Asset Venture, Aju IB Investment, and DVP.

- NeighborSchools, a Boston-based child care startup, raised $3.5 million in seed funding. Accomplice led the round, and was joined by investors including Tuhaye Venture Partners and World Within.

- HMBradley, a Santa Monica, Calif.-based digital banking platform that rewards users for positive financial behaviors, raised $3.5 million in seed funding. Accomplice Ventures and Walkabout Ventures co-led the round, and were joined by investors including Mucker Capital, Index Ventures and HVF Labs. Read more at Fortune.

- Daasity, a San Diego, Calif.-based data analytics solution provider for direct-to-consumer retailers, raised $2.3 million in funding. Okapi Venture Capital led the round, and was joined by investors including Serra Ventures, Cove Fund II, 1855 Capital and Mooring Ventures LLC

- Metawave Corporation, a Palo Alto, Calif.-based smart radar startup, raised Series A funding of an undisclosed amount. Denso led the round, and was joined by investors including Mirae Asset Capital, NTT DOCOMO Ventures and BOLD Capital Partners.

HEALTH & LIFE SCIENCES DEALS

- A2 Biotherapeutics, an Agoura Hills, Calif.-based developer of cell therapies for cancer patients, raised $57 million in Series A funding. Investors include The Column Group, Vida Ventures, Samsara BioCapital and Nextech Invest.

- Coda Biotherapeutics Inc, a South San Francisco-based preclinical-stage biopharmaceutical company, raised $34 million in funding. Versant Ventures led the round.

PRIVATE EQUITY DEALS

- Novacap acquired a majority stake in Foliot Furniture, a Canada-based provider of furnishings for the hospitality and educational housing sectors. Financial terms weren't disclosed.

- Cognate BioServices, which is backed by EW Healthcare Partners, acquired Cobra Biologics, a U.K. and Sweden-based advanced therapy CDMO that specializes in providing manufacturing services for the plasmid DNA and viral vector. Financial terms weren't disclosed.

- Bluestone Investment Partners made an investment in Intrepid Solutions and Services Inc, a Sterling, Va.-based provider of enterprise IT, data analysis and operational training services to the U.S. intelligence community. Financial terms weren't disclosed.

- Hunt Valve Company, a portfolio company of May River Capital, acquired Pima Valve, a Chandler, Ariz.-based provider of bronze marine valves. Financial terms weren't disclosed.

- Mainsail Partners made an investment in SourceScrub, a San Francisco-based information services platform for the financial services industry. Financial terms weren't disclosed.

- OpenGate Capital acquired a majority of CoreMedia, a Germany-based content management platform. Financial terms weren't disclosed.

- L Catterton invested in OdontoCompany, a Brazil-based dental clinic franchisor.

- Anacapa Partners made an investment in Agasus, a Brazil-based hardware-as-a-service - provider. Financial terms weren't disclosed.

IPOs

- GFL Environmental Holdings, an Ontario, Canada-based waste management firm, cancelled its IPO. It previously said it planned to raise up to $2.4 billion in an IPO of 87.6 million shares priced at a range of $20 to $24 apiece. The firm posted $1.9 billion in revenue in 2018 and loss of $483.3 million. BC Partners, Ontario Teachers, and GIC back the firm. It plans to list on the NYSE and TSX as “GFL.” Read more.

- Postal Savings Bank of China, a Beijing-based network with the most branches in the country, is seeking to raise 32.7 billion yuan ($4.7 billion) in an IPO in Shanghai, Reuters reports. Read more.

EXITS

- Gravity, which is backed by Clearlake Capital Group, agreed to acquire On Point Oilfield Holdings, an Austin, Texas-based oilfield fluids waste solutions company, from White Deer Energy. Financial terms weren't disclosed.

- Rackspace, which is backed by Apollo, acquired Onica, a Santa Monica, Calif.-based professional and managed services company in the AWS Cloud space. Financial terms weren't disclosed. Onica had raised approximately $20 million in funding from investors including Sunstone Partners.

- Sumo Logic acquired JASK Labs, Inc, an Austin, Texas-based provider of cloud-native autonomous security operations center software. Jask had raised approximately $39 million in venture funding from investors including Kleiner Perkins, Battery Ventures, Dell Technologies Capital, and TenEleven Ventures.