Venture capitalists are sounding the alarm.
At luxury conferences, they buzz about falling valuations on startups. On CNBC, they lamented the sudden lack of initial public offerings. On Twitter, they warning of an impending recession.
It’s a familiar chorus. Over the past decade, such warnings have echoed in startup land. The industry is in another bubble, investors and commentators beware, reminiscent of the dot-com era of 1999 and the significant crash and downturn that followed. Jobs disappear, fortunes go up in smoke, and reputations tarnish.
The message since then has carried those scars: The boom times are ending. Fasten your seat belt for a tough ride.
However, each time, more money is pouring into startups. Instead of collapsing, things became more boiling.
US Venture Capital by Month
It started in 2011, when a small, elite group of startups achieved “unicorn” status, with a valuation of $1 billion or more.
Investors pour billions into start-ups every month; and hyped initial public offerings from LinkedIn, Pandora, Zynga and Groupon have raised concerns about bubbles.
Founder of the VU team
The warnings are not sticky. Investors pumped $45 billion into US startups that year.
Facebook went public in May 2012 with the largest-ever tech IPO in the United States. Many see its valuation — more than $100 billion for a startup with less than $4 billion in revenue — as a sign that the valuation of the technology has spiraled out of control.
Is the Facebook IPO the start of another tech bubble?
Facebook IPO: Worth it or the Next Internet Bubble?
The bubble they warned would never burst.
Web Start-up: Dot-Com Bubble Repeat?
If it looks like a bubble and floats like a bubble…
By 2014, the number of unicorns around the world had reached 90.
Venture capitalist Sound of warning about startup investment
Startup investing rewards risk taking. Many of the boldest, most irrational investors have won by double down in a frenzied market. People who are cautious, petty about petty worries like high prices or burning money? Less than.
Suddenly Uber – a small taxi app – is worth $51 billion. More than American Airlines or FedEx, companies that have actually turned a profit. Investors’ alarm was even greater.
But for each boom, there are new ideas. New sources of capital – including private equity, mutual funds and sovereign wealth funds – began to chase unicorn investments. In May 2016, they poured $14.2 billion into more than 800 deals, the highest amount in a decade so far.
Top unicorns are overvalued
Then Masayoshi Son came.
High valuations and inappropriate spending have become the norm. Startups are valued more than profit growth. Investors have given up on their bubble talk. Fear goes out the window. Everyone decided to enjoy the party.
It’s correct. It’s a bubble. So what?
Investors have never cared about whether an IPO makes money or not
Venture capital skyrocketed, reaching $26.9 billion in December and hitting an annual high of $143 billion. The number of unicorns has increased to 348, according to Pitchbook.
Losing tech companies are floating like 1999
More than 500 startups around the world topped a $1 billion valuation. Those in the US raised $164 billion in 2020, setting another record.
Yes, it could be a bubble, investors shrug. But YOLO, amirite?
‘This feels like 1999’: Funding frenzy around the globe scares away the bubble
This year, fear arose again as interest rates were set to rise, inflation rose and war broke out. Soon after, tech stocks rallied. Initial public offerings are paused. Start-up investments are down.
A sense of caution returned. Did the last bubble really burst?
Today’s warnings are different from those of a decade ago. Investors tiptoe around the word “bubble,” rather than referring to “recalibration,” “feedback,” or even “softening.” Those who used to call for warnings are growing tired of mistakes, and their audiences have become numb to the warnings. Every time the alarm goes off, more money pours into startups.
“This time is different” used to be a sick joke among investors; Now people believe it. Technology is already so pervasive in our lives, think about it, and the dot-com bubble is too far in the background. This decade-long startup boom has skyrocketed in the face of numerous threats, each time accumulating more money and power. Maybe it really is different this time.
Some investors believe that market euphoria is a good – even necessary – thing for growth. Without all that attention and excitement, how can a startup founder convince workers and investors to help turn their crazy ideas into reality? Sure, most of the people who rushed into the bubble were for the money. And yes, things can get messy. But below, all is moving forward. From the ashes of dot-com, the tech world reminds us, grew Amazon, PayPal and eBay.
Even the biggest factor driving investors to high-growth startups over the past decade – low interest rates – is starting to change, even as economists worry about a recession. recession is imminent, and even if startups drop in valuation or suddenly run out of money, a few today predict a total collapse.
A decade of talking about bubbles that never burst will do just that.