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Tech Bubble? What Tech Bubble?
HughPickens.com writes: Conor Dougherty writes in the NYT that the tech industry's venture capitalists — the financiers who bet on companies when they are little more than an idea — are going out of their way to avoid the one word that could describe what is happening around them: Bubble. "I guess it is a scary word because in some sense no one wants it to stop," says Tomasz Tunguz. "And so if you utter it, do you pop it?" In 2000, tech stocks crashed, venture capital dried up and many young companies were vaporized. Today, people see shades of 2000 in the enormous valuations assigned to private companies like Uber, with a valuation of $41 billion, and Slack, the corporate messaging service that is about a year old and valued at $2.8 billion in its latest funding round. A few years ago private companies worth more than $1 billion were rare enough that venture capitalists called them "unicorns." Today, there are 107 unicorns and while nobody doubts that many of tech's unicorns are indeed real businesses, valuations are inflating, leading some people to worry that investment decisions are being guided by something venture capitalists call FOMO — the fear of missing out.
With interest rates at historic lows, excess capital causes investment bubbles. The result is too much money chasing too few great deals. Unfortunately, overcapitalizing startups with easy money results in superfluous spending and dangerously high burn rates and investors are happy to admit that this torrid pace of investment has started to worry them. "Do I think companies are overvalued as a whole? No," says Sam Altman, president of Y Combinator. "Do I think too much money can kill good companies? Yes. And that is an important difference."
With interest rates at historic lows, excess capital causes investment bubbles. The result is too much money chasing too few great deals. Unfortunately, overcapitalizing startups with easy money results in superfluous spending and dangerously high burn rates and investors are happy to admit that this torrid pace of investment has started to worry them. "Do I think companies are overvalued as a whole? No," says Sam Altman, president of Y Combinator. "Do I think too much money can kill good companies? Yes. And that is an important difference."
Um, no, you are exactly wrong. Uber is valued at $41b because of public stock market traders. The private investors are willing to pay $x, where $x is less than the valuation after IPO minus the time cost of money. This is all driven by idiots investing in the public stock market. They are the engine car that pulls the train.
Where are you that you are still in a pension plan which you don't control? I'd think most /. users have 401(k) which they have at least a bit of control over. Too bad that doesn't stop a common mistake, though - someone betting everything on the company they work for, salary, stock/options, and 401(k) investments.
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