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Silicon Valley's Tech Bubble Is Now Larger Than In 2000. Will It Come To An End? (cnbc.com)
"We are now officially in a tech bubble larger than March of 2000," argues Keith Wright, instructor of accounting and information services at the Villanova School of Business. An anonymous reader quotes his commentary on CNBC:
In case you missed it, the peak in the tech unicorn bubble already has been reached. And it's going to be all downhill from here. Massive losses are coming in venture capital-funded start-ups that are, in some cases, as much as 50 percent overvalued... 76% of the companies that went public last year were unprofitable on a per-share basis in the year leading up to their initial offerings, according to data compiled by Jay Ritter, a professor at the University of Florida's Warrington College of Business, and recently featured in the New York Times. This is the largest number since the peak of the dot-com boom in 2000, when 81 percent of newly public companies were unprofitable...
Several financial models project that up to 80 percent of unicorn companies are set to fail within two years. Uber, the highest-valued private technology company, has rapidly growing revenue but remains highly unprofitable. With revenue of $6.5 billion in 2016, it still registered a net loss of $2.8 billion. The truth is, when a unicorn is overvalued, it doesn't take long for the market to discover this fact.
Several financial models project that up to 80 percent of unicorn companies are set to fail within two years. Uber, the highest-valued private technology company, has rapidly growing revenue but remains highly unprofitable. With revenue of $6.5 billion in 2016, it still registered a net loss of $2.8 billion. The truth is, when a unicorn is overvalued, it doesn't take long for the market to discover this fact.
Bottom line (sorry) - there is a metric shitload of capital out there waiting to make more capital. Since that's all that kind of person (or corporation, but I repeat myself) really worries about.
It's ALL about dealing with increasing growth. Which then becomes an exponential function.
Which, in the real world, typically don't end well.
Faster! Faster! Faster would be better!
This is the second longest the US has gone without a recession, per the roughly decade-long "business cycle" that's been recurring more or less since the end of the Civil War. Thus, something will probably happen within a year or two. The only real question is how big the downturn will be, and what sectors will be most affected.
Table-ized A.I.
. . . they'll get a government bailout like the auto and banking industries.
The government should have broken up GM when they bailed them out . . . making the smaller bits small enough to fail.
Maybe the government will break up Silicon Valley . . . sending bits and pieces of Silicon Valley to Arkansas, Alaska and Mississippi . . . ?
Schroedinger's Brexit: The UK is both in and out of the EU at the same time!
Profitability is so ... common.
We need more companies like Theranos, Uber, Tesla ... the profitable companies you probably haven't heard off.
I'm a minority race. Save your vitriol for white people.
as much 50% overvalued? companies during the dotcom boom where hundreds of percent over valued, some 1000% percent plus and they were not the little startups either. Companies like Cisco lost near 90% of their market value. maybe total values are at the same level but the insane overvalue isn't quite their yet, though with some we are rapidly approaching it. It isn't the startups that should scare you it is when the so called bluechips are overvalued.
The first dotcom boom had something this one doesn't serving as a brake on growth...getting big fast (the model for all startups) came at a massive cost. Building out data centers, paying for Internet traffic, etc. This second dotcom boom has the cloud. As a result it's going to take a lot longer to deflate...or get even bigger before it pops which will cause more damage.
Back around 1999/2000, if a startup was a truly dumb idea, investors would be much less likely to fund their expansion and you'd see a natural thinning of the herd. This time, a startup only has to bring in enough money to pay the monthly cloud bill and can continue expanding for a longer time. They're starting to ship 50-pound bags of dog food for free like pets.com did, simply because they have more money on hand to burn. They're able to hire more workers and pay them exorbitant salaries to stay ahead in a "talent arms race." And, they're able to exist in a money-losing status for much longer because as long as they pay the cloud and the SaaS vendors, they're in business.
The 90s bubble was about eyeballs, and this one is about monetizing personal information generated by those little supercomputers everyone carries with them. There seems to be an infinite amount of room in the market for hundreds of copycat subscription-box services, "Tinder for X", "Uber for Y", you name it. Oh, and don't forget blockchain enabled, AI-powered dog treat box selection algorithms powered by your Facebook posts of your dog pictures.
Will it end? You betcha. Will it end quickly? I doubt it...there's a much lower barrier to entry and the capital markets seem unwilling to weed out the copycats.