Press "Enter" to skip to content

Tech Bubble?

In the past two years, more than 50 U.S. venture-backed tech startups reached a valuation of $1 billion plus. Specifically, Snapchat Inc. and Pinterest Inc., are planning to raise financing at valuations of $19 billion and $11 billion, respectively. Uber Technologies Inc. has a valuation of approximately $40 billion, the highest for a private U.S. company.

Venture capitalist Bill Gurley claims, “we are not in a valuation bubble, as the mainstream media seems to think. We are in a risk bubble”.

The Nasdaq recently hit above the 5,000 mark, for the first time since 2000. The end of these increasing tech valuations may come with a stock market correction. Mark Cannice, professor at University of San Francisco claims “For some of these companies, it is hard to imagine a successful exit”.

If we are in a tech bubble, who is the most at risk? One would immediately think private investors and VCs, since they have the most invested in these private technology companies. But Mark Cuban, the Dallas Maverick’s owner, argues that there thousands (225,000) of “angel investors” in the US, that have invested large sums of money in private startups. He claims that “A bubble is when uninformed investors, in search of a huge payday invest money at prices far greater than their actual value and end up getting a reduced amount in return. In this case, with the private market lack of liquidity. Ten minutes after they invest, their investment is basically worthless. That’s a bubble”.

Do you all think that this potential tech bubble is as dangerous as the tech bubble 0f 2000? Could it reach the stock market?

Bloomberg and


  1. My sense is that the tech sector is quite small relative to housing, and that unlike housing, people don’t (can’t!!) take out “portfolio equity loans” so that the paper gains are not offset by increased debt.

    However, don’t assume that your parents aren’t invested in these firms, in all likelihood part of their pension funds are in NASDAQ. (I really don’t want to know the details of my TIAA-CREF portfolio, I’d end up spending time each and every day looking at stock prices while having very little ability to actually do anything for the better (or the worse) about it.)

  2. deplautt deplautt

    Mark Cuban is described as be credible on bubbles, “since he made a fortune selling his start-up right at the peak of the last one”. I would not necessarily consider him an expert based on those qualifications. Based on his original blog post he got a lot of push back for this theory. Criticisms of his claim can be found here:

    Overall a lot of what Cuban is saying based on speculation and he admits it. But that does not necessarily mean he is completely out of line. This will be an interesting idea to follow, regardless of how accurate it may or may not be currently.

Comments are closed.