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?