The tech bubble that never burst

Venture capitalists are sounding the alarm.

At fancy conferences, there is talk of falling start-up valuations. On CNBC, they lament the sudden lack of IPOs. On Twitter, they warn of a looming recession.

It’s a family chorus. Over the last decade, these kinds of warnings have surfaced repeatedly on startup turf. The industry is in another bubble, investors and commentators warn, evoking the dot-com era of 1999 and the dramatic crash and recession that followed. Jobs disappeared, fortunes evaporated and reputations tarnished.

Since then, the message has left those scars: the boom times are coming to an end. Buckle up for a tough ride.

However, more and more money has been poured into startups. Instead of a meltdown, things got bubblier.

US venture capital funding per month

It started in 2011, when a small elite group of startups achieved “unicorn” status, with valuations of $1 billion or more.

Investors poured billions into startups every month; and hyped initial public offerings from LinkedIn, Pandora, Zynga and Groupon fueled fears of a bubble.

Lisa Buyer

Founder of the Class V Group

“Yes, we have a frenzy again.”

The warnings did not stick. Investors pumped $45 billion into American startups that year.

Facebook went public in May 2012 with the largest technology initial public offering in US history. Its valuation — more than $100 billion for a startup with less than $4 billion in revenue — was seen by many as a sign that tech valuations had spiraled out of control.

Is Facebook’s IPO the start of another tech bubble?

Facebook IPO: Is it worth the price or the next internet bubble?

The bubble they had warned about never burst.

Web Startups: The Dotcom Bubble Again?

Things surely felt bubbly. Engineers demanded Tesla sports cars just for showing up for work, Business Insider presented as evidence.

If it looks like a bubble and floats like a bubble…

By 2014, the number of unicorns worldwide exceeded 90.

marc andresen

venture capitalist

“Many high-rate consumer companies WILL STEAM. … Worry.”

Venture Capitalist Sounds the Alarm on Investing in Startups

The initial investment rewards risk taking. Many of the boldest and most irrational investors have won by doubling down on a market frenzy. The cautious ones, playing on such petty concerns as high prices or losing cash? Less.

Suddenly Uber, a small taxi app, was worth $51 billion. More than American Airlines or FedEx, which actually made a profit. Investors sounded the alarm even louder.

bill gurley

venture capitalist

“You will see some dead unicorns this year.”

cuban frame


The warnings weren’t all bad: some unicorns perished. (Remember and Jawbone?)

But for every failure, there were many more new ideas to support. New sources of capital, including private equity, mutual funds, and sovereign wealth funds, began chasing unicorn investments. In May 2016, they invested $14.2 billion in more than 800 deals, the highest amount in a decade so far.

Keith Rabois

venture capitalist

“We’re more back in fear mode than greed mode.”

jim breyer

venture capitalist

There is “blood in the water”; 90 percent of unicorns will either have a new price or die.

If the warnings were correct, some investors lowered the valuations of their biggest investments, briefly cooling the unicorn frenzy. There was talk of onerous financing terms and start-up layoffs.

The best unicorns are overrated

Then Masayoshi Son arrived.

Masayoshi son

executive director of softbank

“We only live once, so I want to think big. I have no intention of making small bets.”

The brazen investor poured $100 billion into Silicon Valley startups, dwarfing the rest of the venture capital market, at a rate that averaged $100 million a day. Reuters called him a “one-man bubble maker.” Executives nervously joked about Son’s “capital cannon.” Venture capital firms raised more funds to keep up.



We work!


High valuations and obscene spending became the norm. Emerging companies appreciated growth above earnings. Investors gave up on their bubble talk. Fear went out the window. Everyone decided to enjoy the party.

Yes. It is a Bubble. So what?

Investors have never cared less if an IPO makes money

Venture funding soared, topping $26.9bn in December and hitting a new yearly high of $143bn. The unicorn count jumped to 348, according to PitchBook.

Loss-making tech companies are floating around like it’s 1999

In the run-up to its IPO, WeWork imploded. It was the kind of spectacular, embarrassing and humiliating disaster that many thought would have a ripple effect for years to come.

In boardrooms, investors murmured that this was really, truly, finally the end. On conference stages, startup founders vowed to “pivot to profit.”

Then the pandemic came. Get ready for tough times ahead, the venture firms declared. For real this time.

That lasted just a few weeks. Startups flourished in the pandemic and funding soared to new heights. Initial public offerings roared again. Then, naturally, the bubble spoke.

eric paley

venture capitalist

“The party is as loud and the drinks flow as freely as the dot-com boom, even though we all drink at home and alone.”

More than 500 startups worldwide have surpassed $1 billion valuations. Those in the US grossed $164 billion in 2020, setting another record.

Meme Actions! crypto! NFT! SPAC! The Federal Reserve was printing money, interest rates were low, vaccines were available, and the world was ready to reopen. By 2021, economists began predicting a new Roaring Twenties led by technological prosperity.

Yeah, it’s probably a bubble, investors shrugged. But YOLO, amrita?

‘This feels like 1999’: Global start-up funding frenzy fuels fears of a bubble

This year, fear took hold again, as interest rates rose, inflation soared and war broke out. Soon, tech stocks plunged. Initial public offerings stopped. Initial investments fell.

A sense of wariness returned. Has the bubble finally, really, really burst?

Today’s warnings are different from those of the last decade. Investors tiptoe past the word “bubble,” referring instead to a “recalibration,” a “retracement,” or even a mild “softening.” People who once called for caution have grown tired of being wrong, and their audiences have become desensitized to warnings. Every time the alarm bells sounded, more money was poured into startups.

“This time it’s different” used to be a morbid joke among investors; now people believe it. Technology is too enmeshed in our lives, it is thought, and the dot-com bubble is too far in the rearview mirror. This decade-long startup boom has sprung up in the face of so many scares, amassing more and more money and power. Maybe it really is different this time.

Some investors believe that market euphoria is a good thing, even necessary, for progress. Without all that attention and enthusiasm, how can a startup founder convince workers and investors to help him turn his crazy ideas into reality? Sure, most people who go to a bubble do it for the money. And yes, things can get complicated. But underneath, everything is moving forward. From the dot-com ashes, techies like to remind us, grew Amazon, PayPal, and eBay.

Even as the biggest factor driving investors to create high-growth startups over the past decade (low interest rates) begins to change, even as economists worry about a looming recession and even as companies Emerging markets lower their valuations or suddenly run out of cash. , few today predict a total collapse.

A decade of talking about a bubble that never burst will do that.

Add Comment