A few weeks ago famed venture capitalist
Bill Gurley, who has invested in Uber and Snapchat wrote on his personal blog
that “there has been a fundamental sea-change in the investment community that
has made the incremental unicorn investment a substantially more dangerous and
complicated practice.”
If you don’t yet know what unicorns are,
they are startups that are valued at $1 billion or more (Uber/Snapchat), and in
2016 there are more than 160 unicorns now, and of course not all unicorns are
worthy of their valuations. With many bad press, and trouble facing unicorns
this year (bankrupted Powa, Theranos FDA investigation), many are beginning to
talk about a possible tech bubble.
At the end of the dot-com bubble in 2000
many companies that gone public, only to disintegrate and run out of money completely,
hurting the public investors that bought into the hype.
However the reason this bubble might be
different is because of where the money are coming from this time. This time the
funding sources are hedge funds, sovereign- wealth funds, investment banks, and
high net worth investors, thus if there is indeed a bubble burst there will be
a much reduced pressure on the general public, as they have less exposure to
these companies.
Another reason is debt. During the Dot-Com
bubble many companies borrowed billions of dollars to finance their company,
and they lost money, unable to get new financing, the companies in the current
environment have very little debt, and therefore if it burst the economic
damage will be much less painful than the 2000s.
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