The Tech Startup Bubble: Is It Real? [INFOGRAPHIC]
What is the technology startup bubble? The idea of its existence came with IPO flops and billion dollar tech acquisitions. It is an investing phenomenon that involves a clear, though unsustainable market rise in tech stocks, due to increased speculation. Some believe that this bubble exists, and some do not.
With the dot.com burst a few years back, market value jumped from (in billions) $1.5 to $3.7, then fell dramatically to about $1. In 2000, IT companies represented 1/4th of all equity value in the world; and two years later, the value of technology deflated by 70 percent. IPOs had dwindled from 457 to 76 between 1999-2001. The dot.com bubble burst was a result of “too much, too fast.”
An amazon.com-backed company, pets.com, raised 82.5 million in February of 2000, and shares went for $11.00 each. The company collapsed nine months later, due to high shipping costs and low demand; which led them to lose money on orders. Shares resulted in costing $0.19 each.
There are a few reasons that some people believe that there is a technology startup bubble nowadays. 3 out of 4 venture-backed startups don’t return investor’s capital. Additionally, 95 percent of startups don’t meet their projected return on investment (ROI) revenue growth.
The average “successful” startup raises $25.3 million, and sells for $196.8 million. Facebook, as the third largest IPO in history, raised $16 billion in revenue, and is valued at $104.2 billion. Facebook’s trading debut per share was $38.00, and three weeks later, fell to $28.00. A year later, it had lost 31 percent of its initial value.
Though the industry has proved to be inconsistent, it has been settling more as of late. People are building more safely on existing technologies rather than investing in new ideas.
During a recession, there is a stronger point to be proven that money has been too tight, rather than too loose in the market. Check out the infographic below presented by BizBrain.org to learn more about the tech bubble.