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Noah Smith

There Is No Tech Bubble. Still, Be Worried.

The numbers show the much-rumored tech bubble probably doesn't exist. But investors should still be concerned.
Bubbling, but not a bubble.

Bubbling, but not a bubble.

Photographer: Chris Ratcliffe/Bloomberg

Andreessen Horowitz, the most innovative and outspoken of Silicon Valley’s big venture capital firms, recently came out with a presentation intended to kill the idea that there’s a new tech bubble under way. The 53-slide presentation, by Morgan Bender, Benedict Evans and Scott Kupor, takes on the idea that too much money is flowing into private technology companies, especially in the highly valued startups called “unicorns.”

First, a little background. Bubbles, by definition, pop, and if tech crashed it would hurt a lot of investors. People making the case for a bubble often focus on unicorn startups (those with a valuation of greater than $1 billion) such as Uber, which is now valued at $40 billion without having gone public. They claim that large private financing by late-stage venture capital, backed up by large asset managers like Fidelity or Tiger Global Management, have replaced initial public offerings as the driver of overvaluation. This is known as the “private IPO.” The pro-bubble case is that these private financing rounds have inflated the value of the unicorns without spilling over into the public markets.