Big Tech IPOs Look Like the Buildup to a Bubble
As long as hot companies like Uber are private, the mania is contained. Once they go public, all bets are off.
How big can it get?
Photographer: Mark Ralston/AFP/Getty ImagesA few years ago, with funding for startups surging, some people worried that the U.S. was in the midst of a new technology bubble. Calmer heads realized that even if venture capitalists were being a little too carefree with their cash, the result probably wouldn’t look anything like the dot-com bubble and crash of 2000. Price-to-earnings multiples for public tech companies weren’t historically high. The funding in the private markets was unlikely to turn into a speculative mania and subsequent bust, because of the difficulty of selling stock in a private company after investing. And since retail investors — the proverbial Main Street — weren’t heavily invested in startups, any drop in valuations was unlikely to spill over into the broader economy.
Events bore out these calm predictions. Venture funding did fall modestly in 2016, consistent with the idea that financiers had been mildly overoptimistic in the preceding years: