Last year, almost $100 billion was invested in technology startups, much of it in internet-related software. This historically high level has only been matched once, in 2000, a year that was also the peak of a venture financing bubble that burst not long after. Many people are now asking me if the current venture capital market is also a bubble that is about to burst.
It is. Recently released venture capital data show that too much money is chasing too few companies. That’s the hallmark of a financial bubble: Upward momentum in valuations is generated by too much money targeting the same investment opportunities in the belief that valuations will only go higher. For example, the mortgage crisis bubble was created by lots of liquidity seeking returns coupled with a belief that house prices would only go up.
Everything I see and hear now leads me to conclude that the current startup investment climate is another bubble. But there are differences between this venture investing bubble…Read the full story from the Washington Business Journal.