Think We’re in a Tech Bubble? 10 Charts That Will Help You Make Your Case
CB Insights, June 19 2014
From VC financing and IPOs hitting dot com highs to the entrance of corporations, hedge funds and Asian investors into tech investing, data to help you support your tech bubble predictions.
“Are we in a tech bubble?”
We’ve highlighted 10 charts from CB Insights that have most frequently elicited questions of a bubble. So if you’re of the view we’re in a bubble, here’s 10 charts that should help you make your case.
Note: We get this question multiple times weekly, and for the record, we don’t think we’re in a bubble.
We’re in a tech bubble because…
…VC funding has hit levels last seen during the dot com boom
Yup. Our Q1 2014 Venture Capital Activity Report highlighted that VC funding totaled almost $10 billion ($9.992B to be exact). This was the most since Q2 2001 during the now infamous dot com boom.
If we’re approaching funding levels seen in the heady days of Webvan, Kozmo and Pets.com, we must be in a bubble.
Data from Q1 2014 VC Activity Report
…VC-backed IPOs also hit their highest levels since the dot com boom
Beyond really high VC funding tallies in Q1 2014, venture-backed IPOs also hit the highest levels since Q3 2000. Lots of money + lots of VC-backed IPOs. We must be in a bubble.
Data from Q1 2014 VC Exits Report
…corporates are investing big money into late-stage tech deals
One thing folks love to point to is “dumb money” entering the market and a favorite whipping boy in that case is when corporations get in on the act.
And corporations are definitely getting active. They’re now investing in 4 out of 10 largest tech deals and their rate of participation in large tech financings is only increasing.
So if corporations are investing big money into late stage rounds, we must be in a tech bubble.
Data from The Rise of Corporations in Tech Venture Capital
…corporate VCs are hot to invest in super speculative early stage companies
Adding more fuel to the corporate “dumb money” theory is that they’re not limiting their investments just to late stage big money rounds into “proven” tech companies. They’re also getting involved with the highest risk, most speculative financings at the seed stage.
If corporations are investing in such high risk companies, we must definitely be in a tech bubble.
Data from Corporate VCs write more seed checks than ever before
…hedge funds & mutual funds are aggressively investing in private tech companies
So you think corporations are “dumb money”. Add in the Wall Street money guys aka hedge funds and mutual funds who cannot get enough of tech and things are looking even more bubblicious.
And oh yeah — 44% of the billion dollar club have taken money from hedge funds or mutual funds.
Yeah — we definitely must be in a bubble.
Data from 44% of tech’s billion dollar club is backed by a hedge fund or mutual fund and thepace of hedge fund and mutual fund investment is increasing quickly
…big chunks of money from Asia is pouring into private tech companies
If new players in the investment ecosystem get your bubble radar going and corporations and hedge and mutual funds weren’t enough, how about money coming in from Asia? Check.
Alibaba and Tencent have actively been investing in US tech companies. And frequently, they’re doing so in massive rounds including to the likes of Lyft, Tango, Shoprunner and Weebly to name a few.
Asian investors pouring money into US tech startups?
Yup — we must definitely be in a bubble.
Data from Alibaba vs Tencent’s US tech investing activity
…a record number of private tech companies are getting valued at over $1 billion
For a while, there were 1 to 4 companies entering the billion dollar valuation club every quarter. And then all of a sudden, Q1 2014 saw 11 new companies enter the billion dollar valuation club.
What changed in 2014 that made valuations climb so much? Lots of companies suddenly being valued at over $1 billion for no really good reason.
We must definitely be in a tech bubble.
Data from a record number of tech companies joined the billion dollar club
…there are more consumer tech companies valued at over $1 billion today than actual $1 billion consumer tech exits in the last 10 years
There have been 15 consumer tech companies that have exited for more than $1 billion since 2004. Our research brief from December 2013 found that there were actually 14 consumer tech companies valued at over $1 billion today. Note: this number has grown larger since December 2013 to 20+ consumer tech companies.
So in short, we’ve had 15 consumer tech exits in the last 10 years that had valuations of over $1 billion. And today, at this specific moment in time, we have more than 20 consumer tech companies valued in the private markets at over $1 billion.
We must definitely be in a tech bubble.
Dat from there are too many private billion dollar consumer tech companies
…it seems anyone and everyone can get their startup funded these days
Need a few hundred grand to get your big data, cloud-based, collaborative consumption Uber for dish washing off the ground?. No worries. Seed VC deals hit a four year high as venture investors are writing checks like its 1999.
Almost anyone can get funding?
Yup — we must be in a tech bubble.
Data from seed VC deals hit a four year high
…anyone and everyone is starting a venture capital fund
It’s not just that anyone can get funding. Starting a VC fund is also becoming the new hot thing to do. And lots of them are cropping up. In the last 6 months, 129 VC funds closed. The majority are small micro-VCs as starting a venture fund has now been described by some we’ve talked to as “the thing successful entrepreneurs do when they don’t know what else to do.”
Becoming a VC is the hot thing to do again.
We must be in a tech bubble.
Data from the Micro-VC Glut
Ok — that was actually 11 charts & graphs.
And then of course, if you want just one more sign that we’re in a tech bubble over and above these graphs, there is a new VIP bottle-service brunch service in San Francisco featuring trapeze artists, jugglers and other entertainment that is going for $2500. Yup seriously.
For more data, visualizations, and research briefs like this one, visit www.cbinsights.com/blog.
