Will the Tech Bubble Burst? Why That Might Be a Good Thing
The largest discussion in tech over the last 6 months has been whether or not we are standing on the precipice of another bubble. For those who remember the dot-com bust of the early 00’s or the great recession in ’08, the idea of another large scale bubble in the tech industry can have dire consequences that are felt in every reach of the world.
Personally, I don’t think that this is a bubble at that level, but the macroeconomic conditions right now are not conducive for entrepreneurs and start-ups to raise a lot of capital. The economy in the U.S. has been negatively affected by global conditions in China and Europe which has investors feeling skittish. VC’s are being pickier about who they fund and want more equity in return. The valuations in NYC and SF for start-ups have dipped tremendously and the IPO success rate in 2015 was abysmal.
My view is contrary to what might be popular opinion as I believe these are all great things for founders to deal with. With less capital available and investors wanting to see real results (i.e. profit) before even talking about early stage funding, this is now an environment for entrepreneurs to truly test their mettle. They are now forced to create businesses that are actually viable with a track record of acquiring real users and showing that they are on track to scale.
The “wantrapreneurs” will be weeded out, just as they were in the early 2000s where they went from running companies valued in the $100 millions to working in a cubicle at Bain or McKinsey. That’s right some founders might have to take real corporate jobs again instead of spending their weekends on the slopes or flying first class on island getaways. The contraction in the market is going to leave blood in the streets, but those still left standing will emerge with battle tested businesses that they can leverage into further growth and eventually an IPO that holds real value.
Remember that everytime you receive funding from an Angel or VC, you are in essence giving away part of your company. An environment with little to no funding available for the average Joe, will force them to sink or swim when creating their business, but the success is substantially greater for them as more revenue will go directly back in their pocket. For those who do “sink”, there’s nothing wrong with getting a real job like the rest of the 99% and working on developing tangible management skills within the structure of a corporate environment. Heck, you might even find you’re better at it than dealing with all of the nuances of running a start-up or small business. In 18–24 months, it will be interesting to look at the landscape of “unicorns” today and see who is left standing.
Adi Raval is a digital marketing consultant, entrepreneur, and tech enthusiast in Baltimore, MD
