Technology Industry Is Heading Toward A Bubble?

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So, what are some of the signs of tech bubbles? Why are certain experts convinced the current technology industry is heading towards a bubble? There are certain situations that could signal the industry is inside a bubble. IPO market saturation First, IPO market saturation tends to be higher during a tech bubble. As mentioned above, during the dot-com bubble, companies flogged to the stock market at alarming rates. Worryingly perhaps, the level of IPOs is currently getting closer to the levels of the 2000. The high IPOs don’t benefit the owners or the employees of the company, but play in the hands of the initial investors. Employees and owners typically have lock-in periods for reselling the stock. But in a bubble situation, the stock…show more content…
Marketing firm CB Insights has studies a number of technology companies and noticed the overvaluation issue. For example, the ride hailing app Uber received a valuation of 100 times its sales from investors. AirBnB’s $25 million valuation is over 90 times its sales. Private companies aggressively searching for fresh capital But IPOs aren’t always the only sign of a tech bubble. In fact, the argument now is there are too many private companies being backed by private money. For example, in 2015, the number of tech company IPOs remained low, while the number of private companies receiving over $1 billion valuations doubled in the past 18 months. The problem of increasing VC interest is that companies tend to take as much as they can. Since equity is easy to obtain in the current climate, companies might end up aggressively pursuing it even when it isn’t necessary. Funds and investors moving out of the industry There’s also the element of investors and funds beginning to move out from the tech industry. In a way, this condition is the final sign of a tech bubble, as it often highlights the end of the bubble. Since the bubble cycle is run by speculation and hope of future fortunes, if companies don’t start providing returns at some point, investors may disappear. Certain investment firms are openly starting to warn about the bubble and even funds find it harder to simply throw money at technology firms. Inefficient business models Finally,
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