From The Wall Street Journal:
This Tech Bubble Is Bursting
Despite record amount of money flowing into venture capital, funding for startups is drying up
When the dot-com bubble burst in early 2000, the fallout for publicly traded stocks was quick and severe. The Nasdaq Composite Index fell 37% in the 10 weeks following its peak on March 10, 2000.
For startups, the immediate impact was less dramatic. In the second quarter of 2000, venture capitalists invested $25 billion in startups, down only 5% from the first-quarter peak.
“There was a lot of suspended disbelief between March and June,” says Keith Rabois, then a vice president at PayPal Inc. and now a partner at Khosla Ventures.
Mr. Rabois and others think we’re now in a similar period of suspension of disbelief. Startup investment has cooled. Valuations are falling. But Mr. Rabois says many investors and entrepreneurs haven’t yet grasped the new reality. “If that suspended disbelief ends, all hell breaks loose,” he says.
We are overdue - bubbles like this happen every 10-20 years and we are right in the middle of that range. Running on a wing and a prayer. It will be interesting to see the corporate cathedrals in a few years - all of these modern office buildings are being built on the idea that the businesses will continue to grow at the same rate.
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