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10 Tech Bubble Facts – WMNews Ep. 29


[Music]

[Music] startup valuations and tech industry

startup valuations and tech industry

startup valuations and tech industry employment rates continue to grow the

employment rates continue to grow the

employment rates continue to grow the potential for another tech bubble looms

potential for another tech bubble looms

potential for another tech bubble looms in the future welcome to watchmojo.com

down 10 crucial facts you should know

down 10 crucial facts you should know about the potential tech bubble number

about the potential tech bubble number

about the potential tech bubble number 10 what is an economic bubble an

10 what is an economic bubble an

10 what is an economic bubble an economic bubble is a period at which

economic bubble is a period at which

economic bubble is a period at which point the values of assets are

point the values of assets are

point the values of assets are considerably greater than their

considerably greater than their

considerably greater than their intrinsic value and they are traded at

intrinsic value and they are traded at

intrinsic value and they are traded at these prices generally speaking such a

these prices generally speaking such a

these prices generally speaking such a period is confirmed when the market

period is confirmed when the market

period is confirmed when the market subsequently drops prices which leads to

subsequently drops prices which leads to

subsequently drops prices which leads to a correction and industry as well as a

a correction and industry as well as a

a correction and industry as well as a drop in consumer and investor confidence

drop in consumer and investor confidence

drop in consumer and investor confidence the first recorded economic or

the first recorded economic or

the first recorded economic or speculative bubble occurred during the

speculative bubble occurred during the

speculative bubble occurred during the Dutch tulip mania in the 1630s

Dutch tulip mania in the 1630s

Dutch tulip mania in the 1630s throughout this period the value of

throughout this period the value of

throughout this period the value of tulip bulbs rose and then fell sharply

tulip bulbs rose and then fell sharply

tulip bulbs rose and then fell sharply and at one point was 10 times the annual

and at one point was 10 times the annual

and at one point was 10 times the annual salary of a skilled craftsman the

salary of a skilled craftsman the

salary of a skilled craftsman the problem with economic bubbles is that

problem with economic bubbles is that

problem with economic bubbles is that they’re nearly impossible to predict and

they’re nearly impossible to predict and

they’re nearly impossible to predict and only after the dust has settled are

only after the dust has settled are

only after the dust has settled are important markers and indicators of an

important markers and indicators of an

important markers and indicators of an impending bubble discovered number 9

impending bubble discovered number 9

impending bubble discovered number 9 what was the dot-com bubble the dot-com

what was the dot-com bubble the dot-com

what was the dot-com bubble the dot-com bubble occurred primarily between 1997

bubble occurred primarily between 1997

bubble occurred primarily between 1997 and 2000 during which industry stock

and 2000 during which industry stock

and 2000 during which industry stock prices rose and fell dramatically and

prices rose and fell dramatically and

prices rose and fell dramatically and resulted in the collapse of the internet

resulted in the collapse of the internet

resulted in the collapse of the internet sector on the stock market the bubble

sector on the stock market the bubble

sector on the stock market the bubble was a result of the meteoric rise of

was a result of the meteoric rise of

was a result of the meteoric rise of dot-com stock prices as venture

dot-com stock prices as venture

dot-com stock prices as venture capitalists heavily invested in

capitalists heavily invested in

capitalists heavily invested in companies that had little to no profit

companies that had little to no profit

companies that had little to no profit with only the expectation of future

with only the expectation of future

with only the expectation of future revenue in five years the value of the

revenue in five years the value of the

revenue in five years the value of the Nasdaq Composite which many tech stocks

Nasdaq Composite which many tech stocks

Nasdaq Composite which many tech stocks call home rapidly grew from 1,000 points

call home rapidly grew from 1,000 points

call home rapidly grew from 1,000 points to over 5,000 by the year 2000 the

to over 5,000 by the year 2000 the

to over 5,000 by the year 2000 the bubble burst on March 11 2007 reaction

bubble burst on March 11 2007 reaction

bubble burst on March 11 2007 reaction by sinking the Nasdaq triggering a large

by sinking the Nasdaq triggering a large

by sinking the Nasdaq triggering a large volume of company bankruptcies a slew of

volume of company bankruptcies a slew of

volume of company bankruptcies a slew of high profile lawsuits and eventually a

high profile lawsuits and eventually a

high profile lawsuits and eventually a full US economic recession number 8 what

full US economic recession number 8 what

full US economic recession number 8 what was the aftermath the resulting stock

was the aftermath the resulting stock

was the aftermath the resulting stock market crash from 2000 to 2002 led to a

market crash from 2000 to 2002 led to a

market crash from 2000 to 2002 led to a drastic loss of over five trillion in

drastic loss of over five trillion in

drastic loss of over five trillion in the mark

the mark

the mark value of industry companies furthermore

value of industry companies furthermore

value of industry companies furthermore the value of the NASDAQ quickly sunk

the value of the NASDAQ quickly sunk

the value of the NASDAQ quickly sunk beginning in March 2000 and within a

beginning in March 2000 and within a

beginning in March 2000 and within a month nearly a trillion dollars worth of

month nearly a trillion dollars worth of

month nearly a trillion dollars worth of stock value had disappeared let me go

stock value had disappeared let me go

stock value had disappeared let me go back what is it I can’t wait I can’t

back what is it I can’t wait I can’t

back what is it I can’t wait I can’t wait I can’t wait what is it iguana

wait I can’t wait what is it iguana

wait I can’t wait what is it iguana large companies began to fold such as

large companies began to fold such as

large companies began to fold such as pets calm with others declaring

pets calm with others declaring

pets calm with others declaring bankruptcy amid allegations of illegal

bankruptcy amid allegations of illegal

bankruptcy amid allegations of illegal accounting practices leading to an

accounting practices leading to an

accounting practices leading to an exaggeration of yearly profits the

exaggeration of yearly profits the

exaggeration of yearly profits the events of September 11th in 2001 further

events of September 11th in 2001 further

events of September 11th in 2001 further intensified the stock market drop by the

intensified the stock market drop by the

intensified the stock market drop by the end of 2004 over 50% of the dot-com

end of 2004 over 50% of the dot-com

end of 2004 over 50% of the dot-com companies had gone bankrupt number 7

companies had gone bankrupt number 7

companies had gone bankrupt number 7 what changes were made as a result of

what changes were made as a result of

what changes were made as a result of the dot-com bubble numerous changes were

the dot-com bubble numerous changes were

the dot-com bubble numerous changes were instilled this included more stringent

instilled this included more stringent

instilled this included more stringent standards by which a company could

standards by which a company could

standards by which a company could launch an initial public offering as

launch an initial public offering as

launch an initial public offering as well as more restrictions on investment

well as more restrictions on investment

well as more restrictions on investment bankers of research analysts enacted on

bankers of research analysts enacted on

bankers of research analysts enacted on July 30th 2002 the sarbanes-oxley Act or

July 30th 2002 the sarbanes-oxley Act or

July 30th 2002 the sarbanes-oxley Act or Sox is a united states law that enhanced

Sox is a united states law that enhanced

Sox is a united states law that enhanced the responsibilities of a public

the responsibilities of a public

the responsibilities of a public corporations Board of Directors

corporations Board of Directors

corporations Board of Directors augmented criminal penalties for

augmented criminal penalties for

augmented criminal penalties for retaliation against whistleblowers and

retaliation against whistleblowers and

retaliation against whistleblowers and the failure to certify corporate

the failure to certify corporate

the failure to certify corporate financial records what’s more an

financial records what’s more an

financial records what’s more an agreement was reached on April 28 2003

agreement was reached on April 28 2003

agreement was reached on April 28 2003 titled the global settlement it revolved

titled the global settlement it revolved

titled the global settlement it revolved around the issue of conflict of interest

around the issue of conflict of interest

around the issue of conflict of interest within investment firms the agreement

within investment firms the agreement

within investment firms the agreement was settled between the SEC NASD NY SE

was settled between the SEC NASD NY SE

was settled between the SEC NASD NY SE and ten of the largest US financial

and ten of the largest US financial

and ten of the largest US financial institutions and required that they

institutions and required that they

institutions and required that they literally insulate and separate their

literally insulate and separate their

literally insulate and separate their banking and analysis departments this

banking and analysis departments this

banking and analysis departments this was done in order to prevent the abuse

was done in order to prevent the abuse

was done in order to prevent the abuse that had occurred from the pressure

that had occurred from the pressure

that had occurred from the pressure investment bankers placed on their

investment bankers placed on their

investment bankers placed on their analysts to provide falsified favorable

analysts to provide falsified favorable

analysts to provide falsified favorable portfolio results number six what is a

portfolio results number six what is a

portfolio results number six what is a start-up a start-up is the term given to

start-up a start-up is the term given to

start-up a start-up is the term given to a newly created company that is in a

a newly created company that is in a

a newly created company that is in a rapid process of development research

rapid process of development research

rapid process of development research innovation and scalability modern

innovation and scalability modern

innovation and scalability modern startups are typically characterized by

startups are typically characterized by

startups are typically characterized by their low bootstrap costs dependency on

their low bootstrap costs dependency on

their low bootstrap costs dependency on private equity and high rate for

private equity and high rate for

private equity and high rate for potential return on investment while

potential return on investment while

potential return on investment while having a relatively small rate of

having a relatively small rate of

having a relatively small rate of success examples of modern-day

success examples of modern-day

success examples of modern-day successful startups range from the

successful startups range from the

successful startups range from the popular and well

popular and well

popular and well such as uber and Pinterest to the

such as uber and Pinterest to the

such as uber and Pinterest to the obscure yet massively profitable

obscure yet massively profitable

obscure yet massively profitable Palantir technologies a software company

Palantir technologies a software company

Palantir technologies a software company that specializes in data analysis and

that specializes in data analysis and

that specializes in data analysis and has even had clients like the CIA and

has even had clients like the CIA and

has even had clients like the CIA and FBI this type of business model has bled

FBI this type of business model has bled

FBI this type of business model has bled into corporate culture instilling a

into corporate culture instilling a

into corporate culture instilling a casual attitude that promotes efficiency

casual attitude that promotes efficiency

casual attitude that promotes efficiency by removing environmental stressors in

by removing environmental stressors in

by removing environmental stressors in the office setting companies such as

the office setting companies such as

the office setting companies such as Google have deliberately cultivated a

Google have deliberately cultivated a

Google have deliberately cultivated a relaxed and enriched work environment in

relaxed and enriched work environment in

relaxed and enriched work environment in order to attract the best and brightest

order to attract the best and brightest

order to attract the best and brightest talent from startups there is no set

talent from startups there is no set

talent from startups there is no set date at which point a company ceases to

date at which point a company ceases to

date at which point a company ceases to be labeled a start-up but most of these

be labeled a start-up but most of these

be labeled a start-up but most of these businesses and their startup phase when

businesses and their startup phase when

businesses and their startup phase when they reach milestones such as an

they reach milestones such as an

they reach milestones such as an acquisition by a larger firm a large

acquisition by a larger firm a large

acquisition by a larger firm a large employee base considerable revenue or an

employee base considerable revenue or an

employee base considerable revenue or an initial public offering number five who

initial public offering number five who

initial public offering number five who invest in startups startups can find

invest in startups startups can find

invest in startups startups can find funding from multiple sources including

funding from multiple sources including

funding from multiple sources including venture capital firms angel investors

venture capital firms angel investors

venture capital firms angel investors seed funds and crowdfunding these

seed funds and crowdfunding these

seed funds and crowdfunding these sources of funding are important at

sources of funding are important at

sources of funding are important at different levels of the startup growth

different levels of the startup growth

different levels of the startup growth phase at the beginning it is typically

phase at the beginning it is typically

phase at the beginning it is typically angel investors seed funds or

angel investors seed funds or

angel investors seed funds or crowdfunding websites that provide the

crowdfunding websites that provide the

crowdfunding websites that provide the initial funding companies such as Y

initial funding companies such as Y

initial funding companies such as Y Combinator are known to fund hundreds of

Combinator are known to fund hundreds of

Combinator are known to fund hundreds of startups by providing seed money that

startups by providing seed money that

startups by providing seed money that amounts to about one hundred and twenty

amounts to about one hundred and twenty

amounts to about one hundred and twenty thousand dollars in total this is known

thousand dollars in total this is known

thousand dollars in total this is known as the seed round once a company has

as the seed round once a company has

as the seed round once a company has gained traction and is generating

gained traction and is generating

gained traction and is generating revenue it begins its series around a

revenue it begins its series around a

revenue it begins its series around a more aggressive route of funding whereby

more aggressive route of funding whereby

more aggressive route of funding whereby venture firms may provide significant

venture firms may provide significant

venture firms may provide significant funding in the range of two to ten

funding in the range of two to ten

funding in the range of two to ten million dollars in exchange for a

million dollars in exchange for a

million dollars in exchange for a portion of the company this leads to

portion of the company this leads to

portion of the company this leads to Series B C and D rounds of funding

Series B C and D rounds of funding

Series B C and D rounds of funding before the company eventually launches

before the company eventually launches

before the company eventually launches the initial public offering number four

the initial public offering number four

the initial public offering number four what is an IPO the acronym IPO stands

what is an IPO the acronym IPO stands

what is an IPO the acronym IPO stands for the term initial public offering a

for the term initial public offering a

for the term initial public offering a process by which a private company

process by which a private company

process by which a private company becomes public by issuing shares of

becomes public by issuing shares of

becomes public by issuing shares of stock in their company to institutional

stock in their company to institutional

stock in their company to institutional investors which in turn are sold to the

investors which in turn are sold to the

investors which in turn are sold to the general public for the first time the

general public for the first time the

general public for the first time the first recorded modern IPO occurred in

first recorded modern IPO occurred in

first recorded modern IPO occurred in March 1602 when the Dutch East India

March 1602 when the Dutch East India

March 1602 when the Dutch East India Company offered its shares to the public

Company offered its shares to the public

Company offered its shares to the public an IPO can be a huge asset to a company

an IPO can be a huge asset to a company

an IPO can be a huge asset to a company as it can generate a massive influx of

as it can generate a massive influx of

as it can generate a massive influx of revenue give easier access to capital

revenue give easier access to capital

revenue give easier access to capital and

and

and Cree’s exposure and brand by contrast an

Cree’s exposure and brand by contrast an

Cree’s exposure and brand by contrast an IPO can lead to an increase in marketing

IPO can lead to an increase in marketing

IPO can lead to an increase in marketing accounting and legal costs and an

accounting and legal costs and an

accounting and legal costs and an overall loss of control due to new

overall loss of control due to new

overall loss of control due to new shareholders it would also allow the

shareholders it would also allow the

shareholders it would also allow the public and competitors to gain access of

public and competitors to gain access of

public and competitors to gain access of company financials and policy the

company financials and policy the

company financials and policy the current IPO process in the United States

current IPO process in the United States

current IPO process in the United States is overseen by the United States

is overseen by the United States

is overseen by the United States Securities and Exchange Commission and

Securities and Exchange Commission and

Securities and Exchange Commission and in the United Kingdom it is regulated by

in the United Kingdom it is regulated by

in the United Kingdom it is regulated by the UK listing authority number three

the UK listing authority number three

the UK listing authority number three how our startups valued evaluation of a

how our startups valued evaluation of a

how our startups valued evaluation of a startups worth is extremely important as

startups worth is extremely important as

startups worth is extremely important as it will dictate the level of funding an

it will dictate the level of funding an

it will dictate the level of funding an angel investor or a venture capital firm

angel investor or a venture capital firm

angel investor or a venture capital firm is willing to invest in the company

is willing to invest in the company

is willing to invest in the company valuations are notoriously hard to

valuations are notoriously hard to

valuations are notoriously hard to calculate as most startups have little

calculate as most startups have little

calculate as most startups have little history revenue or earnings

history revenue or earnings

history revenue or earnings this leads prospective investors to

this leads prospective investors to

this leads prospective investors to calculate valuations based on similar

calculate valuations based on similar

calculate valuations based on similar industry valuations and the level of

industry valuations and the level of

industry valuations and the level of competition for start-up investment

competition for start-up investment

competition for start-up investment based on the economy in booming economic

based on the economy in booming economic

based on the economy in booming economic times there will be larger company

times there will be larger company

times there will be larger company valuations as competition to invest in

valuations as competition to invest in

valuations as competition to invest in the best startup is higher for example

the best startup is higher for example

the best startup is higher for example in 2013 there were only 38 tech startups

in 2013 there were only 38 tech startups

in 2013 there were only 38 tech startups valued at over 1 billion dollars also

valued at over 1 billion dollars also

valued at over 1 billion dollars also known as unicorns yet as of May 2015

known as unicorns yet as of May 2015

known as unicorns yet as of May 2015 there were over a hundred not to mention

there were over a hundred not to mention

there were over a hundred not to mention over a handful of deca corns companies

over a handful of deca corns companies

over a handful of deca corns companies that are valued at over 10 billion such

that are valued at over 10 billion such

that are valued at over 10 billion such as uber Dropbox

as uber Dropbox

as uber Dropbox Naomi and Airbnb number two our startups

Naomi and Airbnb number two our startups

Naomi and Airbnb number two our startups being overvalued as company valuations

being overvalued as company valuations

being overvalued as company valuations continue to grow at a staggering pace

continue to grow at a staggering pace

continue to grow at a staggering pace many in the industry fear that they’re

many in the industry fear that they’re

many in the industry fear that they’re being pushed by external factors such as

being pushed by external factors such as

being pushed by external factors such as low interest rates and investors fear of

low interest rates and investors fear of

low interest rates and investors fear of missing out and a need for higher

missing out and a need for higher

missing out and a need for higher returns as of mid May 2015

returns as of mid May 2015

returns as of mid May 2015 uber an American international

uber an American international

uber an American international transportation network company is

transportation network company is

transportation network company is pushing for another round of funding in

pushing for another round of funding in

pushing for another round of funding in the territory of two billion dollars

the territory of two billion dollars

the territory of two billion dollars expectations are that this round would

expectations are that this round would

expectations are that this round would push the company to a valuation of more

push the company to a valuation of more

push the company to a valuation of more than 50 billion which would make it the

than 50 billion which would make it the

than 50 billion which would make it the highest valued venture-backed startup in

highest valued venture-backed startup in

highest valued venture-backed startup in history that being said there are many

history that being said there are many

history that being said there are many industry investors and experts who

industry investors and experts who

industry investors and experts who believe that startups are not overvalued

believe that startups are not overvalued

believe that startups are not overvalued for example according to Sam almond

for example according to Sam almond

for example according to Sam almond president of Y Combinator giving a

president of Y Combinator giving a

president of Y Combinator giving a start-up and easier access to a large

start-up and easier access to a large

start-up and easier access to a large cash flow can kill a good company

cash flow can kill a good company

cash flow can kill a good company number one is there another tech bubble

number one is there another tech bubble

number one is there another tech bubble brewing the question of whether there is

brewing the question of whether there is

brewing the question of whether there is another tech bubble brewing is a touchy

another tech bubble brewing is a touchy

another tech bubble brewing is a touchy one as the 2,000 comm bubble still

one as the 2,000 comm bubble still

one as the 2,000 comm bubble still weighs heavily on investors minds thanks

weighs heavily on investors minds thanks

weighs heavily on investors minds thanks to the dot-com bubble there are stricter

to the dot-com bubble there are stricter

to the dot-com bubble there are stricter regulations governing IPOs and

regulations governing IPOs and

regulations governing IPOs and investments making it harder for Shapley

investments making it harder for Shapley

investments making it harder for Shapley constructed companies to go public

constructed companies to go public

constructed companies to go public however according to entrepreneur Mark

however according to entrepreneur Mark

however according to entrepreneur Mark Cuban an American investor and owner of

Cuban an American investor and owner of

Cuban an American investor and owner of the NBA’s Dallas Mavericks we are in a

the NBA’s Dallas Mavericks we are in a

the NBA’s Dallas Mavericks we are in a bubble and actually headed towards its

bubble and actually headed towards its

bubble and actually headed towards its imminent burst while stock markets may

imminent burst while stock markets may

imminent burst while stock markets may be affected

be affected

be affected unlike the 2000 calm bubble he argues

unlike the 2000 calm bubble he argues

unlike the 2000 calm bubble he argues that angel investments also will be

that angel investments also will be

that angel investments also will be which is an even bigger problem startup

which is an even bigger problem startup

which is an even bigger problem startup valuations and tech industry employment

valuations and tech industry employment

valuations and tech industry employment rates continue to grow yet whether our

rates continue to grow yet whether our

rates continue to grow yet whether our world is actually in another tech bubble

world is actually in another tech bubble

world is actually in another tech bubble remains to be seen

remains to be seen

remains to be seen did these facts surprise you to vote for

did these facts surprise you to vote for

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