Renaissance Venture Investments: Technology Growth or the Second Dotcom Bubble?

Private and corporate investors invested $ 47.3 billion in startups in 2014. A similar surge in the market was only in 2001, when during the dot-com bubble, investors invested 36.2 billion in young companies. The total amount of capital last year increased by 62 percent compared to 2013. This is due to the financing stages from $ 500 million - the number of transactions increased by only 8 percent over the year and amounted to 3,617. More than 3,600 companies received part of 47 billion.

Larry Elton , an independent business consultant, described two possible scenarios . Which one you choose depends on your optimism or pessimism.

First: the surge will continue. The demand for new applications and technologies will not diminish, and venture capitalists will be happy to give blood and then earned millions to young and audacious companies. If this is so, then this should inspire young entrepreneurs to work and risk.
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The second is that such a private capital inflow is a sign of a bubble that is about to burst as it was in 2001. Fred Wilson, the founder of Union Square Ventures, recently expressed fears that start-ups are burnt out rather than entering the market through developing their own technologies .

... burn money. The stakes are very high in the US startup market. At some point you have to build a real business, create real profits, support your company without a generous investor, and start producing values ​​in the old way.

Wilson’s view is consistent with that of another technology investor, Bill Gurley:

I guarantee you two things. First: the average burning rate of funds in an average company in Silicon Valley is higher than ever in the period since 1999, and perhaps in many areas of industry is even higher than it was then. And the second: in Silicon Valley, companies that simply lose money work far more people than they have in the past fifteen years.

Bill Gurley said last year that the availability of large investments forced companies to spend more money, increasing risk. After the investment ends, the startup will need to rely only on itself and its technology - you will have to pay bills.

Zack Weisfield, Chief Executive Officer of Microsoft Ventures Global Acceletators, looks at venture capital investments in the largest market in the world — China — on the contrary, is full of optimism. Weisfield is sure that in the case of this country, this is not about a bubble, but about a mania to open new high-tech companies. The required investments here are even higher - due to the lack of a developed infrastructure, business has to be created from scratch.

The renaissance of high-tech startups is interesting for industry participants, but fears that this is just another bubble are being pursued by venture capitalists. And only time will tell whether this money will help rapid growth in the technology sector, or is it the beginning of the end of an era.