NOTHING VENTURED, NOTHING GAINED – BUT WILL THE TECH BUBBLE BURST?
Last year, the UK tech sector raised a staggering $3.6bn from venture capital firms. The money flooded into London from around the world, with more than a third of investment coming from the US. The buzz around tech investment became so great that overall, that investment figures at the end of 2015 were up 70 percent from 2014. London had cemented its position as the European capital for tech entrepreneurs and global investors to do business.
However, at the same time, venture capital firms are raising money at the quickest rate since pre-recession, and more of it. Pitchfork recently stated that global VC fundraising for Q1 2016 was $16.7bn, up from $13.1bn for Q1 2015 and the median fund size had increased by over $30m to $77.3m. With these figures, it is no surprise that newspapers, sector magazines and tech and VC blogs are awash with speculation as to whether we are in a tech bubble that will imminently burst.
These warnings derive from those who lived and worked through the dotcom boom years and through its demise – and comparisons are often drawn with the rise of tech. After all, if there is an increase in money that needs to be invested and a finite amount of companies that are worth investing into then the bubble inflates, but at some point valuations become unrealistic, investors chase bad ideas, and the likelihood of return becomes slim.
However, the current ‘tech bubble’ might be different, especially if investors across the board exercise extra caution when deciding which ideas to invest in.
Jul-Sep 2016 Issue
Shoosmiths