With the Nasdaq at 5,000, Bush and Clinton as presidential frontrunners, and venture capital flowing through Silicon Valley like water, you might be asking yourself how you ended up back in the late 1990s. Rest assured, it’s still 2015, but that sense of déjà vu could be a warning sign for another 90s re-run: a tech bubble 2.0.
A look at the market makes it easy to see that market valuations are a little out of touch with reality. Instagram and Tumblr were snatched up for over $1 billion each, while SnapChat is valued at a mindboggling $16 billion. But these tech startups have one dubious thing in common: almost no revenue. Investors have been in love with companies that embody the latest fads, hoping that an investment could someday make them overnight billionaires as was the case with the creators of the aforementioned apps and websites.
Will we still be using SnapChat in 10 years? What many people seem to forget is that for every mega-success, every Google, that emerged from the 90s dot-com boom, there was also at least one MySpace, and hundreds of other startups that are largely forgotten from the public consciousness. Many of today’s high valuation tech startups could suffer a similar fate when all the freely available venture capital funding eventually dries up.