economics | July 29, 2019

“More Money Than Anyone Imagined”: Atlantic Writer Annie Lowrey Explains Why the Tech Bubble Never Burst

Years ago, journalists and pundits were warning about the tech bubble. But unlike the dot-com explosion before it, the tech bubble never burst. It simply faded from public consciousness, as investors continued to invest. Atlantic writer Annie Lowrey explains what happened.  

“Back then, the concern was that very little money was getting made at all. Investors were throwing billions of dollars at start-ups with scant or nonexistent revenue streams, producing obscene valuations,” Annie Lowrey writes, listing Snapchat as a prime example.

 

The continuation of investments was linked to a few factors, one of which being that foreign investors from places like China, Saudi Arabia, and Japan lined the pockets of start-up founders and helped early investors cash out. Highly profitable tech companies like Amazon, Google, and Facebook were another source of cash, funneling money down the pipeline by acquiring younger, newer firms.

 

“All that capital from institutional investors, sovereign wealth funds, and the like has enabled start-ups to remain private for far longer than they previously did, raising bigger and bigger rounds,” says Lowrey, noting that private investors have eaten the losses when start-ups fail. “If there was a bubble and it were to burst, kitchen-table investors might scarcely notice, unlike in the late 1990s.”

 

You can read the full article here.

 

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