Posted by Early Growth
June 12, 2018 | 3-minute read (560 words)
We often are asked, “When is this tech boom going to end?” We’ve been saying that the boom has about a year left—but we’ve been saying that for the past five or six years, so our past calculations have been a bit off. The tech boom just keeps surprising us.
The growth of the technology sector has been phenomenal, with incredible amounts of cash invested every year. We think that the tech boom’s been given longevity from a couple of few factors, and if those factors change, we might reevaluate our predictions—again.
A Rush of money
The micro venture capital trend adding to the pool of VC money coming in
Micro VC firms invest smaller amounts in very early-stage companies—we’re talking funds with under $80 million in capitalization. With more than 500 micro VC funds created in the last five years, there’s a deluge of cash coming in at very early stages.
In the past decade, startups have required less and less money to reach product market, doing more faster and with less cash. Micro VC firms can use a little money across a diversification on a chance for a big payout. Micro funds (under $50 million) reached an all-time high in 2017 and are expected to keep climbing. These smaller investments are helping to sustain a large number of tech-heavy startups.
Add this micro VC money to the traditional funds, then add in the steadily growing corporate VC funds that are expanding beyond major tech players into many major companies. This pile of money keeps the fires of the tech boom well stoked.
Continuation of radical frontier technology
After a deluge of mobile-centric tech and social media solutions, everyone’s investing in AI, IoT, AR, and VR—a veritable alphabet soup of impressive and not-so-futuristic technology that has us hypothesizing about how it will affect the future of our work.
As companies rush to make our science fiction and luxury-filled dreams a reality (mostly through the accumulation and analysis of big data), they only increase our thirst for technology that makes possible what we thought was only pretend.
The canaries in the coal mine
Lack of liquidity
There’s an international lack of liquidity right now; not a lot of exits are being completed
, so a lot of those returns aren’t being realized. Additionally, companies are tending to stay private longer, and many VCs are investing more to see better returns.
The unicorns (privately held startups valued at more than $1 billion) were once a statistical rarity, but CB Insights reports that there are more than 200 of these companies today
, with a total cumulative valuation at more than $800 billion. These huge and unrealistic valuations aren’t sustainable—we might be feeling a retraction from this overvaluation in the near future.
Warnings of a looming recession
On a national scale, we’ve seen corporate debt double since 2008, and experts are saying that the US is headed for a major recession—the Associated Press says it might be just around the bend in 2020
, citing current international trade troubles as a factor, along with retiring baby boomers and weak productivity gains.
No matter the future of the tech boom, we’re here to encourage growth and help companies navigate a complicated field of competition for funding.