Is there a tech bubble?

[SmokeMonster]

With the upcoming Linked-In and Pandora IPOs, insane out of control valuations for Facebook and Groupon, startups getting funding left, right and center even when they don't seem to make any sense http://mashable.com/2011/03/24/color/, increases in CS enrollment http://computinged.wordpress.com/2011/04/13/guest-post-eric-roberts-on-the-dangers-of-escalating-enrollments/, not to mention the frenzy around everything "social". Now, I wasn't old enough to be conscious of the tech bubble in the 90s but from what I've read about it it seems that the phase we are going through is quite similar. Obviously it does not seem to be on the same scale as the 90s as the IPOs are not in full swing but it seems like are getting there. Do you think there is a bubble? If so how long till the inevitable crash?

[Tony]

So the answer is: maybe, and it varies greatly, depending on who you ask.

The problem in the 90s was that companies with no business models were going IPO and the general population was jumping on the shares. It's the same as the housing bubble in recent years -- general population was buying houses from each other for the sole purpose of selling it back to the next schmuck at a profit.

Now presumably VCs do more due diligence with their investments than an average person, and not reselling ownership to each other (with the exception of the SecondMarket and thus Facebook's evaluation. Facebook could be in a bubble).

Should the "bubble" crash, in its current form, the VCs will stop injecting new money into the ecosystem. If companies get to the end of their runway, people will loose jobs. At the very least the salaries will drop. But it's not like a large chunk of the population will loose their life savings and pension plans. Until your mom (who's presumably not a VC) starts putting all of your family's savings into Facebook's shares, we'll be fine.

[2goto1]

If by bubble you mean more speculative money plus higher P/E multiples for publicly traded companies, then could be. Some bootstrappers, angels and vcs are willing to take on more risk with the hopes of a greater reward...the speculative dream is to fund the next facebook or groupon.

Hard to say when the bubble will go away. Technology will play a critical role in our futures probably for the rest of our lives and beyond. What that means to business models and valuations in the near term and 20 years down the road is hard to say...things change pretty fast