Signs of Another Tech Bubble: VC
Ignorance may be bliss, but for many tech entrepreneurs of the millennial cohort—and the venture capitalists who fund them—that could be a double-edged sword.
Tech pros from Generation Y are too young to have firsthand experience of the tech boom and bust in the 1990s and early 2000s. That can work to their advantage, as they don't bring "any bias to the table," said Bill Gurley, general partner at the early-stage venture capital firm Benchmark, at TechCrunch Disrupt in New York on Monday. "They don't even know about the reason of why they shouldn't be successful."
But the lack of institutional memory could also engender another tech bubble, according to Gurley.
"We could get to a point—depending on how things flow and how much money is available—where people start doing things that they shouldn't do," he said.
Gurley, whose current investments include GrubHub, Uber and OpenTable, said that he doesn't think the tech sector has reached bubble status but sees signs of one forming.
For example, he said the late-stage private market continues to be "the most frothy thing" he's seen since the late 1990s—even though many have had their shares flop after going public. "If you have a hot company that is the select chosen one, then you have people knocking on your door begging you to take money."
Rising interest rates are another threat to the VC community and entrepreneurs, Gurley said. Low-interest rates in the late nineties helped develop the capital that was available for start-ups during the boom and are doing the same thing now.
Gurley said that the Federal Reserve can't keep rates low forever and that when rates rise it will have a negative impact on VCs.