These have been good times for technology companies. The industry performed better than most of its peers in 2014 and helped the overall market reach record returns. But the real story is the soaring valuations for some of the biggest names in tech that are still private. Companies used to contemplate an initial public offering as a way to raise the funds necessary to finance their growth. But not anymore.
Companies like Uber, AirBnb, Lyft and Instacart have found plenty of willing investors anxious to fill their coffers with capital. And each funding round has raised their valuations to the point where some wonder where we're headed.
"All of these big numbers you're seeing for Uber, Airbnb, Instacart, etc. -- companies that some people have never heard of -- all of that money is coming from private venture capital investors," said Katie Benner, a technology columnist at Bloomberg Businessweek. "So if that bubble bursts, it's really only going to hurt the venture capital investors."
Compare that to the Dot Com Crash of 2000 and 2001 when most of the big names in tech were publicly traded. As investors looked up and realized that these media darlings had no earnings and were built on little more than a promise to figure it out over time, they pulled out. Some companies survived, but many withered on the vine, and then disappeared all together. As investors fled, they prompted a general market correction that rifled through the economy. Anyone with a pension, 401(k) or other market exposure saw significant losses.
Benner's point is that even though valuations have spiked recently -- Uber valued north of $40 billion? -- another market correction will have little impact beyond the venture capital firms who pumped them with funds.
There's another distinction at play here. Investors are betting big that today's top tech fliers are more valuable because they go beyond technology. They reach straight into the way that we live.
"Some of these valuations are very high because they're predicated on the idea that the companies will become a replacement for things we already use," said Benner. Taxis, hotels and office space have been around forever. Uber, AirBnb and WeWork are not simply tech companies. They're deploying sophisticated technology to upend established industries.
Later in program, Charlie Herman, host of WNYC's Money Talking sits down with Jon Oringer, the CEO of Shutterstock, one of New York's hottest tech companies. They discuss technology, venture capital and photography.