Ah the good old days. Stocks up $25, $50, $100 more in a single day. Day trading was all the rage. Anyone and everyone you talked to had a story about how they had made a ton of money on such and such a stock. In an hour. Stock trading millionaires were being minted by the week, if not sooner.
You couldn’t go anywhere without people talking about the stock market. Everyone was in or new someone who was in. There were hundreds of companies that were coming public and could easily be bought and sold. You just pick a stock and buy it. Then you pray it goes up. Which most days it did.
Then it ended. Slowly by surely the air came out of the bubble and the stock markets declined and declined till the air was completely gone. The good news was that some people were able to see it coming and get out. The bad is that others were able to get out, but at significant losses.
If we thought it was stupid to invest in public internet websites that had no chance of succeeding back then, it’s worse today.
In a bubble there is always someone with a “great” idea pitching an investor the dream of a billion dollar payout with a comparison to an existing success story. In the tech bubble it was Broadcast.com, AOL, Netscape, etc. Today its, Uber, Twitter, Facebook, etc.
To the investor, its the hope of a huge payout. But there is one critical difference. Back then the companies the general public was investing in were public companies. They may have been horrible companies, but being public meant that investors had liquidity to sell their stocks.
The bubble today comes from private investors who are investing in apps and small tech companies.
Just like back then there were always people telling you their idea for a new website or about the public website they invested in, today people always have what essentially boils down to an app that they want you to invest in. But unlike back then when the dream of riches was from a public company, now its from a private company. And there in lies the rub.
People we used to call individual or small investors, are now called Angels. Angels. Why do they call them Angels ? Maybe because they grant wishes ?
According to some data I found, there are 225k Angels in the US. Like the crazy days of the internet boom, I wonder how many realize what they have gotten into ?
But they are not alone.
For those who can’t figure out how to be Angels. You can sign up to be part of the new excitement called Equity Crowd Funding. Equity Crowd Funding allows you to join the masses to chase investments with as little as 5k dollars. Oh the possibilities !!
I have absolutely not doubt in my mind that most of these individual Angels and crowd funders are currently under water in their investments. Absolutely none. I say most. The percentage could be higher
Why ?
Because there is ZERO liquidity for any of those investments. None. Zero. Zip.
All those Angel investments in all those apps and startups. All that crowdfunded equity. All in search of their unicorn because the only real salvation right now is an exit or cash pay out from operations. The SEC made sure that there is no market for any of these companies to go public and create liquidity for their Angels. The market for sub 25mm dollar raises is effectively dead. DOA . Gone. Thanks SEC. And with the new Equity CrowdFunding rules yet to be finalized, there is no reason to believe that the SEC will be smart enough to create some form of liquidity for all those widows and orphans who will put their $5k into the dream only to realize they can’t get any cash back when they need money to fix their car
So why is this bubble far worse than the tech bubble of 2000 ?
Because the only thing worse than a market with collapsing valuations is a market with no valuations and no liquidity.
If stock in a company is worth what somebody will pay for it, what is the stock of a company worth when there is no place to sell it ?
I dont often check the comments here , If you want to discuss with me , hit me up on Cyber Dust app. Add the account AskMark and ask away
http://www.cyberdust.com/addme?askmark
Pingback: Mark Cuban Warns Small Angel Investors a Burst Hi-Tech Bubble Will Destroy Them – Jewish Business News
Pingback: The next tech bubble is about to burst | Blog of Leonid Mamchenkov
Pingback: Of course we’re in a bubble. Duh. | Growth Engineering
Pingback: Etsy’s IPO will be a point against bubble proponents | SomeLearning
Pingback: Etsy’s IPO will be a point against bubble proponents | MyWebspace
Pingback: Etsy’s IPO will be a point against bubble proponents | 381test
Pingback: 【怪兽TV】科技泡沫论又一弹：为什么现在的科技泡沫比2000年更糟糕 | 怪兽TV
Pingback: Are We in a Tech Bubble, or Not?
Pingback: What Mark Cuban Is Really Saying About The Tech Bubble | The MSB Cheat Sheet Blog
Pingback: Monster bubbles: the delayed crisis of capitalism resurfaces « WORDVIRUS
Pingback: Monster bubbles: the delayed crisis of casino capitalism resurfaces | ROAR Magazine
Pingback: Can This System Help You Avoid the Next Crash? | My Blog
Pingback: 10 Signs of a Tech Bubble
Pingback: SEC Rules Everyday Citizens (Non-Accredited Investors) Can Now Participate in Equity Crowdfunding & Invest in Startups | The Grady Firm, P.C.
世界一流のサッカー用品ショップ
通常1万点売れ筋商品を毎日激安通販
メーカーから直入荷、最安値にチャレンジ、即時注文対応！
のサッカー用品ショップ
Comment by Bo Wang -
Pingback: Mark Cuban: Huidige techbubbel erger dan in 2000 | Slim Beleggen
Pingback: SEC allows regular Americans to become venture capitalists, no Silicon Valley cred required - DailyScene.comDailyScene.com
Pingback: financial geo1 | help with finance, geo1 | money, geo1911-Financial Services
Pingback: Start-Ups Make Their Way Into Retirement Accounts | LaunchPad Daily
Pingback: As Nasdaq soars, bubble fears grow - Smarter Investing
Pingback: Mutual Funds And Pensions Now Piling Into Risky Tech Investments | The Today Online
Pingback: SiliconBeat – Wall Street, mega tech valuations and you
Pingback: Liquidity Causes Bubbles | Elaine's Idle Mind
Pingback: Things that Cause Bubbles | Elaine's Idle Mind
Pingback: Interest Rate Hike, Why and What is Ramifications?
Hello Mr. Cuban,
My name is Omar Mercado, and I have a product venture that might interest you. I am not a big company, so the product is still in it’s early development stage (prototypes are being tested, and there is no competition on a close to 30 billion dollar market. ), but it should not take much to get this product from prototype to consumer ready.
If you are interested, you will have to sign a non-disclosure agreement before discussion of this product.
Thank you for your attention and you can contact me via e-mail at omarf13@gmail.com,
Omar Mercado
Comment by Omar Mercado (@OmarDaily) -
Pingback: Bill Gurley又一次警告：今年会有一批独角兽公司死于泡沫中 | 极客互联|关注极客事业
Pingback: How to Avoid the New Technology Bubble | Reading The World
OTC security exchanges. http://realitycrowdtv.com/blog/news/will-otc-markets-solution-crowdfunding-liquidity-concerns/
Comment by Augustus (@AjinVT) -
Pingback: What Did We Learn From the Dotcom Stock Bubble of 2000? - Business Tech | Business Tech
Pingback: What Did We Learn From the Dotcom Stock Bubble of 2000?
Pingback: What Did We Learn From the Dotcom Stock Bubble of 2000? - TaskBusiness
Pingback: What Did We Learn From the Dotcom Stock Bubble of 2000? | USA Press
Pingback: Free Wallpaper News | What Did We Learn From the Dotcom Stock Bubble of 2000?
Pingback: Tech Stocks and the 2000 Dotcom Bust: 15 Years of Wall Street Lessons
Pingback: Founders Weekly #40
Pingback: Smackdown: Steve Case on Mark Cuban “His View is Skewed by the Circles He Runs in” as Cuban Criticizes Crowdfunding | Digital Fortress
Pingback: Why this N.C. investor thinks Mark Cuban is ‘dead wrong’ about a tech bubble | Tech Reformers
Pingback: Cuban Weighs In | rorycgallagher
Pingback: Sizing Up Bill Gurley’s "Bubble" And The End Of The IPO | I Travel Easy
Pingback: Why This Tech Bubble is Worse Than the Tech Bubble of 2000 | PINEBASE
Pingback: Sizing Up Bill Gurley’s “Bubble” And The End Of The IPO « Malaysia Daily News
Pingback: 科技泡沫论又一弹：为什么现在的科技泡沫比2000年更糟糕 | 产品汪的笔记
Pingback: Do we have a new tech bubble?
Reblogged this on Oleg Baskov.
Comment by Oleg Baskov -
Pingback: Lo mejor del Mobile World Congress, burbujas tecnológicas y el nuevo Windows 93. Internet is a Series of Blogs (300) | el BLOG de FCASTROG
Pingback: Money is the Fuel for Tech Startups (and Jobs)
Pingback: Lo mejor del Mobile World Congress.
Pingback: 科技泡沫论又一弹：为什么现在的科技泡沫比2000年更糟糕-道同汇
Pingback: Why This Tech Bubble is Worse Than the Tech Bubble of 2000 | blog maverick | journal therapy 1981
Pingback: Copying the Silicon Valley Bubble | Decoding the new economy
Pingback: Mark Cuban: Huidige techbubbel erger dan in 2000 » CFDInfo
Pingback: Lo mejor del Mobile World Congress, burbujas tecnológicas y el nuevo Windows 93. Internet is a Series of Blogs (300) | Donald Rodriguez
Pingback: Lo mejor del Mobile World Congress, burbujas tecnológicas y el nuevo Windows 93. Internet is a Series of Blogs (300) | Bauber.com
Pingback: Lo mejor del Mobile World Congress, burbujas tecnológicas y el nuevo Windows 93. Internet is a Series of Blogs (300) - eImagenes.com
Pingback: Mark Cuban says we’re in a new bubble — but it’s a problem of inexperienced angels | SomeLearning
Pingback: Rich People Bitching about Bubbles | Elaine's Idle Mind
Pingback: Massive new tech bubble? Mark Cuban has no idea what he’s talking about | Tech Reformers
Pingback: 5 MIsses in Mark Cuban's Angel "Bubble" Post | Graffagnini, A Law Corporation| New Orleans, LA
Pingback: Shark Tank Billionaire Says ‘This Tech Bubble is Worse Than The Tech Bubble of 2000.’ Is He Right? | San Francisco News
Pingback: Jordan Meyerowitz | Mark Cuban says we’re in a new bubble — but it’s a problem of inexperienced angels
Barry Obama has complete 6/8ths of his “Fundamental Change of America”. It’s called COMMUNISM. The entire ‘Stock Market’ is but a little chunk of keeping those who have not realized what is REALLY happening still believing that ‘Investing Moves looking positive’ in the Game.
Fact is, the “Cloud” is real — being held up by our “NEW-GOV” Banking under control control of overheating Printing Presses until the most massive economic Crash & Burn the World has ever seen. The saving grace is that there are THREE things that will ALWAYS have true VALUE…
1. REAL ESTATE – As long as its ‘ownership’ remains undisputed (NOT GRABBED by NEW-GOV).
2. GOLD, SILVER, ETC. – Using the Limited Supply list, Somebody, Somewhere WANTS IT. This, too, could be subject to GRABBING as well as thievery (Unless you sleep with it, surrounded by a VAULT!).
3. PRECIOUS JEWELS – Although the audience is smaller than “Precious Metal”, more easily concealed.
So… am i Crazy? Ultra-Paranoid? Maybe just Super-Pessimistic? It really depends on YOUR “World View” taking into consideration AGENDA 21, Barry’s “Equal Distribution of Wealth”, the “One World Government” people (YES – They ALREADY own a good portion of “World Wealth”), or even unimaginable ‘World Turmoil’ brought on by Terrorism ( Islamic? Nuclear?)…
~O~R~
The World goes on, a day at a time, with Civilized “Politics as Usual” and smooth migration to a Better World moves us all forward… In which case your wealth and power grow at a pleasing rate – and life is GOOD.
Comment by Wm Brian Maday -
Pingback: El rün~rün de los inversores de Internet en España | La Pastilla Roja
Pingback: Why Tech Bubble 2.0 Will Be Much Worse Than The Last One
Pingback: Morning Report – Decent jobs report. Bonds get crushed. 3/6/15 | All Things in Moderation
There’s some good, bad, ugly and weird here:
•Good – This “bubble” is almost all-private money from wealth individuals, so if these “angels” lose their money, which many of them have and will continue too, they will still be ok.
•Bad – Yes, there are more “angels” than ever these days, giving dumb money to even dumber ideas because they are uneducated “angel” investors. Luckily the average investor only writes one $25,000 check every year and won’t see a return, if any, for 5-8 years so they get angel exhaustion and stop investing.
•Ugly – Equity Crowd Funding (SEC JOBS Act) is a byproduct of all of this because the masses think that the rich are getting richer because they can invest in these deals, which for 1% of investors is true, so they want a piece of the action. Unfortunately investing $5k along with having no formal background in angel investing, will almost always end up losing your money
•Weird – Shark Tank is a fun show (yes it’s entertainment) but not how most investing actually takes place. You are hypocritically inspiring millions of people to do exactly what they shouldn’t do and getting people who can’t afford to lose their investment, to want too invest.
•Even Weirder – The plug for Cyber Dust at the end. Enough said.
Comment by Trace Cohen (@Trace_Cohen) -
Pingback: Mark Cuban is wrong about today’s tech ‘bubble’ - Fortune
Pingback: Tech News / Mark Cuban says we’re in a new bubble — but it’s a problem of inexperienced angels
Pingback: Mark Cuban says we’re in a new bubble — but it’s a problem of inexperienced angels | MyWebspace
Pingback: Mark Cuban says we’re in a new bubble — but it’s a problem of inexperienced angels | 381test
Pingback: 科技泡沫论又一弹：为什么现在的科技泡沫比2000年更糟糕 | 江叔博客
Pingback: Mark Cuban: This Bubble is Worse - Wilson Growth Partners, LLC
Pingback: 科技泡沫论又一弹：为什么现在的科技泡沫比2000年更糟糕 | 23Seed
Pingback: La segunda burbuja tecnológica, según Mark Cuban - TecNoticiero
Pingback: Why This Tech Bubble Is Worse Than the Tech Bubble of 2000 – StdGod
The public markets are broken. The original intent was to operate a system where companies could raise capital through issuance of equity or debt and then match buyers and sellers to provide liquidity. Price discovery is a natural benefit to interested parties.
In an HFT dominated world, price action tells you little about underlying companies. Poorly conceived and selectively enforced regulations have allowed the markets to essentially morph into casino that no longer serves the listing companies or the true investors.
As an entrepreneur, the idea of going public has lost its appeal. However, I see a glimmer of hope in The JOBS Act. The first component, lifting the ban on general solicitation has opened up a massive new opportunity for entrepreneurs seeking capital. The rules are not perfect, but they are a start in the right direction.
This new opportunity has the potential to attract millions of Americans who qualify as Accredited Investors into the current universe of Angel Investors. The reality is that the antiquated non-solicitation rules severely limited access to private offerings to many who were financially qualified to invest. Entrepreneurs had no legal way of accessing these millions of potential investors without the costly intermediation of a broker / dealer.
I concede that liquidity outside of the official markets is limited. So be it. Great ideas (not stupid App ideas) will find investors easier than ever before and should not require ultra-liquid markets in order for them to grow and succeed. These new secondary markets already exist and better versions are being built right now.
So… Mark, please tell me that you see the potential here? What am I missing?
Comment by eskimo111273 -
Pingback: Cuban: Today’s tech bubble worse than 2000 | VoxBox
Pingback: March 5, 2015 « PrefBlog
There is always some sort of BUBBLE POPS or Huge Corrections every 8 Years…ex) Tech + Mortgage..This one Marc’s talking about could be it? There will be a time when even Billionaires / Sharks can’t afford to keep investing in an idea that isn’t bringing back real cash with no public offering in the future. When they realize there really are no Unicorns in Real Life and there are only .0000001% Unicorns in the delusional tech Silicon Valley fantasy world, then sht will hit the fan. On Shark Tank there are more and more companies coming in valuing their companies at a million dollars in return for 5%…Wtf, how many investors can keep giving these people money before it dries up and the American Internet Dream of becoming an internet billionaire dies? One day all entrepreneurs will wake up and have to go back to the 9-5 job and work for the man.
Comment by PRODUCT HAULS (@ProductHauls) -
Pingback: Cuban: Today’s tech bubble worse than 2000 | Techyville
Mark, with all due respect, I thought you were trying to caution the sheepherders not the keepers of mice. The word Bubble carries a much bigger connotation then what private investing represents. It is indeed like yelling FIRE in a movie theater. The plug of your latest start-up is truly an irony..
Comment by Christopher Tetzlaff (@CRT_928) -
Pingback: Mark Cuban: Current Tech Bubble Even Worse Than Dot-Com Bubble | Trading Common Sense
Pingback: Mark Cuban: Why This Tech Bubble Is Worse Than the Tech Bubble of 2000 | WorkTrigger
Pingback: Red Ivy – Advice: This is the reason why Mark Cuban is wrong about the tech bubble
Pingback: Mark Cuban Thinks It’s Bubblicious Points and Figures
Pingback: Mark Cuban says this tech bubble is worse than the one in 2000 - GeekWand
Pingback: Mark Cuban Explains Why Most of Today’s Startup Investors are Idiots | NextShark
Certainly on average angels are going to lose money. But we are talking about probably less than $5 billion a year: a tiny fraction of the overall investing landscape. Most of the angels I know are investing play money: a fraction of their total net worth. Late-stage large-scale investments in companies like Uber are a different matter, but one should not be too hasty to assume that those investors are suckers. We don’t know the terms. If I could invest in Uber at $40 billion pre with a 2x preference, preference over previous rounds, and an 8% dividend, I would do that in a heartbeat. To make money, I would only need to have Uber be worth over $2.8 billion, not $42.8 billion.
Comment by Matthew Greenfield (@mattgreenfield) -
Pingback: Mark Cuban says this tech bubble is worse than the one in 2000 | MyWebspace
Pingback: Mark Cuban says this tech bubble is worse than the one in 2000 | brettwilson1170
oh the irony, plugging Cyberdust at the end of this blog post….
Comment by michaelxavierd -
There’s only one puzzle piece, which is when spending slows down on mobile and wearables that is when investors should worry.
Comment by Kevin Yu -
Pingback: Why This Tech Bubble Is Worse Than the Tech Bubble of 2000 - AltoSky - AltoSky
Very thoughtless piece by Mr. Cuban. See attached for a better analysis than I could write. There won’t be any “widows and orphans” that will be losing their money when the private company bubble crashes.
http://philpearlman.tumblr.com/post/112797589571/has-mark-cuban-completely-lost-touch-with-america
Comment by zach7676 -
Couple of typos: Everyone was in or “knew” someone. . . I have absolutely “no” doubt . . . I don’t mind if you delete this comment and make the corrections.
Comment by Donna Balon -
Interesting conversation – thank you for the post, Mark! Obviously, any bubble burst would be bad for everyone, but I disagree that this one will be worse.
I would reference as a first point Pitchbook data that shows increasing exits from buyouts and acquisitions as compared to IPOs (2015 Annual U.S. Venture Industry Report, pgs. 16 & 17). To me, that means that even when there is a bust, cash rich companies like Facebook, Google, Apple, etc. are going to continue to make acquisitions, especially as valuations tank. Even if their stock is down and is less available as a currency, they can use cash to scoop up devalued companies (I would also argue they do have value, unlike the last bust, since they typically do have revenue and/or profits). Those large acquirers with tons of cash were not around in the last bust, and as a result, should make a bust less harsh (still harsh, but we are arguing whether it will be worse, not whether it will be bad).
Secondly, I think the number of angel investors has gone down over the past few years, not up. That means less people who will lose money in risky investments in the event of a bust. Even those still in the game I think are well-educated on the risks, and if not, I agree they should not be doing it (which begs the question as whether Crowdfunding will be good for the public as a whole – I think yes if the portals provide enough education). With the boom we have seen in recent years in angel groups and professionally managed funds, there are more opportunities than ever for early-stage investors to make smarter investments. These options were not as widely available before the last bust, leading more inexperienced investors to get into a hot market they did not understand.
Comment by Phillip Shmerling (@philshmer) -
Pingback: Outside the Box: This is why Mark Cuban is wrong about the tech bubble | i-can-help.net
Pingback: Mark Cuban says this tech bubble is worse than the one in 2000 - NEWS | Phones | Nigeria Science | Technology |Computers
Hey Mark, you need a proofreader for your blog. I new that write aweigh. Feel free to send me an offer.
Comment by Thingumbob (@Thingumbobesq) -
I don’t see the relationship between these crowd funded apps the stock market. Sure, maybe all of these angels investors will have their investment washed away at some point, but how exactly will affect those investing in big public tech comapnies that generating large amounts of free cash flow? If anything these apps, and the monmey this is going to be lost in them, helps drive usage and therefore revenue of the bigger companies like Apple, Facebook, and Twitter.
Comment by mikebayes -
Pingback: Cuban: Tech bubble worse now than 15 years ago - Yahoo7 News - Stock Quotes Now
Pingback: Mark Cuban says this tech bubble is worse than the one in 2000 | FOM
Meanwhile…Mark continues to work on Shark Tank will openly criticizing the number of Angels in the market.
Comment by Signifyin (@Signifyin) -
Pingback: Cuban: Today’s tech bubble worse than 2000 | Bain Daily
Not sure if Mark is pointing out the irrational bubble market conditions or advocating that SEC enables this stupidity even further by making it “liquid”.
Comment by Anthony Lysenko -
Pingback: Why This Tech Bubble Is Worse Than the Tech Bubble of 2000 | Omaha Sun Times
Pingback: Mark Cuban says this tech bubble is worse than the one in 2000 | TRENDING NEWS
Pingback: Meetmenews – Mark Cuban says this tech bubble is worse than the one in 2000
Pingback: Mark Cuban says this tech bubble is worse than the one in 2000 | EarlyNewToday
Pingback: Mark Cuban says this tech bubble is worse than the one in 2000 | Oh Alright!
Pingback: Mark Cuban says this tech bubble is worse than the one in 2000 - iPad Workshop
Pingback: Mark Cuban says this tech bubble is worse than the one in 2000 - Responsive | Responsive
Pingback: Mark Cuban says this tech bubble is worse than the one in 2000 - DailyScene.comDailyScene.com
Pingback: Mark Cuban says this tech bubble is worse than the one in 2000 | Top ReShare
Pingback: Mark Cuban says this tech bubble is worse than the one in 2000 - Top In Worlds
Pingback: Mark Cuban says this tech bubble is worse than the one in 2000 | moomblr!
Pingback: 1p – Mark Cuban sees tech bubble – Exploding Ads
Mark, You certainly have a sixth sense for spotting ‘amateur hour’ that has stood the test of time. My question is, to what extent does it affect main street that (rich) fools (with illusions of insight) and their money are parted. And in that sense, is this as ominous to the economy as your 2000 analogy?
Comment by Venu Vasudevan -
Pingback: Mark Cuban says this tech bubble is worse than the one in 2000 | Devang's Domain
Pingback: Mark Cuban says this tech bubble is worse than the one in 2000 | ShoutYourSite
Pingback: Mark Cuban says this tech bubble is worse than the one in 2000 | The Techstartups
Pingback: Mark Cuban says this tech bubble is worse than the one in 2000 | Content Generator
Pingback: Mark Cuban says this tech bubble is worse than the one in 2000 | SEO News | Technology News | Insurance News | Mecwan.com
Pingback: Mark Cuban says this tech bubble is worse than the one in 2000 | unlimited
Pingback: Mark Cuban says this tech bubble is worse than the one in 2000 | Cesar Vela
Pingback: Mark Cuban: We’re in a Tech Bubble—and It’s Worse Than 2000 | Tech Reformers
Pingback: 1p – Mark Cuban sees tech bubble | OnAdvertise.com
Pingback: 1p – Mark Cuban sees tech bubble | blog.offeryour.com
Pingback: 1p – Mark Cuban sees tech bubble | Profit Goals
Pingback: The Silicon Valley Tech Bubble | Phillip LaBrasca
Pingback: The Daily Debt Rattle | StealthFlation
Pingback: Why This Tech Bubble Is Worse Than the Tech Bubble of 2000 - VOICENEWS :: ENGLISH
Pingback: 03/05/15 - Thursday AM Interest-ing Reads -Compound Interest Rocks
Pingback: Why This Tech Bubble Is Worse Than the Tech Bubble of 2000 | SuddenlySlimmer
Pingback: Why This Tech Bubble Is Worse Than the Tech Bubble of 2000 - GANGUPON
Pingback: Why This Tech Bubble Is Worse Than the Tech Bubble of 2000 | AGReGate.info
Pingback: Why This Tech Bubble Is Worse Than the Tech Bubble of 2000 | Cesar Vela
Equityzen.com seems relevant here.
“Our mission is to improve the way startup employees are paid by unlocking the value of their equity compensation in a way that benefits all key players: the shareholder, the company, and the investor.”
I have no financial connection to them.
Comment by vimspot -
Pingback: What We're Reading This Morning — March 5, 2015
Pingback: Mark Cuban: ‘Uber, Twitter, Facebook’ part of a new tech bubble | The Market Surge
Majority of the high-(f)lying “start-ups” akin AirBnB, Uber and others are based on violation of laws that others follow. Their argument is literally: “I have an APP, so your rules ain’t no relevant!”
It takes a certain arrogance to preach this new kind of criminal-tech bubble.
It takes a complete total ignorance – to invest in one.
I’m with Mark. This APP bubble is too obvious and considering the tiny little contribution these “start-ups” add to the actual REAL technological advancement – this bubble long overdue for a pop and significant valuation drop. I would venture further and say that APPs, in their vast majority, are actually detrimental to human advancement.
Comment by Robert Blake -
Mark you are correct on your views, no one is vocal about this
Comment by @melloeser (@mellloeser) -
Tick-Tock Tick-Tock. Well said, we listen to it all day long over here with the Angles and the big dreams they promise. 🙂
Comment by State of Text SMS (@Stateoftext) -
I work with a group that advises and raises capital for tech startups….i totally agree with Mark on this one…we see a lot of twenty somethings with the next great boot strapped app or idea looking for a get rich quick scheme without putting in the necessary hard work to build a company….but what is most alarming is the number of “investors” willing to go along…this is the 2000 tech bubble all over again only this time it’s on steroids… >
Comment by henry peraza -
Pingback: Mark Cuban says we’re in a tech bubble — and it’s going to be worse than the bust in 2000 | Financial Post
Good Points..though one would think that the size of the bubble is smaller. Also, it would seem that hedge-funds investing in private companies with pension funds might be a bigger issue. Overall good article, but has a couple of typos… shown below.
Ah the good old days. Stocks up $25, $50, $100 more in a single day. Day trading was all the rage. Anyone and everyone you talked to had a story about how they had made a ton of money on such and such a stock. In an hour, stock trading millionaires were being minted by the week, if not sooner.
You couldn’t go anywhere without people talking about the stock market. Everyone was in or knew someone who was in. There were hundreds of companies that were coming public and could easily be bought and sold. You just pick a stock and buy it. Then you pray it goes up. Which most days it did.
Then it ended. Slowly but surely the air came out of the bubble and the stock markets declined and declined till the air was completely gone. The good news was that some people were able to see it coming and get out. The bad is that others were able to get out, but at significant losses.
If we thought it was stupid to invest in public internet websites that had no chance of succeeding back then, it’s worse today.
In a bubble, there is always someone with a “great” idea pitching an investor the dream of a billion dollar payout with a comparison to an existing success story. In the tech bubble it was Broadcast.com, AOL, Netscape, etc. Today its, Uber, Twitter, Facebook, etc.
To the investor, its the hope of a huge payout. But there is one critical difference. Back then the companies the general public was investing in were public companies. They may have been horrible companies, but being public meant that investors had liquidity to sell their stocks.
The bubble today comes from private investors who are investing in apps and small tech companies.
Just like back then there were always people telling you their idea for a new website or about the public website they invested in, today people always have what essentially boils down to an app that they want you to invest in. But unlike back then when the dream of riches was from a public company, now its from a private company. And there in lies the rub.
People we used to call individual or small investors, are now called Angels. Angels. Why do they call them Angels ? Maybe because they grant wishes ?
According to some data I found, there are 225k Angels in the US. Like the crazy days of the internet boom, I wonder how many realize what they have gotten into ?
But they are not alone.
For those who can’t figure out how to be Angels. You can sign up to be part of the new excitement called Equity Crowd Funding. Equity Crowd Funding allows you to join the masses to chase investments with as little as 5k dollars. Oh the possibilities !!
I have absolutely not doubt in my mind that most of these individual Angels and crowd funders are currently under water in their investments. Absolutely none. I say most. The percentage could be higher
Why ?
Because there is ZERO liquidity for any of those investments. None. Zero. Zip.
All those Angel investments in all those apps and startups. All that crowdfunded equity. All in search of their unicorn because the only real salvation right now is an exit or cash pay out from operations. The SEC made sure that there is no market for any of these companies to go public and create liquidity for their Angels. The market for sub 25mm dollar raises is effectively dead. DOA . Gone. Thanks SEC. And with the new Equity CrowdFunding rules yet to be finalized, there is no reason to believe that the SEC will be smart enough to create some form of liquidity for all those widows and orphans who will put their $5k into the dream only to realize they can’t get any cash back when they need money to fix their car
So why is this bubble far worse than the tech bubble of 2000 ?
Because the only thing worse than a market with collapsing valuations is a market with no valuations and no liquidity.
If stock in a company is worth what somebody will pay for it, what is the stock of a company worth when there is no place to sell it ?
Comment by Rahul Razdan -
Wrong Mark Austin
Comment by Austin, Mark -
Pingback: Thursday Morning Links | timiacono.com
Pingback: We're In A Tech Bubble And It's Worse Than The 2000 EraGulf Elite Magazine
I think more along the lines of what Mark is referring to is that for a company to have “value”; it needs to have something of value for liquidation for Angel investors to recoup losses. I still have my reservations and theories about a social media website going public with no product. There’s nothing to monetize publicly. What could possibly be for sale and to whom?
Bubbles arise from over-inflated beliefs about “new” perceived value and short-sighted greed. Use your head for something other than a hat rack. When common sense is overruled by social phenomena and ego that’s a recipe for disaster.
Comment by Jay Robertson (@JayWRobertson) -
I agree with most of the sentiment in this article, but would add 3 things:
1. The crowd platforms (in my opinion) have a duty to educate the investor that (i) stocks are illiquid (ii) highly risky and (iii) often end in failure – so only invest what you can afford to lose
2. The Kaufmann Foundation did an exhaustive study of successful angel investors over the past 10+ years. The biggest determinant of success was portfolio diversification – having 20+ investments. So, quite apart from successful angels being “excellent stock pickers”, they were just well diversified. The crowd should learn form this
3. A secondary market will emerge in time, but will inherently difficult to operate due to lack of transparency etc. Nonetheless, it is something we have an eye on over at Reportally.com – starting with our free cap table builder & reporting.
Interesting times…
Comment by Stephen W Findlay (@stevewfindlay) -
Pingback: Weekly Links #11 | meshedsociety.com
Pingback: Why This Tech Bubble is Worse Than the Tech Bubble of 2000 | David Stockman's Contra Corner
I wrote a piece about this, http://www.arilewis.com/late-stage-growth-equity-investments-are-a-bubble
Comment by Ari Lewis (@amlewis4) -
Don’t you have to be an “accredited investor” ie. already have a substantial net worth, to be legally allowed to invest in startups? Or is this Equity Crowd Funding the governments solution? Mark, you point out a problem. What would be a better solution?
Comment by Jenny Zopa -
I dunno Mark, but Angels don’t expect liquidity that early, and they are supposed to be high net worth individuals, so even if they lost it all, so what?
The difference between 2000 and now is that in 2000, it wasn’t just 225K people that stood to lose something, it was millions of consumers, and that was a bad thing,- not now.
If these 225K angels can help to seed more startups, so that more great ones come out of that early bunch, then that’s a good thing, and the good ones will have enough liquidity to make-up for these investments.
Comment by William Mougayar (@wmougayar) -
Hey Mark – Great Reading. Do you have any idea how much of this “angel” money is floating around?
Comment by edlearn1234 -
Comments were as usual right on. Can’t recall when I did not agree. Maybe sharing 7/31/58 DOB explains it. Love how you threw BROADCAST.COM in there…LOL
Comment by Ken Bell -
There is a bubble of biblical proportions going on but people are so clueless to see it. Just a few years ago you couldn’t give assets away and now people are paying premium for everything from private companies, collectibles, art and real estate yet the party goes on. Every day the farce continues as the FED 0% circus justifies this asset bubble yet nobody seems to figure that mathematically it is impossible for this to continue without a pullback.
History repeats itself due to human nature repeats itself. Be forewarned. Soon we will be saying..”remember back in the day where all you needed was to design and app, wear plaid and skinny jeans with a beard and become a millionaire overnight?”
And how can you argue with Mark who sold his overpriced company to Yahoo during the last tech bubble?
Comment by George Gotch -
Kick ass write up. And so damn true Mark.
This surely needs to be read by all parties who reside on either side of the fence.
Personally, I believe the angel mentality is nothing like it was in 1997-2000.. These days “real” angels are far and few. Today’s “angel world” is seriously saturated with folks who do not know how their initial investment effects subsequent rounds of funding. Nor do they understand how their investment requirements effect the value of their own investments. And on the other side of the fence, entrepreneurs have no clue how initial angel investments effect their attempts to raise a second or third round.. Most start ups, who take in an angel round, are UNABLE to successfully achieve subsequent rounds of funding thus flushing down the drain the investment an angel made..
What a mess…..
Bob
Funn Networks
ps- Speaking of bubble.. Isn’t it amazing how companies continue to obtain investments that utilize the same business model which have usually proven to be unprofitable? i.e.: Spotify, Pandora, Vevo, Beats, etc… Hell Pandora has lost how much value in the past 18 months? Yet they, as with Spotify and Vevo, continue to raise money hand over fist… Its insane.. What’s worse are the valuations these companies are able to obtain investments with.. It’s Pathetic and there’s no end in sight.. As with the first bubble, investors should be to blame when they lose their asses on a company they themselves helped to pump up in value.
Comment by nypbbob -
Pingback: Mark Cuban Warns: This Bubble Is Far Worse Than The Tech Bubble Of 2000 | ZombieMarkets
Wow, I’m not saying you’re wrong, Mark, but I think someone’s heard too many pitches.
Mark, Mark, Mark… Three words of advice back to you: “Vay Cay Shun.”
Comment by John Coonen (@JCoonen) -
Disagree with your current bubble theory. These are disruptive companies that have proven to scale and acquire individuals attention and information. If the due diligence wasn’t done between the previous bubble and this one on your behalf, you’re a little late to the game to incriminate. Your influence and statements are the ones that will pop this. Investments are made for future growth.. our investments rely on teens’ decisions 10 years from now, not what happened 10 years ago. The world has what it wants at its fingertips because of these companies, try taking it away.
Comment by Ray Leon -
“There is ZERO liquidity for any of those investments. None. Zero. Zip.”
This is why we launched Sand Hill Exchange ( http://sandhill.exchange/ ) — where we provide liquid, accessible startup derivatives.
Comment by Sand Hill Exchange (@SandHillX) -
Right on the money, Mark. Not only is there no liquidity for angels, but there are very few rules to protect this new breed of crowdangel. What would you say about the opportunity to invest in a company that you have not met (or even talked to on the phone) via a “syndicate lead” or crowdfunding platform whom you also don’t know? The deal sponsor has no verifiable investment track record, the company information provided has not been verified, and there could be undisclosed side deals or conflicts of interest between the deal sponsor and the company of which you are unaware. You will rarely if ever receive updates from the deal sponsor or company. And, here’s the kicker, your money is likely to be illiquid for 10 years on average with a better than 50% chance that you lose it all, a 25% chance at an even money return, a 20% chance at a very modest return, and only a 5% chance at a good return. Who would be crazy enough to invest in these new platforms if you were not already a very experienced angel investor? Well, AngelList (just one of many platforms) facilitated +$100mm in investment last year via its crowdfunds and most of these platforms are growing fast. The aftermath of equity crowdfunding looks like it is going to be bloody at its current trajectory. Great post!
Comment by Kevin Moore (@Kevrmoore) -
If you are long private equity investments (I’m not) in Uber, Snapchat, Pinterest, Airbnb, etc., you could sell calls / buy puts in FB, TWTR, P, YELP, GOOGL, AAPL, QQQ, etc. to hedge. Isn’t that how you made your fortune, Mark?
Comment by Chad (@OptionsGarden) -
Excellent point Mark. Angellist is trying to clean up the “Angels” point you are making by making sure that most Angels are qualified and “supposedly” know what they are getting into, although I am sure that many of those “qualified” angel investors still have no idea what they are doing. As long as we do not let the average Joes get into these private investments and insane valuations we should be more or less fine. I remember one episode on Shark Tank where you got really frustrated with the Tycoon Real Estate entrepreneur, for that same issue. Bottom line entrepreneurs should refuse to take investments from people who have no idea what they are doing, since the probability that these people will never see that money again is pretty high and also the entrepreneurs will lose their reputation and credibility in front of the professional investors.
Comment by Val Tsanev (@tsanev1980) -
I completely agree with you, 100%. So where should I put my money if I’m just an ordinary guy? Do you think it’s best to save up a nice stockpile of cash, wait for the bubble to burst and opportunities to arise, and then either invest or start my own company?
Comment by Andrew Lynch -
Personally, I consider it a bubble when companies with almost no revenue (and no prospects for generating revenue of any consequence) are getting acquired for billions.
Comment by markcancellieri -
So that is why you invested in Cyberdust? What troubles me about this blog is that it makes a blanket statement and overlooks the many successful small tech companies and apps that have great business models, revenue, strategic partners, and clear exit strategies through merger or acquisition. Please Mr. Cuban life may be easy for you, but don’t be so quick to make blanket statements that can be harmful to companies that have worked their tails off to earn investor confidence. Remember, you were once one of them.
Comment by Lady Louboutin (@LadyLouboutinTX) -
There never has been a bubble in 2000 and never will come a new bubble. Whole life is one bubble. No ups, no downs. It’s all magic. The best story will survive. Money is not important any longer. Time that money made the rules have changed. Now opinion is creating the rules.
Comment by Henk J.J. Leferink (@henry2145) -
Pingback: Startups News / Why This Tech Bubble is Worse Than the Tech Bubble of 2000
This article is right on! There are also a whole host of other problems in the current bubble that come from the early stage funding bubble (i.e. elevated failure rates from the Series A Crunch and adverse selection of the companies funded on the margins, ridiculous early stage valuations diminishing longer-term angel returns even for successful companies, etc.) in addition to the lack of secondary liquidity. The liquidity problem can probably be solved with a regulated Venture Exchange that increases both capital formation and secondary liquidity for earlier stage companies.
There is also a bubble in later stage private company valuations. While these companies’ cap structures likely limit the extent to which any investors are actually “underwater” (i.e. Preferred liquidation preferences), it is bizarre and unsustainable that late stage private company valuations exceed what those companies would likely be valued at in more liquid public markets.
Comment by Lenny Grover (@lennygrover) -
I think this means Cyber Dust is in trouble, and Mark has no one to sell to.
Comment by Patrick Miller -
Great read Mr Cuban, I’ve been following your blog for sometime now and I feel you are always spot on.
Sent from my iPhone
Comment by Nick Venson -
Mark, you should check out Indie.VC (http://indie.vc/). Maybe there’s a new financial instrument aside from the traditional Angel/VC model that is so under duress.
Comment by Preston Zeller -
Pingback: 1p – Why current Tech Bubble worse than 2000s – Mark Cuban | OnAdvertise.com
Pingback: 1p – Why current Tech Bubble worse than 2000s – Mark Cuban – NewCribs.com
Does anyone have any recommendations to learn about the changes to the SEC to which Mark is referring?
Comment by Bryce Anderson -
not sure what I just read, but it wasn’t good.
Comment by jsa (@JSA2422) -
Interesting point Mark. I think you might be right. But I think for people who know how to leverage social, seo and ppc this is the time to start your own non-venture backed business.
The easy access to crowds of people on Facebook was just shut down late last year. I think if you’re serious about launching a tech based business. Start as a media company that produces great content and gains an audience. Then, solve that audiences need.
This method still works and doesn’t require funding like these other tech projects. It could also be a way to avoid the bubble all together.
-Tyler
Comment by Tyler Zey (@easyagentpro) -
Reblogged this on IJI Law and commented:
Hey, Wait, I’ve got a new complaint; forever indebted to your priceless advice…
Comment by iimrich -