Why This Tech Bubble is Worse Than the Tech Bubble of 2000 – Part 2

Since a few people seem to be freaking out that I limited my example of those being subject to the bubble in private investments to Angels and Crowdfunding, I decided to do a part 2.

They were right. I should have been clearer on just how extensive the abuse and impact of this bubble is.

Lets change it to a question.

How many people have been pitched an app that is going to be the next ……..

How many people have been pitched to invest in that app ?

Has anyone not been pitched investing in an app ?

There are more than 1.3mm app in each of the 2 main stores. That excludes the dead and gone. That excludes the ones that never made it in.

I don’t know how many took in external PRIVATE investment from SMALL, individual investors.

I don’t know how many individuals in this country have made private investments in small deals while not being part of or self identifying as an Angel or Crowdfunding group. My guess is that its as big as the number of  non SOES day traders in 2000.

Does any one have any data I can use ?

I thought i would ask. I don’t want anyone to think i have lost touch with America:),

as always, I will take your responses and respond to as many questions as I can on Cyber Dust at

http://www.cyberdust.com/addme?askmark

 

55 thoughts on “Why This Tech Bubble is Worse Than the Tech Bubble of 2000 – Part 2

  1. Hmm, I guess it’s not that clear cut. I should have used a better term for write offs, this seems like strong evidence that people looking to learn about write offs is on an uptrend. It’s even more evident if you look at the countries where it’s applicable:

    https://www.google.com/trends/explore#q=write%20off&cmpt=q&tz=

    Comment by Sanjeev Dhanda -

  2. You can visit my website and watch movies:) http://filmifull-izle.com/

    Comment by filmifull-izle (@IzleFilmifull) -

  3. Apps that use data in neat ways to solve problems, with a performanced-based revenue model, are interesting. We think small to mid-sized businesses are underserved.

    Comment by Shelfmint (@Shelfmint) -

  4. Great post!

    Comment by TheBBRcast -

  5. by the way I am an entrepreneur following the road tech brick road to the wizard of apps, however this time around I have chosen a different approach, and a different product. Check it out, this product is a good fit for your team Mark…… https://www.youtube.com/watch?v=RtS1rhy2jSE&spfreload=10

    Comment by Maurice Moore -

  6. true, but this is also a good thing. When this tech (app) bubble burst, just as when the dot com bubble did, new ideas will come forth again to change the entire topology of the market. Milking the cow until its dry is essential, because once we have done and discovered all we can with current and old ideas/technology, then we will think of something new. For instance the internet became more interactive, and cell phones got smarter, and we tried merging the two with our old ways of thinking, but nothing worked until someone figured out internet/websites should be formatted to fit cell phones and other wireless devices, and then someone introduced a better solution, which is now what we call apps. So, in the words of a close friend “their is opportunity in chaos”. I would focus on being ahead of the curve finding out where is the market for tech transitioning, and what problems will need to be solved. Also, the investors of this tech bubble will find their place again, just as the investors from the dot com boom did, because many of them understood the risk and opportunity they were the gurus and go to guys for today’s tech boom (This includes you Mark). So, just like fashion repeats itself in new ways, so will tech

    Comment by Maurice Moore -

  7. Shovelware everywhere!

    Comment by acanadiantrepanation -

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  11. Well we might compare it to the California Gold rush……… Lots of mines with lots of discoveries…….. and a whole lot of investors…… most of the original miners didn’t make squat….. because they didn’t have the resources to develop their claim Probably the more wise were able to hold on with leasing out or reserving royalty clauses……. which I think is the best today even…. but it all ends up with due diligence on the investor……..in other words… buyer beware…… So like the wild west .you may find records of investments and acquisitions of the big companies…. but the little guy will probably remain hidden…… So as an original miner . The question arises……. How can I realize the best value for my intellectual property…….make sure it works flawlessly, and do all I can first before approaching an investor…… and show the money…… its like the Magic of thinking Big…….. Date: Thu, 5 Mar 2015 20:06:23 +0000 To: jamesdavis3764@msn.com

    Comment by JAMES M DAVIS -

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  15. I don’t think it’s the 225k angel/crowd/flavor-of the-day-moniker investors that represent the risk. It’s the exposure that institutional investors currently have to VC funds (mostly managed by grey beards trying to bet on the next WhatsApp, but not necessarily understanding the market or the millennials driving it) that could cause problems. If institutional money is overexposed to risky VC investments and those investments tank (or the market ‘corrects’ as is the nature of markets) then the domino effect is the portfolio can’t absorb the volatility and ultimately Jane Sixpack see’s her 401k value go down and ponders pulling the money out. I think the underlying metric that should be evaluated is institutional exposure to private high risk investments, not the proliferation of the 225k who are unlikely to be orphans and widows or know what the term ‘equity crowd funding’ even means.

    Comment by Nate Mariner -

  16. The app market does not encompass all of tech. There may be an app bubble, but not a tech bubble. I actually think there are more growth opportunities in tech right now than ever before. AI, Machine Learning, IoT, clean tech, just to name a few are areas that are creating whole new foundations for new growth in the tech sector. Its all just beginning. App bubble sure…tech bubble NO.

    Comment by Dave Copps (@iamdavo) -

  17. Pingback: Mark Cuban Thinks It’s Bubblicious Points and Figures

  18. Mark, if it weren’t for tech bubbles, you’d merely be an obnoxious Mav’s fan with decent seats. Enjoy that you were at the right place at the right time, but please don’t over look the role that luck played in you becoming admired for your genius.

    Comment by Michael Siciliano -

  19. Bubbles also have surface tension that comes in the form of those that defend it up to the point of bursting. In fact, you can’t have a bubble without those forces.

    Comment by Mike Reyher -

  20. Mark – My comment to part one of this blog was “Do you have any idea how much of this “angel” money is floating around?” I asked you this question as I was surprised that you did not include this information in the blog. Now it appears that you are asking your readers the same question.

    I am confused, why would you blog about a huge up and coming bubble (worse than the 2000 Tech) without having the financial data?

    I remember the 2000 Tech bubble very well. Although I lost very little money (a couple of grand in an IRA), most of my friends were not as fortunate. Everyone from my barber to lawyer were planning their early retirement. We all know how that turned out.

    To answer your question, I do not know anyone who has invested money in apps, Venture capital, or any untraditional investment involving internet capital groups. I have a decent size circle of friends and business associates, who are all high earners.

    The only group I have invested money in is LendingClub, a peer to peer lending group, which has been returning a nice dividend over the past few years.

    I myself am solicited often (Twice a month) by individuals and companies who want to develop a business app for my business. That’s it, and the same holds true for my friends and business associates.

    Comment by edlearn1234 -

  21. Mark – I was under the impression that you had the financial data of how much private investments were out there. Why else would you compare to the

    Comment by edlearn1234 -

  22. Hmm? I don’t think there is a bubble in the app space because these projects have low capital requirements. There may be a bubble in the VC space with apps and technology but even if there is it is constrained to the private investment community. It’s just a bunch of millionaires, hedge funds, and even institutional wealth managers rushing in with the herd mentality in full force. Human beings do what seem to be strange things but it’s really just a basic animal instinct. Uber comes to mind as a company that has a lofty valuation though it’s more than an app and it has changed an entire industry. The cell phone is the platform and the app is the gateway. You still need fleets of cars, drivers, and of course customers. Eventually, I envision self driving cars hooked up to an app interface. You push a button on your app and the Google Car picks your drunk ass up and takes you on your merry way. Not sure how Uber will hold up when that becomes a reality. They don’t have the self driving car technology. Perhaps Google could buy them and do that. Google already has developed the technology that I’m sure Uber uses. Now that Uber raised the 1.2 Billion it’s not like there’s a endless supply of greater fools to hand off the shares to at ever higher prices. The small pool of investors constrains the bubble to some extent.

    The 2000 tech bubble was largely companies with high labor costs, high infrastructure capital costs, and they didn’t make a single dime of revenue. It was then fueled by greed on a national level — greater fool concept in full swing.

    Anyway, half of the new jobs since the great recession were in fracking and energy related jobs. Then came high yield debt in that industry and a bubble was beginning to form. Not sure how many projects will be shut down because of oil prices. It remains to be seen as well the effects those job losses will have on the economy. You live in Texas so perhaps you have some insight into that. The economic damage will probably be regional because the consumer is stronger and companies in other industries have reduced leverage significantly. Bubbles are usually the result of significant leverage, speculation/greed, or a combination of both.

    I think that as we speak, there’s a bubble getting some air and eventually it will swell to epic proportions and in typical human fashion, no one wants to talk about it: OASDI — aka social security. There are only so many levers that can be pulled to fix it so maybe everyone thinks it will be an easy solution or maybe we’re all just blind fools.

    Comment by Taylor Financial (@TF_RIA) -

  23. We’re appreciative of Mark’s candid post on this subject. From a different perspective I can confirm some of these observations. As a technology professional that experienced the first tech bubble, I recall that quite a lot of projects didn’t make sense then. I can say that today something doesn’t seem right either. When I meet people, both professional and general public, it seems common to hear “Oh you’re an app developer? Well I have this idea, but you’ll need to sign a non-disclosure …” Then if I’m foolish enough to sign I get to hear about the next better mousetr-app.

    Comment by sandiachris -

  24. I agree 100% that there is a tech bubble; patches from 2008 re-inflating the bubbles and a lot of new ones inflating quickly. It is not a matter of if, it is a matter of when. When it does happen I believe it will be the worst we have ever witnessed in our lives. My prediction is that all will hit the fan when the next President of the US is elected, same year, October. There is a lot more than a tech bubbles out there, i.e. real estate, stock market, etc; the tech bubble is the tip of the iceberg in my opinion…

    Comment by Ron Calonica (@rcalonica) -

  25. Apps are nothing new, no matter how many, the cream always rises. how would anyone categorize this technology? https://www.youtube.com/watch?v=4Rj-ZH-B0fE.. let’s see how intelligent people really are…LOL.

    Comment by JeanMichel leTennier (@jmletennier) -

  26. Mark – I always love to hear your thoughts as they are usually very smart and typically provocative. My issue with your assessment is that you are not comparing apples to apples. If you intend to compare the current “app” market to the tech bubble in 2000, I agree with you. Much like today’s app market, companies that contributed to the tech bubble in the early 2000’s rarely had a real revenue model, product market fit or clear path to profitability. They were built on hype and speculation. However, many companies that are receiving angel and VC funding today have solid fundamentals, a demonstrable market and real revenue. I agree about the problem related to liquidity in private markets. However, if you analyze the need in the marketplace for a particular solution, the likelihood of that solution being consolidated by large companies needing to build out a suite of tools and the number of potential acquisition targets, I believe that you can predict (within a reasonable range) the potential for exit and the associated timeline. The fundamental lesson learned from the last bubble is that today’s entrepreneurs need to build real companies with a solid plan to return investor’s capital at an attractive multiple. For those that didn’t learn that lesson and intend to lob light weight apps into the market hopping to be the next Instagram…buyer (investor) beware. Thanks for your thoughts.

    Comment by Richard Brasser (@richardbrasser) -

  27. Hey mark Cuban invest my Satellite Database Vent Cert Ecosystem Idea Ypiur$1 billion dollars in the cloud Computing Technology MobilevBankingvData centervwith Nasa Walmart $35 billion on BRT USPS Obamacare USPS Satellites mobile banking Hosted payload 344 Trillion Gigabyte Microsoft Google Cisco global web ports Oracle IBM generating over $1 trillion Satellite mobile Transaction s per day to beat Alibaba.com 1 online ecomnerce sales record on Wall st and bet that Ceo Bill Gates idea and my Satellute nasa Nfc mobile paymentbchip hosted payload day 9 billion dollars is the next Tech bubble We launch with Boeing Nasa Dish Via sat Ses skies match 212015. P.s Ceo leon pearson Black Renaissance Technology Bus13474427048.

    Comment by ceoleonpearson -

  28. The bubble described affects VC and Angels mostly – higher risk, illiquidity, and longer horizon are already baked into the investment logic. And these types of investments aren’t pegged to exchange indices as stocks/ETF’s so aren’t as pressured by comps.

    Comment by shanewhiteside -

  29. great post. Have you ever thought about posting on Medium? This article would get so much traffic on there.

    Comment by macmurda1 -

  30. Reblogged this on IJI Law and commented:
    Part Deux poses simple apropos questions on this score…

    Comment by iimrich -

  31. The next big tech company is kabotip.com, and yes it will be an app!

    Comment by truninja -

  32. Pingback: Mark Cuban is absolutely convinced we are in a tech bubble, and it’s worse than the last one – Quartz

  33. I tend not to listen to fame whores. Really, dude, if you want to be taken seriously, try not doing “reality” TV shows or “acting” in cheeezbal cable flicks. And stop shaving your chest, fat boy.

    Comment by Mark Allen -

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  35. Mark- have you made any investments in the legal cannabis space?

    Comment by H Goldberg (@MJCompliance) -

  36. Its all about greed, VCs seeing how much money they can make in the short term. I agree how many of the same kind of app/service/model is needed out there. And the fact VCs/investors are jumping on the same type of startup time after time is disturbing. Surely they cannot all have what it takes as everything is so similar. Its greed so that the top 1% get even richer while making it seem the rest will somehow benefit too. Its hard not to notice this upcoming bubble.

    Comment by Tilly Tubular -

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  41. Bubbles take a while to burst, and these are more “private” than the public housing bubble. But you’re right there is over investment in apps right now that don’t seem to work or have really bad business models.

    Comment by AlphaWolf -

  42. So there is an app bubble…

    Comment by coinnetwork (@coinnetwork) -

  43. Mark. Listened to you on CNBC at the closing bell and you mentioned that, although there is a private bubble in tech but the public is not in a bubble. Did you mean ” not yet” ?

    Comment by Djnverve Bekah Lynn -

  44. Don’t have an app…but how about a pitch for a game changing approach to feature animation?

    Avid Shark Tank viewer,

    Seth

    Dojoproductionsinc.com

    Comment by Seth Kearsley -

  45. I use lots of apps, but all of them are free like the Internet. I love free.

    Comment by Sharon -

  46. I look at apps just like movies that everyday people invest in, it doesn’t matter how amazing the finished product is if you don’t know how to market it. Marketing is more important that the actual product, pet rock anyone?

    Comment by jaxsilverfox -

  47. you still should look at the amazing Wonder Funnel at wonderfunnel.com it is quite a product.

    Comment by david r tarver (@dave_tarver) -

  48. times that by all the other stupid app ideas that get pitched every day… significant number.

    On Thu, Mar 5, 2015 at 2:23 PM, Michael McCutcheon wrote:

    > Haha. Anyone who has any money (and I’m talking middle class money) and > knowledge of tech has been pitched an app and most likely invested some > time and money into trying their hand at the 1% market share pitch from > their buddys’ college kids who created an app to drop beer at the doors of > college frat houses uber model. Which obviously is being done but there has > to be 1000s of kids that tried models like this and got a few grand to do > it from friends and family. >

    Comment by Michael McCutcheon -

  49. Haha. Anyone who has any money (and I’m talking middle class money) and knowledge of tech has been pitched an app and most likely invested some time and money into trying their hand at the 1% market share pitch from their buddys’ college kids who created an app to drop beer at the doors of college frat houses uber model. Which obviously is being done but there has to be 1000s of kids that tried models like this and got a few grand to do it from friends and family.

    Comment by Michael McCutcheon -

  50. Also seeing incredible amounts of p2p and b2b lenders.. Losing money, and letting $LC consumers participate in investing online loans, $ONDK giving nonrecourse advances to small businesses . That looks like 2009 subprime disaster.

    Best, Jordan Feinstein

    >

    Comment by stick33@aol.com -

  51. Another question might be, “what proportion of private investments are tied up in non-liquid opportunities such as those you describe?” Even if the the numbers to the questions you pose are large, the private nature of those investments limits their ability to affect the broader investment market when the bubble pops.

    Perhaps, the over-heated app investment market has siphoned off a significant amount of money that might otherwise be invested in traditional public stocks and which might return to public stocks once the app investment bubble bursts. If that’s the case, it would suggest traditional stocks are, as a group, undervalued by some factor, right?

    Though perhaps I’m simply inflating your claim. Your comment about the non SOES day trader population suggests that’s your point of comparison. Will this bubble be worse for its heavily invest participants than the tech bubble? I don’t know. But most of us aren’t part of that investment group and more concerned about the spillover effects on the broader market, where our retirement savings live.

    Comment by Rick Groves (@rgroves11) -

  52. Common!!! There’s got to be an App for that data Mark LOL !!!

    Comment by Christian Perlini -

  53. Pingback: Startups News / Why This Tech Bubble is Worse Than the Tech Bubble of 2000 – Part 2

  54. Reblogged this on Beechdey’s Weblog.

    Comment by beechdey -

  55. Isn’t this more a VC bubble?

    >

    Comment by Andrew Byrnes -

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