VC Firms Rain Down Cash on Tech Startups, Is Bubble Brewing?
SAN FRANCISCO — Jan 16, 2015, 6:16 PM ET
By BRANDON BAILEY AP Technology Writer
Cash rained down on startups in 2014, as venture capitalists poured a whopping $48.3 billion into new U.S. companies — levels not seen since before the dot-com bubble burst in 2001. Strong technology IPOs are luring investors chasing the next big return, but with valuations this high, critics suggest some investors may be setting themselves up for a major fall.
“It’s not that many businesses aren’t viable, but the question is, what are you paying for them?” said Mark Cannice, a professor of entrepreneurship at the University of San Francisco.
Venture funding surged more than 60 percent in 2014 from the prior year, most often fueling software and biotechnology companies, according to a new “MoneyTree Report” issued by PricewaterhouseCoopers and the National Venture Capital Association, based on data from Thomson Reuters. But the money wasn’t spread around to buoy many more companies. A few just got huge piles of cash.
Last year saw a record 47 “mega-deals,” defined as investments of more than $100 million. That’s nearly twice as many as reported in 2013, said Mark McCaffrey of PricewaterhouseCoopers, who leads the accounting and consulting firm’s global software practice.
Uber Technologies, the ride-hailing service disrupting the transportation industry and generating plenty of press, received the top two biggest rounds of investment last year. Each raised $1.2 billion for Uber, and the company’s value is now pegged at $41 billion. Other major deals included $542 million (mostly from Google Inc.) invested in Magic Leap Inc., a secretive startup working on virtual reality technology; $500 million in Vice Media, which operates online news and video channels; and $485 million in SnapChat, the popular messaging service.
https://abcnews.go.com/Technology/wireStory/funding-boom-shows-power-tech-startups-raises-concerns-28263323
