While more and more startup posers contend that there is no bubble, Cuban, the owner of the Dallas Mavericks and ABC Shark Tank’s billion dollar investor, couldn’t agree less. In fact as Geekwire reports, Cuban says the tech bubble is far worse now than the dot com bust of the early 200s. He backs that talk up though.
Cuban describes the difference between today’s startup climate and the dot com bust. “Back then,” the Cuban writes, “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.”
Cuban goes on to explain, “people we used to call individual or small investors, are now called angels” and new equity crowd funding mechanisms allow those with as little as $5,000 to invest.
Having so many private “angel” investors is extremely dangerous to the startup ecosystem and the startup economy. It seems everyone calls themselves angels these days. Cuban says it’s because they “grant wishes”. More importantly though, while there are at least some requirements for being a true angel, equity based crowdfunding means anyone with a few thousand dollars can be an “investor” in the next big app, the next big thing.
Angels and crowdfunders are being sold up the river though. They are spending money that they don’t really have to hold onto the dream that they’ll make hundreds of thousands of dollars or millions of dollars off a low dollar investment, a gamble. Then the next time the furnace breaks that money is gone, off to investment land.
Cuban, and others insist a market like this has no true valuations an no liquidity. Back when the dot com bubble burst, public companies like pets.com burst, but those were public companies with some presumption of value.
Cuban wasn’t the only noteworthy investor talking about the demise of the current tech bubble. Earlier this week at Jason Calcanis’ Launch Festival, Chris Sacca said he “can’t wait” for tech industry to crash.
“I think this whole Valley has gotten way ahead of itself, and I’m excited for the crash, and for all the pretenders to clear out and for the people who are the die-hards, the builders, the people who have been hustling and selling candy in their high school cafeteria, who have been going door-to-door their whole lives, who are built for this game, I can’t wait until it’s just them again,” he said, Geekwire reports.
While Cuban addresses no valuation and no liquidity, Sacca talks about the Unicorn investment the gigantic valuation over nothing.
“If we’re going to recruit we have to be on a list of unicorn companies, so it has to be at least a billion,” he was told.
Dreamers are going to dream though, so as long as that’s the case is there a way out of this?