You are using an older browser version. Please use a supported version for the best MSN experience.

The Real Reason Tech Investment Is Up This Year

The Huffington Post The Huffington Post 3/03/2016 Sam Colt

2016-03-02-1456938902-2198522-9730644150_32d625134f_o.jpg © Provided by The Huffington Post 2016-03-02-1456938902-2198522-9730644150_32d625134f_o.jpg
There's a growing debate in the tech community -- are we in a bubble, or not?
Some people think the private valuations we've seen in the last few years are inflated due to historically low interest rates. Large institutional players have invested in tech companies because other less risky options haven't been offering very attractive returns.
There are also people who think the recent bubble narrative has been pushed forward by the media. They think not much has changed and the recent fluctuations we've seen in tech valuations don't actually mean much in the long-term.
So when Mattermark, an industry research startup, said VC deal volume and capital deployment are both up so far this year, some took it as a sign that we might not be in a bubble after all.
Out of context, a spike in VC deals would suggest that it's business as usual in Silicon Valley. But I think there's something larger going on.
Whether or not you think we're in a bubble (or a correction, which I'll save for another post) recent events have definitely spooked the market. Fidelity's markdowns of Snapchat and Dropbox last year were a wake up call for the community. Entrepreneurs like Y Combinator's Sam Altman have advised founders to be more careful about choosing investors. And mega-unicorns like Zenefits have slashed their staff as statups have started to prioritize profits over growth.
While some companies that have focused on profitability or raised a boatload of cash in the last few years are doing fine, a lot of companies are fundraising now because they know it will be harder down the road, even later this year. They're raising out of fear of what could come next.
A VC I heard speak the other day stressed this, too. Founders and CEOs are racing to capitalize because they know the tide is going, out so to speak.
The good news? If we enter a downturn, those who survive it will be in pretty good shape in a few years.

DEFAULT © Provided by The Huffington Post DEFAULT

More from Huffington Post

The Huffington Post
The Huffington Post
image beaconimage beaconimage beacon