VC Funding is _Not_ Back to Dotcom Levels

There are some bad headlines being repeated today, all basically saying that VC funding is back to dotcom levels. Wrong. It’s not even close, with something like $32-billion set to go in this year, versus $51.2-billion at the peak of the bubble.

Sure, it’s the highest it’s been in four years, but you  might equally write that VC funding is still 36% off its dotcom peak, or that it is more or less flat year-over-year. Instead we have this irresponsible stuff.

How this meme has taken hold I don’t know, but they’re all pulling from some new E&Y/Ventureone figures — which say nothing like what the headline writers are writing.


  1. Paul,
    If judging a bubble were simply about the absolute dollars invested your point would be well taken. But let’s not forget that at the “peak of the bubble” we had a significantly better IPO climate; so it allowed for many otherwise flawed VC investments to escape into the public equity domain (where many of us ended up feeling pain, but that’s another story).
    We’re now seeing $30B+ flowing into VC with no end in sight, yet we have a much tighter exit market and, frankly, we’re seeing a lot of companies with, shall we say, exogenous business models to boot.
    *** Extremely healthy fund raising conditions for new VC vintages
    *** Lots of “me too” investments (61 other video sharing companies and counting)
    *** Lots of VCs explaining why it’s “different this time”
    *** Increasingly more challenging deal closures (higher valuations, more funds chasing the same term sheets)
    *** Tight exit market
    *** Lots of concepts getting funded in search of business models
    That’s sounding a LOT like a bubble. Perhaps you doth protest too much.

  2. VC is the incubator where isolated bubbles are allowed. In the aggregate, yes a bubble.
    It’s where risk-prone capital gravitates and where the responsibility for due dilligence falls more directly upon the risk-taker.
    I see public equity well protected as it should be. It’s ALWAYS differenter this time.

  3. Thanks for noticing this paul. Not only was the article wrong in its “half-glass full” argument, but also in its decision to use 2001 as the peak: