Investors Wary of Tech Bubble 2.0

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Webvan. eToys. Infonet. The Globe. Any of these names ring any bells?

In the late 1990s, they were the Facebooks and Twitters of their day. The hot properties that everyone wanted a part of. They were worth billions, and now they’re nothing but internet history.

If the thought of that bothers today’s tech investors, they’re not letting it show. Money – more of it than last time round – is flooding the tech industry.

Yesterday’s New York Times article paints an uncertain picture. The writers point out many differences between the 1999 and 2011 markets, but quote a variety of fund managers and investors voicing concern.

On the flip side, Hunch co-founder Chris Dixon wrote a reasoned argument that overvalued companies do not a bubble make:

“During bubbles, investors stop valuing companies based on fundamentals and instead invest based on the expectation that prices will continue to rise and “greater fools” will buy the assets from them at a higher price. This process is unsustainable, which is why bubbles eventually pop.”

In short, no-one can say whether we’re in another bubble or not. All we can say for sure is that last time tech companies got this big, this fast, their expansion was soon followed by the sound of a big bubble popping. It wasn’t even that long ago, and the memories are still raw for some.

While many people remain very confident that the wider economic circumstances are more favorable, others are all too aware of history’s habit of repeating itself.

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