Risk In Startups Is ‘Excessive’ Right Now, Says VC



In the technology world, no question comes up more frequently these days than “Are we in a bubble?” And while it’s not up to us at CNBC to answer that question, we do sometimes happen upon little nuggets—data, anecdotes, tweets and the occasional wild party that can possibly help others make their own assessments. When we do, we’ll share them in an occasional column we’re calling “Bubble watch?”

Yet another high-profile Silicon Valley venture capitalist is warning investment in the tech world could be getting a bit ahead of itself.

In an interview in The Wall Street Journal, investor Bill Gurley says the amount of risk being taken on in Silicon Valley is “unprecedented since ’99,” i.e. the tech bubble.

Gurley—an investor in Uber, Zillow, OpenTable and other Web start-ups—said an important indicator is start-ups’ “burn rate, ” or the rate at which they’re willing to lose money in order to grow their businesses. That rate has reached such heights that it has already triggered a vicious cycle of spending among startups.

“In ’01 or ’09, you just wouldn’t go take a job at a company that’s burning $4 million a month. Today everyone does it without thinking,” he said.

Whether the high-tech industry is entering or in a bubble has been one of the most common topics of conversation all year, with analysts taking stances both pro, and con.

The full interview with Gurley is at the WSJ.

Reprinted by permission.

Image Credit: CC by Ben Stephenson


About the author: CNBC

First in Business Worldwide

You are seconds away from signing up for the hottest list in New York Tech!

Join the millions and keep up with the stories shaping entrepreneurship. Sign up today.