Tech Founders Fear Market Bubble: Survey



With eye watering valuations, top investors have sounded the alarm over a bubble in the private technology market, and now it seems the founders of startups are also pretty worried too.

In a survey of over 500 venture-backed founders carried out by venture capital firm First Round Capital, 73 percent said that the sector is in a bubble – a market environment often characterized by high valuations that may not be sustainable. But it does depend on the type of startup the founder is from.

“Enterprise company founders deny the bubble twice as often as their consumer company peers. Given that twice as many enterprise founders also think they’ll be profitable in the next year, their outlook is more optimistic on the whole,” First Point’s report said on Wednesday.

At the same time 66 percent of founders think it’s going to be somewhat or much harder to raise VC money in the next 12 months while 31 percent believe it will be “neither harder nor easier.” Only 3 percent think it will get easier.

First Round’s study also showed that founders are happy to shop around for deals with 22 percent pitching to between 11 and 20 VC firms and 10 percent approaching over 30 VC companies.

‘No one has a clue’ about IPOs

Among founders, there seems to be a divergence on views about the number of initial public offerings (IPOs) in the near-term. Roughly 1/3rd said more companies will go public in the next 18 months, just over a 1/3rd said the number of tech flotations will remain the same, while another 1/3rd said fewer companies will list publically.

And 28 percent of startup founders think their company will go public in the next 3-5 years while 29 percent think this will happen in 5-7 years. Nearly 1/4 have no intent to go public, presumably because of the availability of VC cash right now.

“We did find that a huge chunk of early-stage founders believe their companies will go public in the next 3 years, whereas most late-stage founders said it would take more than 7 years for their companies to IPO. It seems the further you go down the road as an entrepreneur, the more distant that horizon gets,” First Round noted.

Hiring, revenue top concerns

Despite talk of a bubble, the top concern for founders right now is hiring good people and revenue growth as well as acquiring customers.

Over half of the founders surveyed said they were on track with their hiring plans, but 40 percent said they were behind. Only 5 percent said they were ahead.

Also, building the right culture to keep talent happy and effective is a bigger concern than raising money or losing customers, according to First Round.

Elon Musk ‘most admired’

And who are the founders, which are trying to build the next $1 billion company, looking up to? Tesla boss Elon Musk apparently.

First Round asked founders which tech leader they admire most and received back 611 different names. But 22 percent said Musk, with the next most popular chief executive being Amazon’s Jeff Bezos. Facebook boss Mark Zuckerberg got 3.3 percent of the vote with Google co-founder Larry Page gaining 2.6 percent.



Reprinted by permission.

Image credit: CC by Sebastian Dooris


About the author: Arjun Kharpal

Arjun Kharpal is a News Assistant for CNBC in London. He took on the role after interning at the company for three months. Arjun has previously written for the Times, the Telegraph, the Guardian and the Mirror in London.

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