Are We in a Tech Bubble?
The tech space has seen a lot of activity lately. With numerous IPOs, mergers and acquisitions, and venture capital investments on the rise, a lot of people are speculating about a tech bubble. It does make sense to a degree given Groupon and LinkedIn’s recent successful IPOs.
Facebook is also reportedly going public next year with an alleged valuation at $100 billion. Popular companies like Yelp and LivingSocial are also expected to file for IPOs as well.
But, do all these factors indicate that we’re in a bubble? What do you think?
A report from legal Q&A website Avvo adds even more fuel to this speculation. It has seen a 3,000 percent increase in its startup-related pageviews in the Silicon Valley over the past 6 months. Mark Britton, the company’s CEO and founder, told us that terms such as “incorporation,” “online company,” “tech startup,” and “intellectual property” have been searched very frequently.
“What we saw is that, particularly in [the] Silicon Valley, but also in traditional startup markets like Seattle, Austin, etc., we’ve seen a massive, massive jump in the number of searches and pageviews and overall site activity,” he said.
A few of the popular questions that Avvo has received include:
– Is a verbal partnership agreement for a startup binding in California?
– How do I fire the co-founder of my startup?
– My startup company is being accused of trademark infringement. What should we do?
According to Britton, most entrepreneurs are not lawyers, and, typically, try to avoid anything that has to do with legal matters. He believes that they finally understand that “if you don’t get this stuff right, it can sink a company.”
Although he didn’t come out and say that we were experiencing a bubble, he did point out some strong indications.
“I think you are seeing a lot of value that has been locked into these companies for a tremendous amount of time,” he said. “I think these companies are finally finding a favorable IPO market, and they’re going to that market to unlock the value.”
“I don’t know if that’s a bubble, but I do think we have some interesting sparks that are often driven by the tech sector that could light… a very nice micro fire in the larger economy,” he added.
Coincidentally, at the recent Sun Valley conference, Google Executive Chairman Eric Schmidt was asked whether or not he thought we were in a tech bubble. Even though he didn’t directly state that we were in a bubble, his answer was pretty clear.
“On the general question of bubble, in the first place you don’t know it’s a bubble until the bubble ends, by definition. The rule I set for myself 10 years ago was that if the press calls it a bubble then I’d pay attention, and let me report that the New York Times, the Wall Street Journal and the Economist have all written articles saying that it’s a bubble.”
Interesting perspective, huh? If he is right, then understanding legal matters is very important for startups. Britton advises startups to have a set of agreements in place that plainly shows all the founders how much they own and what will happen if one of them leaves. He also recommends that they have agreements in place for intellectual property to make sure that the people working with it understand it and protect it.
“In the same way that you have an infrastructure that would support a website, have an infrastructure, a legal infrastructure, that will support your company,” he said.