Tim Herbert, the senior vice president for research at CompTIA, says the investment landscape today "is still well short of the dot-com bubble days of 2000." The number of IPOs is nearly 70 percent lower than they were 15 years ago, and among those companies going public, "the trend appears to be towards firms that have a longer track record, solid business fundamentals and earnings." There are also far fewer "mom and pop" investors pouring money into individual stocks, he said.
Herbert still sees some reason for caution. The uptick in VC funding over the last eight quarters "may suggest there are more dollars chasing fewer quality deals." Funding for software firms may soon match the 2000 peak, and those investments also correspond to the rise in cloud computing, he notes. But some valuations "have been pushed to levels hard to justify."
One area of broad agreement is the reduced cost of a start-up. The risks may not be as great as they once were.
New technologies including open source software and cloud computing "have dramatically" reduced the costs of starting a business, said Patrick Gallagher, general partner of VC firm CrunchFund. A start-up that might have needed $5 million to $10 million in funding in 2000 can be established with $1 million or $2 million today, he said.
In the dot-com era, companies could launch and go public "all within 12 months," said Gallagher, with employees of these firms selling their shares. "It just kind of created this unsustainable market because these companies themselves weren't real companies," he said.
Another difference: In the dot-com bubble, firms without revenue were being valued on metrics that had no substance, such as eyeballs. Today, the firms that are getting high valuations are earning revenue and aren't going away, said Glen Rieger, general partner at NewSpring Capital.
The 2000 bubble wasn't a complete disaster. Many of today's firms -- such Amazon, Google and Salesforce -- emerged and have thrived. But there is no escaping the bubble's long-tail impact on undergrad student enrollment, which followed the market down.
Enrollments in computer science at the undergraduate level have in the past "been pretty correlated with the state of the tech industry," said Peter Harsha, the director of government affairs at the Computing Research Association.
The enrollment survey only tracks numbers, but there is a belief that the present surge in computer science enrollments "feels different than the previous peaks," said Harsha. For one thing, there's a sense that "students are engaging in computing because they recognize that it's becoming increasingly required for success in other disciplines as well."
Computing science enrollments will still be cyclical, but this idea -- that computing science is needed today in almost every endeavor ---will mean that "those cycles won't be tied so tightly to the health of the tech industry but rather the health of the economy as a whole," said Harsha.
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