Over the past few days two venture capitalists in the United States have expressed their worries about the current state of the US startup community. In essence, both are saying that startups are burning through too much cash and that the overall amount of risk currently taken on in Silicon Valley is excessive. It’s not the first time people have warned about a new tech bubble, but are the concerns justified?
A look at the data seems to suggest so: according to Thomson Reuter data published by PricewaterhouseCoopers, venture capital funding in the U.S. amounted to $12.97 billion in Q2 2014, which is by far the highest level it’s been at since Q1 2001. Compared to the second quarter of last year, VC funding jumped 81% in Q2, representing the highest year-over-year increase since Q3 2000 when VC funding reached its historical peak. Interestingly the number of VC deals hasn’t increased as much as the total amount that was invested, indicating that the average value per deal must have increased. And indeed it has: at $11.64 million the average value per deal was as high in Q2 2014 as it’s last been in Q4 2000.
While these numbers do not necessarily mean that we’re in a new dot-com bubble, they make one thing perfectly clear: the period of prudence that followed the financial crisis of 2009 is officially over.