The excessive money-printing that has been prevalent in the United States economy for years is now seeping into various sectors and creating bubbles. One of these areas of the economy is the tech sector, which is being pumped with vast sums of venture capitalist dollars.
New data published by the National Venture Capital Association and PricewaterhouseCoopers highlights that venture capitalists pumped $48.3 billion into U.S. startups last year. This is the biggest amount of VC investment in this part of the economy since the dot-com boom, a time when investors gave more than 300 tech firms $105 billion in the year 2000.
According to the report, the money from VCs just keeps revving with each passing year. Last year’s numbers were up 61 percent from the previous year’s $30 billion and more than double the $20.4 billion that startups received in 2009. In December alone, startups raised $7.1 billion. Software firms were the largest recipients of VC investment as they controlled nearly half (49 percent) of the market.
The VC money last year was transferred over in approximately 3,600 deals. This massive growth has been attributed to the mega rounds of funding that consist of around $500 million in each deal.
At the present time, there are 50 VC-backed startups that are valued at $1 billion or more, which is considerably higher than the dozen or so around at the peak of the dot-com boom.
The most active investors in 2014 were New Enterprise Associates, Andreessen Horowitz, Kleiner Perkins Caufield & Byers, Google Ventures and Khosla Ventures.
David Stockman, Reagan budget director and bestselling author of “The Great Deformation,” wrote about this pressing issue this past summer and warned that another financial crisis will likely unfold once this bubble bursts similar to the dot-com crash that led to a recession.
“Any day now, this third and greatest bubble of the 21st century will reach a boiling point that even the mad money printers in the Eccles Building will not be able to sustain. Then there will be another thundering financial market crash—with collateral damage ricocheting willy-nilly in every direction along main street,” said Stockman.
“At the end of the day, free money is the mortal enemy of free markets. And free money is the catalyst for rank speculations that value imaginary cash flows at 87X…..that is, before the high flyers come crashing back to earth, like they always do.”
We reported that Fed Chair Janet Yellen has concede there are parts of the economy, including the social media industry, that are currently in a bubble. She said at the time she wasn’t going to raise interest rates just to burst those very same bubbles. It’s nice to know that she concedes there are bubbles currently forming, and that’s because of her and her cohorts’ dangerous monetary policies.
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