How To Navigate The Dreaded Tech Bubble

Anyone paying attention knows what it's called. But no private tech investor dares speak the word, for fear of triggering the beginning of the end. We break down the stakes for companies trying to grow during the tech...boom, bulge, barbell, or whatever you'd like to call it.

- Jeff Bercovici, illustration by FutureDeluxe

Are we in a tech bubble?

Not so long ago, that was a question for Wall Street analysts and venture capitalists to debate among themselves, being of little interest to anyone else. But that was before recent investors valued Uber at $50 billion and Airbnb at $25 billion. It was before mutual and pension funds became leading players in colossal late-stage funding rounds, linking the retirement accounts of middle-class Americans to the fates of hot but unpredictable startups at a rate not seen since the dot-com crash of 2000. It was before the collective work force of on-demand services like Uber, Lyft, TaskRabbit, and Instacart numbered in the hundreds of thousands. It was before Federal Reserve chairwoman Janet Yellen broke the customary sphinx like silence of her office to observe that valuations in some tech categories have become “substantially stretched,” before the tech sector eclipsed financial services as the leading destination for elite business school graduates, and before tech money made over large swaths of New York City, Los Angeles, Seattle, and Austin, and, of course, the entire San Francisco Bay Area, where one in five working adults is employed by a tech firm. Whatever your opinion on the bubble question, you can’t ignore it.

SO ARE WE IN A BUBBLE? YUP.

“I define a bubble as something where assets have prices that cannot be justified with any reasonable assumption,” says Jay Ritter, a professor of finance at the University of Florida’s Warrington College of Business Administration who studies valuation and IPOs. While definitions of