Tags: tech | entrepreneurs | startup | spending

WSJ: Tech Entrepreneurs Bingeing on Spending Like It's 1999

By    |   Monday, 06 October 2014 11:10 AM

Out-of-control spending by technology startups was one of the strongest signals that the sector had firmly entered bubble territory by 1999. And now things are looking eerily similar.

San Francisco real estate agent Jeffrey Moeller is seeing the frenzied spending up close and personal.

"A four-person startup will tell me, 'We need a 10,000-square-foot office for future growth,'" he told The Wall Street Journal. "I'll say, 'No, you need 1,000 square feet.' Generally, they just get angry at me."

Last time around some of Moeller's clients ended up with rent payments they couldn't afford.

Part of the problem is that venture capital firms are throwing money at entrepreneurs like it's penny candy. So far this year in the United States, 84 technology companies have raised at least $50 million in individual rounds of venture capital funding, according to Dow Jones VentureSource.

That number was "inconceivable a few years ago," according to The Journal.

"That rate is likely to accelerate. But increased interest rates or a sudden stock-market chill could slam on the brakes."

Several venture capital luminaries have expressed concern about the excessive spending by tech start-ups.

"Lots of people, big shiny office, high expense base = Fake 'we've made it!' feeling," tweeted venture capital star Marc Andreessen, co-founder of Andreessen Horowitz.

"Removes pressure to deliver real results. More people multiplies communication overhead exponentially, slows everything down. Company bogs down, becomes bad place to work."

Meanwhile, many experts say valuations also are out of control for tech start-ups. "We're getting ahead on valuations," Randy Komisar, a partner with the legendary venture capital firm Kleiner Perkins Caufield & Byers, told CNBC.

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Out-of-control spending by technology startups was one of the strongest signals that the sector had firmly entered bubble territory by 1999. And now things are looking eerily similar.
tech, entrepreneurs, startup, spending
273
2014-10-06
Monday, 06 October 2014 11:10 AM
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