The startup bubble is bursting: Report

While one of the hottest topics of discussion in the startups space has been the tech bubble. Now, a new report by The Wall Street Journal says the era of high tech valuations is already over. The report points out how startup investments have cooled off, valuations are falling and initial public offerings have disappeared.

However, the quarter is believed to have seen venture capitalist raise a record amount. WSJ spoke to Keith Rabois, a partner at Khosla Ventures. who said, “One of the reasons people are raising all these funds isn’t because they want the money, but because they believe their own metrics are inflated at the moment, and they want to get that money before companies in their portfolios start crashing and burning.” He also warns of a catastrophic shift downward across startup investing.

The report points out that some startups are cutting down on spending in order to utilise the funding for a longer period. However, there are many other startups that are at the risk of being stranded due to insufficient or no funds. “Investors who have been burned at one company will be more reluctant to support high valuations elsewhere. As word spreads through the venture community, other investors will turn cautious as well,” the report adds. While the report points out at startups in the US, the scenario wont be too different in India .

The report further points out how many unicorns have started laying off employees.  It reminds us of the satirical post by Basecamp founder Jason Fried about his take on startup valuation. Further, the report calls Uber the biggest elephant in the room being valued at $62.5 billion. “The company claims it is profitable by some measures in North America, but it is spending huge amounts of money to capture markets in China and elsewhere. If the world’s most valuable startup must curtail its ambitions, it would send shock waves through the whole system,” the report further adds.