If you had been looking for a condo in the San Francisco Bay Area a year and a half ago, realtors would have advised you to bring your checkbook to your showings and be prepared to give them your month’s deposit and first month’s rent on the spot. rental; between $8,000 and $10,000 for a two-bedroom apartment.

Silicon Valley, the kingdom of technology is also the kingdom of machismo and discrimination

“There was no possible negotiation because behind you you had 10 people waiting to be able to keep it,” says Ray Stern, CEO of Bay Rentals.

Rents are still expensive, but the market seems to have stabilized after many years of constant increases. And they’re not the only thing that has stopped rising: Silicon Valley’s tech bubble has run out of steam. Venture capital funds are investing less, startup valuations are down, and hiring is down.

“We’ve started getting a lot of resumes from software engineers who work at companies with a broken business model, they’re out of funding and they’re going out of business or downsizing,” says Mark Dinan, a software industry recruiter in the IT department. the San Francisco Bay Area that knows which companies are hiring and which companies are firing.

These startups are running out of money because venture capital funds are now more demanding when it comes to investing. They do fewer operations, but larger ones.

“The number of investments [in the private market] has fallen by 33%, but the capital invested has remained stable,” explains Tomas Tunguz, of the Redpoint venture capital fund. He indicates that the sector no longer obtains “easy money” from investment funds.

“It’s something that’s been going on for two years. Money is not easy to come by and venture capital funds are demanding better terms,” adds Aswath Damodaran, a finance professor at the Stern School of Business.

In part, this is because fewer companies in the sector are going public. Last year was the slowest for IPOs (Initial Public Offerings) since the recession. According to Bloomberg News, tech companies managed to raise 60% less than in 2015. “Silicon Valley hasn’t had a successful IPO like Snapchat in years. And Snapchat is in Los Angeles,” says Dinan.

Since 2015, CB Insights has tracked more than 100 companies in this situation, including software company Zenefits, app Foursquare and streaming music service Rdio. “Before, in 90% of the investment rounds, the company saw its shares go up. Now, in 20% of cases, they go down”, indicates Tunguz.

The “decacorns” are another factor to take into account; unicorn startups that are valued in the tens of billions of dollars; like Airbnb, Uber and Palantir. Many believe they are overvalued, but you won’t know for sure until they go public and have to report their financials.

The Uber app, which provides its users with a private transportation network, has raised more than $16 billion and is valued at more than $69 billion. It outperforms big auto giants like General Motors and Ford, even though the company lost $2.2 billion last year.

“The big unknown is how much longer it can take before Uber has to go public. They raise money as if they were listed on the stock market but they are not required to render accounts or have the responsibilities of a listed company, ”says Damodaran, who believes that the valuation is exaggerated and that the real value of the company does not exceed 23,000 million dollars. .

What are the similarities between this situation and the one that led to the bursting of the Internet bubble? “I came to San Francisco in 1997 and the city was like it is now, full of people, with traffic jams and flats at exorbitant prices,” says Dinan. “Now we see overvalued companies, whose value seems to be based on hopes and dreams and not on a good business model. They are companies that when calculating their value do not take into account their benefits, but the number of users. This has many elements in common with the internet bubble”.

Another common element, according to Dinan, is “bad habits”, such as sexual harassment complaints at Uber or Zenefits cheating so that their employees could avoid mandatory training courses. “In the late 1990s we saw out of place behavior in many companies, including cases of sexual harassment. This is what happens when there is no discipline”, says Dinan.

Dinan acknowledges that perhaps his perception is not objective, since he personally suffered the bursting of the “dotcom” bubble. “Maybe I still have some open wound. As a recruiter, I saw my income drop by 80%. Maybe I see ghosts”, he recounts.

One key difference is that there is now no slowdown in most techs. Some of the main publicly traded companies in the sector, such as Google, Oracle, Facebook, Apple and Salesforce, are a guarantee of stability.

“We tend to think that technology and constant growth go hand in hand,” says Damodaran. “However, there are the usual technology companies and the new ones. The latter are overrated.

If its value is corrected, many jobs can be lost and many millionaires can see how their accounts have a number less. However, a bursting like the dot-com bubble is unlikely to happen.

“The bubble burst without warning and suddenly,” Damodaran stresses. “When this happened everyone was quick to claim that they saw it coming. If you saw it coming why didn’t you do anything?” he adds.

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