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Surge in startups and capital could be bad news

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William Garza
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Startup numbers have surged, and so have VC investments, according to data released earlier this month by Dow Jones VentureSource.

First, let’s take a look at the data and the causes for the surge.

While I expected an increase, the magnitude surprised me.I did some digging and found the following factors contributed to what we now see.Venture capital overhang: Between 1999 and 2001, venture firms raised $182 billion to invest into startups.

This created a large venture capital overhang (too much cash chasing too few deals) just before the Dotcom bubble burst.

The use of on demand resources in areas like cloud computing, software, social networks, and marketing has reduced the capital required to prove concepts and start companies.

From January 2004 to March 2017 the number of software companies grew from 1,523 to 3,588 During this period investment grew from $29 billion to $67 billion.Tech-enabled companies: Technology has had an impact on numerous previously distinct industries, such as financial services, insurance, health care, and transportation.

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William Garza
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