Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.



Pop! There Goes the Private Equity Bubble

My worst fears haven't been confirmed. But they've not gone away, either.

Over the weekend, the quarterly Money Tree report said that venture capital investing equaled $7.1 billion in the first quarter, down 5% from last year's Q1, MarketWatch reports.

Surprised? Don't be. Private equity all-star Blackstone (NYSE: BX  ) fell in the red in 2007. And peer Fortress Investment Group (NYSE: FIG  ) has no moat.

Even so, there's a broader worry for Fools to contend with. Tight-fisted VCs foreshadowed a tech industry meltdown in 2001. Shares of tech bellwethers Cisco (Nasdaq: CSCO  ) , Oracle (Nasdaq: ORCL  ) , and Sun Microsystems (Nasdaq: JAVA  ) have yet to return to their 2000 highs. Now that VCs are cutting back their investments, it's time to ask: Will today's credit crunch equal the destruction wrought during the dot-bomb era?

Certainly, it has already proven to be worse than any of us thought. But we also have evidence that talk of a global slowdown in tech spending may border on the hysterical. Oracle, for instance, sold off on such fears after reporting big gains in its core database business.

But that's Oracle. Smaller tech companies may prove more vulnerable. Especially those that will need assistance from the capital markets to grow.

My advice? Watch the VCs closely. They're more conservative than you think. If they're funding fewer deals, it's because -- after factoring in valuations, competition, and the pace of innovation -- they don't see as many attractive opportunities as they did a year ago.

I think they're right. Confine your tech investing to stocks that dominate fast-growing, economically critical industries, Fool. History says that's where the big money is made.

Get your clicks with related Foolishness:

Read/Post Comments (0) | Recommend This Article (1)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 625956, ~/Articles/ArticleHandler.aspx, 10/24/2016 7:38:16 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated Moments ago Sponsored by:
DOW 18,223.03 77.32 0.43%
S&P 500 2,151.33 10.17 0.47%
NASD 5,309.83 52.43 1.00%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

10/24/2016 4:02 PM
BX $24.79 Up +0.72 +2.99%
The Blackstone Gro… CAPS Rating: *****
CSCO $30.46 Up +0.31 +1.03%
Cisco Systems CAPS Rating: ****
JAVA.DL $9.49 Down +0.00 +0.00%
Sun Microsystems,… CAPS Rating: **
ORCL $38.27 Up +0.34 +0.90%
Oracle CAPS Rating: ****