SAN FRANCISCO (CBS SF) -The venture capital spending that has helped fuel the recent boom in the Bay Area economy may be nearing an end.
One of the men behind the famed venture capital firm Andreessen Horowitz is now warning that signs of a tech bubble are emerging in Silicon Valley.
Netscape founder Marc Andreessen says startups are burning too much cash right now, at a rate similar to the 1999 dot com bubble, according to Business Insider. Andreessen went on Twitter last week to warn that overspending companies will “vaporize” when the broader stock market begins to go south, much the likes of Pets.com and Webvan did after the original bubble burst.
Andreessen warned that companies aren’t hiring and spending wisely because it has been relatively easy to get enough capital to stay afloat or even appear successful in the current investment climate, but he said the market is poised to turn, and when that happens, startups that are burning big piles of cash won’t be targeted by big companies looking to make smart investments.
Andreeseen’s comments come on the heals of a similar warning from venture capitalist Bill Gurley to The Wall Street Journal that Silicon Valley is taking on too much risk. Gurley says companies can’t just sit back and play conservative with their money, they are compelled to spend and attempt to grow business with the venture money, even if that isn’t the best business decision.
Similar warnings have been coming from China, where the rate of VC spending has been surging in recent years.
Other fairly big names have made similar predictions of doom in the past, but the predicted market correction is yet to come.