I've been waiting for the tech balloon to burst for months. Two recent stories suggest it may at least be floating back to earth.
The first is the controversy swirling around health technology startup Theranos. It will be interesting to see how that shakes out and what becomes of its one-time $9 billion valuation. But even more than the Theranos uproar, it was an article in The Wall Street Journal on the fading IPO euphoria that gave me hope the insanity may soon end.
I like exciting new ideas pitched by enthusiastic entrepreneurs as much as the next guy. But I'm not about to fork over cash to help fund a half-baked idea just because of a polished presentation. That's why I've had a hard time understanding why firms full of savvy people could pour millions into tech startups that seem to offer little but hot air. And I've had a harder time understanding why investors fall for the outrageous valuations of that hot air when it's time for an IPO. I guess it's the wealthy person's version of playing Powerball. Even when you're rich, you can still dream of striking it richer.
Venture capitalists often say that, like the lottery player who buys 25 scratch-offs at a time, they don't expect every investment to pay off, and that all they're really hoping for is one giant payoff. But surely a more careful vetting would mean fewer investments go bust.
Ensure that sales pitches are more than a song-and-dance. Ask questions to make certain disruptive ideas have discipline. Ideas need to represent something both innovative and useful, a solution to a problem. Theranos at least has this going for it.
Recent startup flameouts illustrate how things go wrong: Products created by bankrupt startup Quirky either weren't useful enough or didn't function as well as what was already on the market.
Oyster's unlimited book rental turned out to be no improvement over the public library. An unlimited number of books sounds great, but you'd have to be a book-reading machine to make it a good deal. The company has announced plans to "sunset" its existing services.
Maybe these recent stories mean the tech balloon will soon "sunset," too. I hope so. At least the stories are reminding people that sometimes all that glitters is ... just glitter. If I were investing other people's money, I'd want to feel confident the glitter had a decent chance of turning into gold.