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Entrepreneurs and tech experts claim UK's tech sector is not in another bubble

Sam Shead | June 6, 2014
The technology sector is not repeating its late-nineties bubble and London's ecosystem can go on booming, a panel of experts agreed at a debate hosted by Internet World in London this week.

The technology sector is not repeating its late-nineties bubble and London's ecosystem can go on booming, a panel of experts agreed at a debate hosted by Internet World in London this week.

During the last dot com bubble, between 1997 and 2000, stock markets in developed nations saw a rapid inflation in valuations in conjunction with growth in the internet sector, only to watch it come crashing back down at the turn of the Millenium.

Over the last year, a number of UK technology and internet companies have seen their valuations rocket after raising substantial sums of money on stock markets around the world, just as their predecessor's did in the 90s.

For example, Candy Crush creator King.com raised $500 million on the New York Stock Exchange, while online food delivery service Just-Eat.com raised over £100 million on the London Stock Exchange. Both companies, not strictly "tech" firms in the strictist sense of the word, are today valued at over a billion pounds.

But panel member Julie Langley, partner at technology business advisor Results International, claimed the latest valuations are justified.

"When you see these numbers in the papers, what you have to understand is that these valuations are always rational, not like in 1999," she said.

"If you look at the late 90s, many businesses were going public after three or four years of operation. Now, a business will typically have been established for seven or eight years before they consider going public. At the moment, there is certainly no bubble in the IPO market."

However, Richard Holway, chairman at analyst house TechMarketView, who was not on the panel, takes a more nuanced view.

"There is a 'bubble' in a small number of 'frothy' stocks like Blur, Outsourcery and Wandisco," he told Techworld, adding that their share prices have been extremely volatile.

But unlike the last bubble, Holway said the 'froth' has not infected the vast majority of tech companies, which remain fairly valued and within established metrics.

According to panel member and former Channel 4 technology correspondent Benjamin Cohen, today's investors are harder to hoodwink than they used to be.

"It was easier to raise money with a product that wasn't so good in the 90s," he said. "We are much wiser [today]. The internet is more established and we can better recognise a good product that is likely to succeed."

LONDON'S TECH ECOSYSTEM
The panel was generally positive about the development of London's tech ecosystem, which has been driven with the help of the Tech City UK PR-machine.

Jamie True, founder of fintech start-up Monitise Create, said: "The interesting thing about London is that there is a real confidence. People feel they can start a business here, as there is a market and there is investment."

 

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