Tech Bubble? Not Anymore

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Byline: Dan Lyons

Venture capitalists thought they would soon be cashing in as a new crop of tech stocks went public. Now it's time for plan B.

"That sound you just heard was the IPO window slamming shut." That was the gloomy message tweeted by one Silicon Valley venture capitalist on Aug. 8 as the stock market continued its free fall. Indeed, with stock prices collapsing, all those "hot" tech startups, many of them profitless, suddenly don't seem so hot anymore. Earlier this summer everything seemed promising in Silicon Valley. Real estate was going nuts. Exotic cars were popping up in parking lots. Now, in the Valley like everywhere else, the party could finally be over.

Groupon, which has filed for an initial public offering, may have to settle for raising less money than its owners once expected. Some companies may just sit on the sidelines and wait for the markets to bounce back.

That's a tough break for the irrationally exuberant venture capitalists who have been paying crazy prices for stakes in tech startups, believing they would soon be able to flog off those companies to bigger fools in the public markets. Even for those who weren't looking for a quick flip, the melting market makes life difficult. Some, like Facebook and Twitter backer Marc Andreessen, insist these companies are actually undervalued. Now all VCs, from the scheming to the well-meaning, will need to wait a little longer, or maybe a lot longer, to get a return on their investments.

Or maybe they will never get a return, because in some cases it is going to be hard to persuade investors in public markets to match the prices that VCs have been paying. …