‘Will the Tech-Startup Bubble Burst in 2015?’ – ‘Entrepreneur’ Blog
Peter S. Cohen says, “Some entrepreneurs help create bubbles. These can benefit all startups — or kill them. The two things that make all the difference? Timing and strategy.
By bubble, I mean an economic process by which stories of initial financial wins draw in “tourists,” capital providers without deep expertise in a particular industry who are attracted by others who are making more money than they are. Tourists flood that industry with money that flows into businesses that can’t provide a return.
A few big busted deals cause the tourists to flee. And the collapse begins. If the “tourists” include banks, Wall Street hedge funds and other institutional lenders, the collapse can extend more broadly throughout the economy. That’s because failed banks that loan out government-guaranteed deposits are bailed out by taxpayers“.
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