Looking for a bigger Bonus? Quit Finance and Join a Tech Start-Up

The internet brought about many changes when it was introduced in 1990. Near the end of the decade, the NASDAQ was trending a steadily upward as a result of the technological influence on existing businesses as well as internet start-ups. As the first internet browser was launched, there was a rapid transition to the internet platform. Even at this early stage, many believed the internet to be the future for communication and commerce. The number of internet users increased from 16 million users in 1995 to 250 million in 1999. Droves of venture capital firms entered the picture, offering large sums of capital in exchange for equity in technology companies. Many of these investors provided funding with the intension of selling off stock at over inflated prices once the company went public. Those who didn’t sell early experienced substantial losses. 

During 1999, nearly 25 percent of the technology companies that went public saw two fold increases in price the first day of their IPO. By 2001, these exorbitant price increases had ceased. The NASDAQ continued to fall, and by October of 2002 had lost 80 percent of its value. During the dot.com bubble, most technology companies were pre-revenue. Investors often use less traditional forms of analysis under these circumstances. They tend to look at such criteria as the company’s business model and sales volume. Throughout this period of rapid technological growth such quantitative analysis often dismissed.More recently, news reports claim that technology sector investors are seeing the best returns the market has produced in more than a decade. More than $50 billion was generated in IPOs during 2013. In addition, roughly $8 billion was procured for technology companies in the third quarter of that year. One might wonder if this isn’t the onset of yet another technology boom. A number of technology companies are experiencing substantial increases in trading volume. At the beginning of 2014, LinkedIn was trading at 15 times its previous year’s revenue. Facebook was at 19 times and Twitter 58 times their previous annual revenue.

There were 45 technology IPOs in 2013, and an even greater number is expected in 2014. Nearly 600 technology firms, each with a value of $100 million or greater, have planned IPOs for 2014. An additional 30 companies valued at more than $1 billion each are also planning IPOs. A few of the more predominant tech firms valued in the billions include King, Dropbox and Alibaba. Their growth potential makes them exceptionally attractive for investors.

As with all IPOs, some technology companies will fail while others will go on to be tremendously successful. Tech start-up firms are an excellent alternative for those looking to exit finance opportunities. They are expected to generate the fastest growing businesses opportunities over the next couple of years. There is no sure way to determine which companies will be profitable, or how long the current uptrend will last. Careful assessment of company metrics, sensible risk management and properly timing profit taking will pay off handsomely.


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