Billion Dollar Startups: Celebrate or Worry?

Dozens of technology startups are now part of the Billion-Dollar Startup Club -- a Wall Street Journal list that tracks companies valued at $1 billion or more by venture capital firms. On the one hand, it's great to see startup valuations on the rise. But on the other hand...

...I've got to wonder if this billion dollar list is a modern day tracking system for potentially overvalued companies that are set to go pop.

There are some very promising players on the list. AppDynamics, Box, Dropbox and MongoDB represent fast-growth markets like application optimization, cloud computing and big data. But rising tides don't lift all boats... at least not forever. 

At some point, we'll see shakeouts in multiple markets -- particularly NoSQL databases and file sync and sharing services. Remember: The SQL database market once had a long list of players -- led by Oracle, IBM, Microsoft, Informix, Sybase and plenty more. But by the mid-1990s, the market started to consolidate and several growth companies became niche players or faded into obscurity.

The same will certainly happen for NoSQL players. I don't know when. I don't know who will survive and who will implode. I just know that soaring venture capital investments can't continue indefinitely. Earlier this month, I mentioned Glassdoor CEO Robert Hohman's comments about raising $70 million. At the time, he said it was a very good time to raise money because "there's lots of capital available." 

Placed in proper context, Hohman certainly wasn't speaking with arrogance. He was simply stating a fact. Money does seem easy to come by for many startups these days. That's both a blessing and a curse. VCs are funding tomorrow's innovations. But I wonder: Are the funding terms and associated valuations getting ahead of the market?

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