Lately there have been a lot of discussions from Hacker News to blogs on wether we are in another tech bubble.
The first dot-com bubble happened around late 1990's to 2000, and the poster child for the bubble is pets.com. If there is another bubble, we would expect to see more startups with ridiculous ideas such as location-based pet messaging app to receive significant rounds of funding or major acquisitions. As a consequence, if there is a bubble, we would see an exponentially increase in number of startups and investments.
Let us look at some CrunchBase data . The following chart plots the number of startups created every year.
What is interesting about this chart is that from 2000 to 2008, the number of new companies created were growing on an exponential scale. It seemed like we were heading for a bubble. However, the trend slowed down in 2009. In 2010, there was actually a 38% drop in number of new startups. The most likely reason has been the improving employment environment in the tech sector.
Next let's look at funding data from every year on CrunchBase. I am only looking at recent data from 2005 to 2010, since older deals and data may not have been updated accordingly.
- Total number of funding deals (minimum 100k investment round)
- The total amount of investments in each year.
Notice that both are increasing steadily every year, but hardly an exponential increase. Compare the charts with the Nasdaq Index (below) during the first Internet bubble. We can probably conclude that we have not reached the next tech bubble yet.
So are we in another tech bubble? The data suggests that there has been acceleration in both number and total amount of investments. Along with a surprising decline in number of new startups, this is actually a great time to be a startup founder.
 I am only looking at companies from 2000 to 2010. Data is not 100% accurate but good for approximation.