Last fall, the signs were clear that air was coming out of the current tech bubble. And things have gotten worse since then.
Will 2016's tech bubble burst more loudly than the Dot-Com's? Not even close.
Before getting into the reasons for that, let's look at what both bubble share -- wide swings between two fears: the Fear of Missing Out (FOMO) and the Fear of Losing Everything (FOLE).
In both bubbles, Silicon Valley investors were gripped by FOMO and then FOLE. Under FOMO, investors' biggest fear is not betting on a startup in a market segment that has already had a successful exit (e.g., an initial public offering).
FOMO drove Silicon Valley investors to overpay to invest in companies in attractive market segments and to provide so much capital that the companies were driven to overspend on marketing so they could grow very quickly and get to the point where they could take their companies public and further enrich the venture capitalists.
FOMO abruptly gives way to FOLE when the stock price of these newly-minted IPOS plunge after they go public. Public investors lose money and lose their appetite for new IPOs.
Venture capitalists realize that they will not be able to take their private portfolio companies public. So they tell the CEOs that no more money will be coming to rescue their money-losing companies. The CEOs respond by cutting people to lower their monthly burn rate and extend the life of their dwindling store of cash.
In most cases, FOLE will ultimately happen too late. Those private companies will not be able to get on their path to profitability before they run out of money.
The Dot-Com Bubble was a much more socially widespread phenomenon than the current bubble. More importantly, 480 companies -- 280 of which were Internet-related -- were able to go public during the peak year of 1999, according to Hale and Dorr.
And I was not alone in remembering that taxi drivers in Manhattan would offer me Dot-Com stock tips.
In the current bubble, the number of IPOs in the peak year -- 2014 -- was much smaller (275 of which 55 were in technology according to Renaissance Capital).
There are seven differences between this bubble and the dot-com bubble.
1. Rising IPO standards.
While plenty of companies have gone public in the last few years with limited profits, the standards for going public have risen from the 1990s.
In the recent bubble a company had to have at least $100 million in revenues before it could go public.
During the Dot-Com Bubble, companies -- like printing service, Noosh, were filing for IPOs with no revenues at all.
2. Aversion to public markets
Perhaps the stricter standards for public offerings have made entrepreneurs more IPO-averse.
In the current bubble, private markets let early investors sell their shares at a profit to later stage investors.
This has reduced the pressure on companies to go public or be acquired.
3. Lower entry barriers
The amount of capital required to start a company has plunged since the Dot-Com Bubble -- that's thanks to technology services like the cloud that make it much less expensive to start and operate a startup.
During the Dot-Com Bubble, companies needed to spend millions to buy and operate big computer systems.
Back then, Peter Bell -- who headed the now-defunct cloud-services pioneer, Storage Networks -- was trying to alleviate the cost to Dot-Com entrepreneurs of buying the computers and storage hardware needed to run their web sites.
Bell had the right idea at the wrong time. But thanks to Amazon's AWS, the current bubble has radically lowered the barriers to entry -- creating far more rivals and making it much harder to stand out from the crowd.
4. Galloping unicorns
All that aversion to going public paired with deep-pocketed private investors and lower entry barriers has given birth to Unicorns -- private companies worth over $1 billion -- of which there are now 152 collectively valued at $532 billion, according to CB Insights.
During the Dot-Com Bubble, people did not keep track of private company valuations because it was so easy for them to go public that there was no need track those numbers.
5. Semi-public companies
Among the deep-pocketed institutions willing to take pressure off of early investors are mutual funds -- like Fidelity -- that announce how much they are valuing their private company holdings every quarter.
This information casts an unusual amount of transparency into the value of these unicorns. And yet it raises questions about the rigor and uniformity of the way those valuations are calculated.
In the third quarter of 2015, for example, Fidelity wrote down by 25% the value of its investment in Snapchat, the creator of the mobile app for sending disappearing photos and videos, to $34.5 million in the third quarter, according to data from Morningstar.
Earlier in 2015, Snapchat had raised a total of $1.2 billion in cash from investors at a $16 billion valuation according to a May interview by Bloomberg with "a person familiar with the matter."
A few years ago, mutual funds invested in unicorns because they were reaching for a way to beat their peers by enjoying a nifty IPO pop.
But I am guessing that as 2016's FOLE expands, investors and entrepreneurs will suffer from the semi-transparency that mutual fund ownership demands.
6. Less industry diversity
During the Dot-Com Bubble, I counted nine different industry segments that hosted IPOs -- including Web Portals, Web Consulting, Web Marketing, Internet Venture Capital, Web Content, Internet Infrastructure, Internet Security, Internet Service Providers, and E-Commerce.
The current tech bubble has had highly visible IPOs in fewer categories -- Chinese E-Commerce companies like Alibaba, social networks such as Facebook and Twitter, consumer devices like GoPro and Fitbit, network security companies like Palo Alto Networks, and storage makers such as Pure Storage.
7. Less debt
During the Dot-Com Bubble, fiber-optic broadband service providers borrowed billions to finance the rapid build-out of their networks.
They lost money, could not get new financing when the bubble burst and filed for bankruptcy -- most notably Global Crossing's $22.4 billion (assets) bankruptcy in January 2002.
The current tech bubble's asset-light capital nature does not feature anywhere near that much debt.
While the current bubble is bursting, its economic damage will be more limited than the Dot-Com Bubble's explosion.
