Are We In a Tech Bubble? Majority of Top LA VCs Say 'Yes'

Harri Weber

Harri is dot.LA's senior finance reporter. She previously worked for Gizmodo, Fast Company, VentureBeat and Flipboard. Find her on Twitter and send tips on L.A. startups and venture capital to harrison@dot.la.

tech bubble
Image by Candice Navi

Many leading Los Angeles-based venture capitalists believe we are in a tech bubble, but that's not necessarily slowing investments, according to dot.LA's quarterly survey of top Southern California-based investors.


dot.LA asked dozens of venture capitalists about the pace of new deals that crossed their desks, their outlook on the U.S. economy and other trends in the industry. The results offer an up-close look at how VCs see the market.

Of those who responded to the perennial question — Are we in a tech bubble? — 62.1% percent said yes.

Bubble talk is all but inevitable when valuations and deal counts soar, as outside cash pours into the startup scene, and as trillion-dollar market caps grow commonplace among tech giants. But what is a bubble, exactly?

A bubble appears (and subsequently bursts) when assets such as tech stocks or housing rapidly increase in value and then crash back down to Earth.

The Dot-Com bubble refers to the frenzied rise and collapse of emerging internet companies in the late 90s, many of which did not have profits to match their sky-high valuations. When the market crashed, tens of thousands of workers lost their jobs and the NASDAQ shed 75% of its value, hitting personal and institutional investors alike.

Of those investors who felt we were in a bubble, 56% said they were being more cautious as a result, while 38.9% responded that it had "no impact" on their investing strategy. One VC said they set a "high bar for high priced deals" as a result.

The vast majority (80%) of investors surveyed also indicated they saw higher valuations in the third quarter of 2021 compared to the prior quarter. And a slim majority (53%) said their deal flow increased during the same period. Rising startup value and a boost in deals aren't indicative of a tech bubble on their own, but the trends at least suggest a feverish market.

"Yes, early stage deals have increased in valuations and round sizes have grown considerably in the last 18 months, but I'm not convinced this is a 'bubble,'" said Kelly Perdew, managing partner at Moonshots Capital, a seed stage firm focused in part on veterans with $160 million in assets under management. "There really is more demand (and more capital has to be put to work) so prices are going up across the board. But companies are building faster, moving faster, and disrupting faster. And the winners are being rewarded. I don't believe that is ever going to stop."

Minnie Ingersoll, partner at the early-stage venture firm TenOneTen and host of the LA Venture podcast, sees the market differently — though with similar enthusiasm. "We may be experiencing a bubble around valuations for technology startups but it is simultaneously a revolution for entrepreneurship that is here to stay," said Ingersoll.

"I think anything could happen with the astronomical valuations we are seeing but I think our relationship with work has been reshaped permanently and we are building a society where everyone is empowered with tools and support to be an entrepreneur," she said. "This will have radical implications for how we live and work and I do not think we will go back to single-threaded careers," she added.

While VCs literally have a vested interest in the industry's enduring success, they aren't alone in seeing the upside of a frothy tech market. For one, tech bubbles haven't proved as destructive as, say, the U.S. housing bubble, which preceded the Great Recession. Plus, the Dot-Com era and other frenzied investments in new tech have brought about technological progress, as William Quinn, who co-authored "Boom and Bust: A Global History of Financial Bubbles," pointed out earlier this year.

Still, plenty of livelihoods hang in the balance as fast-growing tech companies disrupt industries and ramp up headcounts, while personal investors clamor for a piece of the action.

More Q3 Survey Takeaways: Startup Hiring and the Pandemic

Of the VCs surveyed, 90% said their portfolio companies boosted headcounts in the third quarter compared to the previous quarter. And 93% said they expected their portfolio companies to increase headcounts in Q4.

However, most VCs surveyed (57%) said the pandemic and its aftermath had an impact on their portfolio companies' ability to retain people.

The same percentage of VCs also said they do not think the greater U.S. economy has recovered from the ongoing pandemic.

And when asked about a return to physical offices, 62% of VCs indicated they had embraced a hybrid program, while just over 20% said their team planned on staying remote.

Want the results of our quarterly VC Sentiment surveys in your inbox? Subscribe here.

Lead image and graphics by Candice Navi.

LA Startups Supercharging Cars and Dating 🚗⚡💑

🔦 Spotlight

Happy Friday Los Angeles!

EVgo Inc., a leading Electric Vehicle (EV) charging company based in West Los Angeles, has seen substantial growth under CEO Badar Khan. The company now operates over 3,400 fast chargers across 1,000 sites nationwide, strategically placed in high-traffic urban and suburban areas to enhance convenience for EV users. EVgo’s model focuses on owning and managing its charging stations to ensure a seamless experience, reflecting its commitment to supporting the mass adoption of electric vehicles and facilitating the transition to cleaner transportation.

In a different electrifying market, Joe Feminella, inspired by his own successful dating journey, launched the dating app, First Round’s On Me in El Segundo with $5 million in funding. This app differentiates itself by requiring users to schedule a date within 24 hours of matching, and after a soft launch in select markets, it expanded nationwide in 2024. As the dating app market faces criticism over algorithmic practices and premium features, First Round’s On Me aims to offer a more genuine and immediate dating experience. Both EVgo and First Round’s On Me exemplify how companies in different industries are addressing their respective market challenges with innovative approaches to improve user experience and engagement.


🤝 Venture Deals

LA Companies

  • 3DEO, a startup that specializes in 3D printing small, high-volume metal parts, raised a $3.5M Strategic Investment Round from Mizuhio Bank. - learn more
  • Spotter, a startup that underwrites creators and offers AI tools, raised a $7.4M Funding Round. - learn more
  • Cashmere, a lead generation startup for wealth managers, raised a $3.6M Seed Round. Canapi Ventures led, and was joined by Benchstrength, Plug and Play, The House Fund, and Courtyard Ventures. - learn more

LA Venture Funds

  • Crosscut Ventures participated in an $8.9M Series A Extension for Nostra AI, a startup that helps e-commerce businesses improve their website performance by speeding up load times. - learn more
  • Fika Ventures, an eight-year-old Los Angeles venture capital firm, has raised a fourth fund in the amount of $160 million to invest in early-stage B2B startups. - learn more

      ✨ Featured Event ✨

      LA TECH CEO SUMMIT

      LA’s tech leadership is set to reunite after a long break! This two day summit will focus on building strong connections, sharing insights, and fortifying the local tech community.

      Learn More Here

      Register Here


      Download the dot.LA App

      🍵☕️Top 6 Coffee Alternatives for Enhanced Productivity

      In the fast-paced world of startups and venture capital in Los Angeles, maintaining peak productivity is essential for founders and investors alike. As the hustle intensifies, many are seeking alternatives to traditional coffee that not only provide a sustained energy boost but also support overall health and well-being. The following list highlights some of the top-rated coffee alternatives that can enhance focus and productivity while minimizing the adverse effects of caffeine. These options incorporate adaptogens, superfoods, and gut-friendly ingredients, making them ideal choices for those looking to optimize their performance without the afternoon crash.


      Matcha

      Image Source: Jade Leaf Matcha

      Matcha is a finely ground green tea that offers a moderate amount of caffeine, along with L-theanine, which promotes relaxation without drowsiness. This combination can enhance focus and concentration, making matcha a suitable alternative for those looking to boost productivity without the jitters of coffee.

      Popular Brands: ReNude Chaga Matcha (60 mg caffeine), Golde Pure Matcha (60 mg caffeine), Organic Ceremonial Matcha - Teahouse Edition (30 mg caffeine)


      Dandelion Root Coffee

      Image Source: Amazon

      Dandelion root coffee is a caffeine-free alternative that mimics the taste of coffee. It is known for its potential to support liver health and digestion, which can contribute to overall well-being and productivity. The drink can help avoid the acidity and jitters that often accompany regular coffee, making it a gentler option for those sensitive to caffeine.

      Popular Brands: Dandy Blend (0 mg caffeine), Teeccino Dandelion Dark Roast (0 mg caffeine)


      Adaptogenic Drinks

      Image Source: MUD\WTR Masala Chai

      Adaptogenic beverages, which include ingredients like ashwagandha, reishi, and maca, are designed to help the body adapt to stress and promote mental clarity. These drinks can provide a sustained energy boost without the crash, supporting productivity throughout the day. They are often made with superfoods and spices that enhance both physical and mental performance.

      Popular Brands: MUD\WTR Masala Chai (35 mg caffeine), Four Sigmatic Think Coffee (150 mg caffeine), ReNude Chagaccino (0 mg caffeine)


      Golden Milk (Turmeric Latte)

      Image Source: Golde

      Golden milk, made from turmeric, ginger, and milk (or a milk alternative), is a caffeine-free option that can improve mood and reduce inflammation. The calming properties of this drink can help maintain focus and clarity, making it a great addition to a productive morning routine.

      Popular Brands: Golde Turmeric Latte Blend (0 mg caffeine), Blume Turmeric Blend (0 mg caffeine), Four Sigmatic Golden Latte Mix (0 mg caffeine)



      Chicory Root Coffee

      Image Source: Teeccino

      Chicory root coffee is an excellent alternative that satisfies the desire for a warm beverage without caffeine. It is rich in inulin, a prebiotic fiber that aids in digestion and promotes gut health by supporting beneficial bacteria. Chicory coffee has a nutty, earthy flavor and can help control blood sugar levels, contributing to overall energy and productivity throughout the day.

      Popular Brands: Anthony’s Instant Chicory Root (0 mg caffeine), Teeccino Chicory Coffee Alternative (0 mg caffeine)


      Yerba Mate

      Image Source: Guayaki Yerba Mate

      Yerba mate is a traditional South American herbal tea made from the leaves of the Ilex paraguariensis plant. It contains about 40-80 mg of caffeine per serving, which is less than a standard cup of coffee but enough to provide a gentle energy boost. Yerba mate is rich in antioxidants, vitamins, and minerals, and users often report feeling energized without the jitters or crashes associated with coffee. It has a unique, slightly bitter flavor and can be enjoyed in various forms, including loose-leaf tea and pre-brewed options.

      Popular Brands: Guayaki Yerba Mate (40-150 mg caffeine)


      Download the dot.LA App

      LA’s Data Center Supply Crunch

      🔦 Spotlight

      Happy Friday Los Angeles!

      The Los Angeles data center market is experiencing a significant supply crunch, ranking 12th in growth among top markets since 2020 with only 265 megawatts of colocation inventory (data centers where businesses rent space to store their computing hardware and servers). Despite this, demand is surging, driven by AI, cloud, and hyperscaler needs, with AI accounting for 20% of new data center demand nationally. This scarcity is creating a highly competitive environment, with vacancy rates at a record low 3% and asking rents rising 13-37% year-over-year. For Los Angeles, this presents both challenges and opportunities in the big picture. The city's strategic position as a global entertainment hub and its connectivity to international markets through subsea cables make it an attractive location for data centers. However, the limited inventory and rising costs could potentially hinder growth and innovation in the tech sector. To maintain its competitive edge, Los Angeles will need to address these constraints through new developments, such as GI Partners' 16 MW addition at One Wilshire, and by focusing on high-connectivity, high-power capacity submarkets. The city's tech community should prepare for a landscape of increased competition for quality data center space, higher costs, and the need for innovative solutions to meet growing demand, particularly in AI and cloud services. While Los Angeles faces a challenging data center supply crunch, its strategic advantages and ongoing developments offer a promising path forward.


      🤝 Venture Deals

      LA Companies

      • Daisy, a one-year-old startup that designs and installs smart home and office technology systems, raised a $7M Series B co-led by Goldcrest and Bungalow, with previous investors Bullish and Burst Capital also stepping up. The company has raised a total of $13.3 million. - learn more

      LA Venture Funds


        ✨ Featured Event ✨

        LA TECH CEO SUMMIT

        LA’s tech leadership is set to reunite after a long break! This two day summit will focus on building strong connections, sharing insights, and fortifying the local tech community.

        Learn More Here

        Register Here


        Download the dot.LA App

        RELATEDEDITOR'S PICKS
        Trending