Here’s what’s happening: Young tech companies have been backed by unprecedented sums of investment money in the last three or four years. Those startup financiers in turn have collected record amounts of money from their own investors to buy pieces of future tech startups. All this money is going into the startup system, but it’s not coming out the other end.
And that’s trouble. The way Silicon Valley’s intricate money pipes are supposed to work is people who start tech companies receive financial backing from venture capital investment firms tasked with finding the next Google or Facebook. Those founders build a company with that money and eventually sell their company or take it public, if all goes well. The financiers make their money back, and then some, and pass the windfall down the line to their investors.