Peak Froth: When Months-Old Startups Get $100M Term Sheets
The numbers are getting stupid. And this time, who's left holding the bag?
We might be hitting peak frothiness as we enter this arc of the technology hype cycle.
The numbers are getting stupid. YC startups, literally months-old, are fielding $100M term sheets before Demo Day. Mercor gets asks to 5x to $10B in six months. Vibe coding darlings (Cursor, Lovable) are doubling valuations between morning coffee and afternoon standup. This week alone, OpenAI drops $1.1B on product testing startup Statsig and Atlassian buys Arc browser for $600M cash.
Toto, we are not in Kansas anymore.
A similar gold rush happened during the dotcom era. Dotcom startups IPO’d after 4 years on average, and then went completely ballistic after going public. Pets.com went from $11 to $0.19 in less than a year. Webvan shares were hyped to $30 at IPO and then fell to just 6 cents a share in two years.
But the speed of capital concentration today has broken every historical precedent. Even compared to the dotcom era.
The Magnificent Seven tech stocks accounts for 33.5% of the S&P 500's total market value.
In Q4 2024 alone, just FIVE companies raised $32B in total. (That's nearly a third of what the entire dotcom sector raised annually at peak bubble.)
Markets are hitting all-time highs, even as job numbers dwindle and miss expectations by 28%.
The two big questions for me here:
Will the IPO drought we’re in today continue? Or will most of the hype and crash happen in the private markets? What happens when 50 “hot AI unicorns” try to IPO and don’t pass the pesky public markets' “sniff test”?
Who are the WeWorks? While everyone's distracted by mega-rounds, who's about to implode?
We've seen this movie before. After the storm settles, the real stuff gets built. But this time, it might not just be day traders losing their shirts like 2000.
But they know the game. The biggest risk isn't in the froth. It's in who's holding the bag when the music stops. And this time, the bag is being held by your retirement fund.
The Download —
News that mattered this week
OpenAI shakes up its leadership team: OpenAI announced that it agreed to acquire the product testing startup Statsig, and bring on its founder and CEO, Vijaye Raji, as the company’s CTO of Applications. As Raji comes on board, OpenAI is making changes to its leadership team. The company’s chief product officer, Kevin Weil, will become VP of a new group called OpenAI for Science, he announced in a post on LinkedIn. Weil says the goal of his new organization “is to build the next great scientific instrument: an AI-powered platform that accelerates scientific discovery.”
GoogleDeepMind and Intrinsic release a new approach to manage multi-robot orchestration, useful for coordination in tight workspaces. If this works, fleets of robots can be orchestrated at speed and scale.
Apple plans AI-powered web search tool for Siri to rival OpenAI, Perplexity: The company is working on a new system, dubbed internally as World Knowledge Answers, that will be integrated into the Siri voice assistant. The companies reached a formal agreement this week for Apple to evaluate and test Google-made model Gemini to help power the voice assistant
DeepSeek targets AI agent release by end of year to rival OpenAI: The Hangzhou-based startup is building an AI model that’s designed to carry out multi-step actions on a person’s behalf with minimal direction from the user, said the people, who spoke on condition of anonymity as the information is private. The system is also meant to learn and improve based on its prior actions, the people said."