And in that five-year span, the tech-heavy Nasdaq has fallen by more than half, corporate America has pulled back its IT spending, a large swath of jobs have been cut across a number of industry sectors, consumer confidence has waned and the tech sector, which garnered the biggest benefit during the go-go years, has suffered a black eye.
"It took 86 years for the Red Sox to win the World Series. It may take a little less for the Nasdaq to hit 5,000 again," said Richard Peterson, chief market strategist for Thomson Financial.
Those in the tech financing community have learned some lessons in the last five years. Venture capitalists are placing a greater emphasis on investing in more mature companies than early stage start-ups. And investment bankers are floating out largely old economy companies as IPOs.
What makes a bubble?A bubble is not defined by its financial size, nor is it a case of rapidly rising share prices due to irrational exuberance, said Carl Haacke, a former White House economic policy adviser under the Clinton administration.
He defines a bubble as quickly rising stock prices that are not sustainable. Those stock prices are fueled by a cascade of bad investment decisions and encompassed by competitive pressures by the companies in that industry.
Venture capitalists, who now acknowledge they contributed to the feeding frenzy of the Internet bubble, say they've learned their lesson and have returned to the practice of funding companies that not only have an enticing idea, but also carry a strong business plan. Profitability prospects carry more weight these days than revenue and market growth.
In part, that has played a role in the way VCs now fund companies.
Historically, venture capital firms allocated a third of their funds to invest in new companies, with the remainder going to more mature companies. But last year, the slice of funding to early stage companies accounted for only a fifth of investments, said Adam Reinebach, vice president of research firm Thomson Venture Economics.
"VCs are now being criticized for not doing enough early stage deals and spending a larger share of their money on later stage investments," Reinebach said. "Some people are saying they're getting away from what made them great. But the VCs say its just responsible investing."
Although the composition of the funding pie has changed, the pie, overall, has grown. Last year, venture capital firms invested US$20.9 billion into companies in all industries, reversing a three-year sequential decline.
Wall Street looks for what's nextOverall, the group of 385 companies--including a number of technology businesses--that underwent an initial public offering in 2000 is performing poorly, according to Thomson Financial. According to the firm, 71 percent of the companies are either trading below their offer price or not at all. The companies in the latter category--including Pets.com and Genuity--have either been delisted, folded or sold.
Now Wall Street is starting to embrace the return of initial public offerings, after a long hiatus. But it's not looking to tech.
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