Are Banks like Dominos for Entrepreneurs?

I heard a commentator say that the collapse of SVB and Signature Banks were “extinction level” events for a generation of small business owner start up’s.

It reminded me we needed to revisit and review what happened in the early 2000’s when the dot com bubble crashed and lo and behold.

The same CEO’s and CFO’s from Leman Brothers and Bear Stearns who were in charge when the dot com bubble popped were also in charge when the housing bubble crashed and now are in charge of the banks going down in a third round.

How many KO’s does it take for people to get the message that these guys either don’t know what they are doing, or know exactly what to do to get millions in tax dollars?

Is it incompetence, or a conspiracy to move money from public coffers into private pockets.

I got a quick review of the dot com debacle below along with the major players for you to review, but take a peek and let me know what questions it makes you want to ask.

Especially if you are a business owner or entrepreneur.

How much do you trust your bank or any bank now?

The dot-com crash in the late 1990s and early 2000s affected numerous hedge funds and banks that had invested heavily in technology companies and internet startups. Some of the most prominent hedge funds and banks that were impacted by the crash include:

Long-Term Capital Management (LTCM): This hedge fund, which had been highly successful in the 1990s, suffered significant losses during the dot-com crash. LTCM had invested heavily in technology and telecommunications stocks, which plummeted in value during the crash. The fund ultimately had to be bailed out by a consortium of banks to prevent a wider financial crisis.

Bear Stearns: This investment bank had significant exposure to the technology sector during the dot-com era. When the market crashed, Bear Stearns suffered significant losses and was ultimately acquired by JPMorgan Chase in 2008.

Lehman Brothers: Another investment bank with significant exposure to the tech sector, Lehman Brothers collapsed during the 2008 financial crisis, largely due to its investments in subprime mortgages. However, the bank had also been impacted by the dot-com crash, which had weakened its balance sheet.

Goldman Sachs: This investment bank suffered significant losses during the dot-com crash, but was able to weather the storm thanks to its diversified portfolio and conservative risk management strategies.

Soros Fund Management: This hedge fund, founded by billionaire investor George Soros, suffered significant losses during the dot-com crash due to its investments in tech stocks. However, the fund was able to rebound and remains one of the most successful hedge funds in history.

These are just a few examples of the hedge funds and banks that were impacted by the dot-com crash. The crash had far-reaching consequences for the financial industry, leading to a period of consolidation and tighter regulation. However, it also helped to create a more sustainable and mature tech industry, one that continues to thrive and innovate today.

The tech bubble collapse, also known as the dot-com crash, was a catastrophic event that occurred in the late 1990s and early 2000s. During this period, the world saw an unprecedented surge in the value of technology stocks, with many investors betting on the potential of the internet and e-commerce. However, this speculative fervor eventually led to a massive crash, wiping out billions of dollars in investment and decimating the tech industry.

The Rise of the Dot-com Era

In the mid-1990s, the internet began to gain widespread popularity, and investors began to see the potential for new business models and revenue streams. Startups like Amazon, eBay, and Yahoo were founded, and investors poured money into these companies, often without regard for traditional metrics like revenue and profit.

In many cases, companies that had little or no track record of profitability were able to secure massive investments based solely on the promise of future growth. As a result, many companies became overvalued, with share prices soaring to unprecedented heights. For example, in 1999, the Nasdaq index, which was heavily weighted towards tech stocks, reached a peak of over 5000 points.

The Bubble Bursts

However, the euphoria of the dot-com era was short-lived. By the early 2000s, it became clear that many tech companies were not able to deliver on their promises of future growth and profitability. Many investors began to sell off their shares, causing a rapid decline in stock prices.

As the bubble burst, many tech startups that had been heavily funded found themselves without a viable business model or a sustainable source of revenue. The layoffs and bankruptcies that followed were devastating, with many workers and investors losing their jobs and savings. For example, in March 2000, the tech startup Pets.com went public, raising $82.5 million in an initial public offering. However, just nine months later, the company was forced to shut down after burning through most of its cash reserves.

The Aftermath

The collapse of the tech bubble had far-reaching consequences for the global economy. Many investors lost a significant amount of money, and many tech startups were forced to shut down or drastically scale back their operations. In the aftermath of the crash, the tech industry underwent a period of consolidation, with many companies merging or being acquired by larger firms.

However, the dot-com crash also led to significant changes in the tech industry. Companies that survived the crash were forced to focus on delivering real value to their customers, rather than simply relying on speculative investments. Additionally, the crash helped to weed out many of the less viable business models, leaving behind a more mature and sustainable industry.

The tech bubble collapse was a defining moment in the history of the tech industry. It was a time of great optimism, but also a time of reckless speculation and overvaluation. The crash that followed was painful, but it also helped to bring the tech industry back down to earth, forcing companies to focus on delivering real value to their customers. Ultimately, the lessons learned during the dot-com era have helped to create a more resilient and sustainable tech industry, one that continues to innovate and push the boundaries of what is possible.