Morning Report: As Microsoft Hits Record Highs, Tech Enjoys Strong Start To 2017

Morning Report: As Microsoft shares rip higher this morning, it’s worth taking a moment to reflect on how strong tech is today for both public and private companies. Why? Because it could change.

2017 is no 2016. Last year brought industry panic after a massive IPO drought and public market tremors left some worried that tech startups were on the verge of a mass extinction event. It didn’t bear out.

Instead, the stock market is strong, IPOs are skipping along, private investment is on the rebound, and there isn’t much on the horizon to warrant panic. We write today to remind ourselves later how correctly priced the market is today or how distorted things have become.

In order, I think:

• The stock market. The Nasdaq is over 5,900, trading in the small-variance range of record highs. The Nasdaq has smashed the historical-psychological barrier of 5,000, first crested in the Dotcom boom. Now, that mark seems small and distant. Of course, other indexes are up at record highs as well.
• IPOs skip along. Tracking 2017’s tech IPOs is decent sport (spreadsheet here) that underscores the variety of companies that the public markets are willing to accept. A quickly growing but deeply unprofitable social company? Sure. Mulesoft and Okta on the enterprise front? Why not. Subprime lending? At a lower price, but fine. Brazilian ecommerce? Yes. Carvana, a group that, until recently, lost money on a gross basis for every car it sold? Seems like a go. Total all that up and you have a pretty damn healthy exit market for late-stage tech startups.
• Private investment rebounds. We have yet to collate all our Q1 VC coverage into a single post, but it’s clear from our various looks at venture activity that things are back in shape after a Q4 2016 dip. And, if you read the first blurb below from the Daily, you’ll see another half-billion-dollar fund close. You’ll forget by lunch who raised it. That’s a signal all its own.
• Impending panic? Not really. Interest rates will climb at a moderate pace it seems, and POTUS has yet to fully act out Revelations. As such, aside from a traditional correction, it’s hard to point a finger at a single event that could smash tech’s short-term prospects. Of course, the nature of surprises is that they are unexpected, but that doesn’t mean scanning the next few months isn’t a useful endeavor.

This isn’t our first time noticing a pronounced warm period for the tech industry, and it might not be our last. But, like all things, tech is cyclical.

From the Crunchbase Daily:

DFJ Growth closes third fund with $535 million

• DFJ Growth, the late-stage investment arm of venture firm DFJ, has raised $535 million for a third fund. The Silicon Valley-based firm, whose previous investments include Box, SolarCity, Tesla and Twitter, closed its last growth fund, for $470 million, in 2014.

Gannett buys SweetIQ

• News publisher Gannett announced that it has acquired SweetIQ Analytics, a provider of location and reputation management software, in a move to expand its digital marketing business. Terms weren’t disclosed. Montreal-based SweetIQ previously raised about $4 million in venture funding.

Quora raises $85M round

• Question and answer site Quora has raised $85 million in a new round co-led Y Combinator Continuity and Collaborative Fund, VentureBeat reports. The investment comes three years after Quora’s last round of $80 million.

VR investment fades in first quarter

• VCs are showing a diminished appetite for virtual and augmented reality startups this year compared to last. Both the number of funding rounds and total investments made into the space have slowed down in the first quarter, according to a Crunchbase News analysis.