Financial Tech Headspin

The "valuations" of financial and investment advice start-ups are staggering. Especially since they are likely not even making a profit. This isn't a new thing, however. A lot of tech startups end up selling for millions (or billions) and never show a profit. Hell, some even do IPOs without profits. Reminiscent of the dot com bubble, the valuations can be staggering. I don't know much about tech company valuations. I was one of the many who thought $1B for Instagram seem crazy. Facebook is having the last laugh.

I do know how financial companies make money and I have a pretty good sense on how small firms value themselves (most overvalue themselves in my opinion, but that's for another day). The acquisitions are more stunning by the day. Some, like Fidelity's purchase of eMoney, are for the technology. Others, like Northwestern's purchase of LearnVest, seem to make no sense at all. Personally, I think we are seeing what has been around in the tech industry for a very long time. Some call it "selling out". I won't go that far. If you build something and it is worth a ton of money then you have the right to sell it and reap the rewards. But, venture capitalists bring a whole new wrinkle. In some cases the VC money could be inflating the values. Mark Cuban may be right