Technology start-ups are playing a major role in the global economy, propping up giants such as AWS, Microsoft and Google.
According to latest figures from hedge fund Bridgewater, tech start-ups (opens in new tab) now account for more than 0.4 per cent of global economic activity.
This may be slightly lower than during the peak internet bubble time (mid-2000’s), when it hit 0.6 per cent, but the hedge group investors should be careful.
“Though the numbers are still small, the shift of funds in this direction has been fast,” Bridgewater said in a research note. “And though the climb has not been quite as stratospheric as in the tech bubble, we see more reason for a continuation today.”
A significant portion of their spending goes on advertising and cloud computing. Last year, they spent $44 billion for such activities, with Bridgewater claiming this spending makes up about 10 per cent of the revenue of tech giants. AWS, Google and Facebook advertising, were the biggest gainers. Just six years ago, start-ups (opens in new tab) spent $9bn for the same cause.
The group says spending ‘greatly exceeds’ their outlays on run-of-the-mill operating expenses.
Venture capitalists have been increasingly betting on start-ups (opens in new tab) ever since the 2008 financial crisis, it was said.
“The decade of falling discount rates has lowered the hurdle for success, especially for investments with payouts far in the future,” Bridgewater wrote.