When the owners of Freelancer.com, a skills crowdsourcer based in Sydney, knocked back a $A430 million takeover bid for the company in favour of a listing on the Australian Stock Exchange in November last year, it signalled a new level of investor confidence in the technology sector.

The shares, priced in the prospectus at 50 cents, enjoyed a volatile few days; soaring above $A1.80, plunging back to around $A1, before settling to around $A1.35 a month after the float.

Very little of the company was actually available to investors – less than seven percent of the shares. But what they could get, they liked. Based on the prospectus which forecasts a net after-profit-tax for the current financial year of $A500,000 on revenues of around $A18.3 million, investors were punting on a very strong future for the business. Even at $A1.35 the stock was still priced at 1300 times earnings – a clearly speculative punt.

New Zealand’s Xero has buoyed similar investor enthusiasm. Listed on the New Zealand and Australian stock exchanges, at time of writing the New Zealand listing values the business at more than $NZ3.6 billion. Not bad for a company which has never made a profit.

Anyone with their nose to the wind could be forgiven for scenting more than a whiff of dot-com mania.

Sandy Plunkett remembers that period keenly; she spent over a decade working in California, first in venture capital, then a start-up, and then back into venture capital. Now returned to Australia she remains an advisor to BullPen Capital, is on the investment committee of lean capital firm TankStream Ventures, and is also an industry fellow in the University of Technology, Sydney’s entrepreneurship programme.

She harbours some concerns that another technology bubble is brewing – but maintains this one is different.

“We are definitely in a boom period that started around 2009. It’s not yet like 1999. But, another tech bubble is brewing,” she says.

Plunkett says that bubbles, as opposed to booms, are spurred by external factors such as government policy – particularly the US Federal Reserve’s programme of quantitative easing – and what she describes as “irrational investment exuberance”.

Australian and New Zealand technology stocks are riding the coat-tails of the global demand for technology stocks which is still led by the US markets. It’s why Australian software company Atlassian is expected to list not on the Australian Stock Exchange but the Nasdaq, which was awash with tech IPOs in 2013.

Peter James, long-term technology investor, besides co-founder and chairman of cloud business ninefold, believes many Australian and New Zealand companies will follow Atlassian’s trajectory, upping sticks to list in the US where there is access to deeper pockets and a larger market, although he laments the resultant migration of A/NZ IP.

“It’s not that there isn’t a growing number of incubators and funds here. But if you want to prove your business model you’ve got to go offshore,” he says.

Certainly the US market for tech listings is red hot. According to Plunkett; “The only better year than 2013 for tech IPOs was 1999 and the Twitter IPO seems to have created a new thrust for the tech sector. Its stock price ‘pop’ first day of IPO went up 72 percent.

Although investors should probably remain alert to the potential for a bubble to burst, it’s a little early for outright alarm. Plunkett says that the raw numbers suggest today’s tech market is a little more sober than that of 1999.

For example there were 368 US IPOs in 1999, compared to 32 in 2013. The average first day return in 1999 was 87 percent compared with a much more sedate 26 percent in 2013, while the average age of a company at IPO is today 13 years compared to just four in 1999.

Plunkett however says that there are warning signs, as 73 percent of companies floated in the US in 2013 have yet to make a profit, compared to 27 percent in 1999 – although generally revenue streams are now much stronger at listing.

For conservative investors the fact that Twitter could be valued at $US11 billion, Pinterest $US3.8 billion, Snapchat $US7.3 billion without a skerrick of profit between them should prompt a few furrowed brows.

“My main concern re all the Twitterpation in the local tech sector now is timing. We have a history of getting into the action too late in the boom cycle, and with a relative lack of investor savvy in the space. So, we have a boom and we buy in, but only after that boom is deep into its cycle. Then there is a bubble and then it crashes,” says Plunkett, concerned this may impact the availability of venture capital in the future.

Peter James agrees, saying that the A/NZ market is probably a quarter of a cycle behind the US.

But he doesn’t believe that the bubble will burst this time, saying that while the dot com era involved a lot of “wishing and hoping” he feels that although there is still something of a land-grab going on, with the current crop of new listings, “this time it’s real business,” coming from companies with revenues, if not yet profits.

Blair Galpin, senior equity analyst at New Zealand-based Forsyth Barr, says that the global technology sector is driven to a large extent by the US market. While there is something of a “halo effect” in New Zealand, cast by Xero and Diligent, there are still very few technology stocks listed on the New Zealand Exchange or the New Zealand Alternative Market (NZAX) he says, a situation he does not expect to change quickly.

While Australia’s National Stock Exchange struggles to attract many tech floats, there are 130 technology-related companies listed on the ASX, including recent successful listing OzForex along with more seasoned tech companies such as Seek, CarSales.com and Technology One. But that list pales compared to the 2700-plus companies listed on the Nasdaq – most of which are tech stocks.

Galpin says that Xero’s performance will prove the bellweather for the New Zealand listed tech sector, and its movement – up or down – will affect the entire market. He notes however that as a tightly held stock, the impact of movement will affect mainly institutional investors rather than mum and dad investors dabbling in the share market.

Adrian di Marco, chairman of Technology One, which listed on the ASX back in 1999 believes that there are in fact two technology markets operating – one mature, based around service providers, and the IP-related start-up market which can attract “sky-high” valuations he acknowledges. He urges investor caution noting that stocks that run too high can drag back the entire market when they correct.

“Sky-high valuations where there are no earnings are dangerous for investors and the companies.” It’s something he experienced when Technology One’s share price was caught up in the dot com bubble and share prices soared to become what di Marco frankly admits were overvalued. The share market valuation he said became a “gorilla on your back,” although the company managed to stay profitable even when the market tanked.

While markets continue to fluctuate, there is no shortage of tech-related investment opportunity in Australia and New Zealand (see breakout box overleaf).

And today, unlike the dot com era, there is a slew of incubator companies, venture capital firms, and even big businesses like ANZ and Telstra setting up funds to inject seed capital into.

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