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Reuters
24-07-2025
- Business
- Reuters
Breakingviews - Netscape IPO casts a shadow from 1995 over AI boom
NEW YORK, July 24 (Reuters Breakingviews) - With a $300 billion valuation, ChatGPT developer OpenAI towers over peak Netscape. The trailblazing web browser, however, looms large from Silicon Valley to Wall Street as the 30th anniversary of its world-shaking initial public offering approaches. Both the similarities and differences with the internet craze have created some worrisome conditions for today's artificial intelligence mania. Netscape IPO delirium was instrumental in reshaping technology and finance. The company went public on August 9, 1995, just 16 months after veteran entrepreneur Jim Clark and computer programming whiz Marc Andreessen started it. With assistance from Morgan Stanley's Frank Quattrone and Mary Meeker, and Bill Hambrecht of Hambrecht & Quist, the co-founders cleared the way for unprofitable, fast-growing ventures to attract investments from big money managers. The frenzy to buy its shares also spawned a dotcom boom that would run for nearly five years. Moreover, Netscape helped rewrite funding handbooks, debunked some of the first-mover gospel, and provides lasting cautionary tales about capital intensity and the threat from entrenched rivals. As AI fever grips the market, these developments are instructive. Consider the technological backdrop as Netscape released its user-friendly Navigator browser three decades ago. Soon after the market debut, Meeker drafted the first of her regular trend-spotting reports, which have become required reading, opens new tab for the industry. 'What is the Internet?' she pondered early in the inaugural 323-page presentation. While TVs and corded telephones could be found in 95% of U.S. households, less than 1% of the world's population had access to the worldwide web, including email. There were about 16 million users. Netscape sold 5 million shares for $28 apiece, nowhere near enough to satisfy insatiable demand for a company considered to be the future of the internet, despite having lost $4 million on $15 million of revenue during the first half of 1995. The stock nearly tripled, before ending the day at about $58 to impute a $2.3 billion market value. Six months later, the boom got an extra boost from the U.S. government. Deregulation of the telecom industry helped fuel a nearly $500 billion spending spree over roughly five years to build network capacity. There are some notable differences between then and now. Just look at OpenAI, whose ChatGPT exploded onto the scene much like Netscape did by making an arcane technology accessible to the masses. The firm led by Sam Altman is now almost a decade old and three years have passed since it shook up the industry, but it remains beyond the reach of most investors. OpenAI recently raised $40 billion privately, the single biggest funding round in Silicon Valley history, at a $300 billion valuation. With so much venture and later-stage money available to entrepreneurs, it's no wonder the number of tech IPOs has plummeted from 370 in 1999 to just 14 last year. Myriad scandals from the dotcom era involving inflated valuations, excess commissions and improperly allocated shares also led to new regulations that chilled some of Wall Street's willingness to underwrite unproven business models. Efforts in 2012 to make it easier for smaller startups to go public failed to jumpstart the market and arguably put investors at greater risk by reducing the amount of required corporate disclosure. New tech stock issuance is so fallow that JPMorgan has started providing, opens new tab clients with research about private ones. 'Some good business models are out there,' Hambrecht, one of the bankers who advised Netscape, told Breakingviews in an interview earlier this month. 'There's still a lot of demand for new investments, and sites like Robinhood are bringing a new dimension with younger, more aggressive investors. There's just a lack of issues, and I just think the financial markets have changed so significantly since Netscape.' Another big reminder of the time remains entrenched in the technological firmament: Microsoft (MSFT.O), opens new tab. The software behemoth squashed Navigator, which had amassed about 90% of the browser market, by bundling its competing Internet Explorer with the Windows 95 operating system. The aggression attracted the attention of U.S. trustbusters, leading to a landmark lawsuit and settlement. Seemingly heeding the ominous precedent, Microsoft boss Satya Nadella carefully partnered with OpenAI in 2019 while providing a $1 billion investment. Since then, however, the relationship has become increasingly strained, leaving open the possibility that history will rhyme. Altman has another good reason to brush up on the browser wars. Netscape could not have mobilized any faster, having developed a product, dominated the market and created investment buzz within 16 months. And yet it was unable to keep up with a deep-pocketed rival. The company swiftly ceded its share of users and succumbed to giving Navigator away free. In late 1998, Netscape agreed to an ill-fated sale to dial-up internet service provider America Online for about $4 billion in stock, worth $10 billion by the time the deal closed months later. One risk for Altman is that ChatGPT winds up similarly clearing a path only for more established rivals to ultimately walk it. 'It's always striking – given all the tech enthusiasm – how few companies become massive winners. There's a lesson there,' Meeker wrote to Breakingviews in an emailed reply to questions. 'There's also a lesson related to just how massive and foundational the big winners can become.' Her observation partly explains the mad rush to build data centers, buy chips and secure the power used to train and expand large language models. The danger is that all this investment alters Big Tech's use of capital for the worse. Alphabet (GOOGL.O), opens new tab, (AMZN.O), opens new tab, Meta Platforms and Microsoft are on track to deploy more than $300 billion this year alone, a 13-fold increase from a decade ago. Although they're funding the outlays with their own cash flow, unlike the debt-heavy telecom providers of the 1990s, there is a risk that capacity winds up similarly outpacing demand. As if all that isn't enough to give investors pause, there are other indications of recklessness, any one of which could cause fear to ripple through the market. Cryptocurrency exuberance abounds thanks to relaxed restrictions; shell companies stuffed with cash have made a comeback buying speculative ventures; meme stocks keep raging; and U.S. regulators have proposed rolling back rules designed to curb day trading and protect investors from big losses that were put into place in 2001 after the dotcom bust. The dearth of IPOs is also leading to a proliferation of sites offering unproven access to hot, private tech firms. It's all part of a shaky edifice that portends another bittersweet anniversary. Full view will be published shortly. Follow Jeffrey Goldfarb on X, opens new tab and Linkedin, opens new tab.
Axios
08-07-2025
- Politics
- Axios
Trump's K-12 funding hold leaves $71M in limbo for Colorado
Colorado is missing out on about $71 million in federal education funding that was expected on July 1 but has yet to be released by the Trump administration. Why it matters: The Department of Education's funding delay deals a major blow to local summer school and after-school programs, as well as English-language instruction and other resources that aim to level the playing field for schoolchildren. Catch up quick: The Education Department said in a last-minute notice that the funds would not be released while the programs were under review, according to the School Superintendents Association. By the numbers: The funding at risk includes nearly $13 million in after-school and summer instruction in Colorado, per the Learning Policy Institute, which conducts research to improve education policies. The funding pays for programming in underserved and low-performing schools. The pause also affects about $26 million in educator development funds, $11 million in English language programming and $7 million for migrant education in Colorado. Zoom out: Some $6.2 billion in K-12 funds across five programs remains unavailable to schools across the country, per the LPI estimates. Threat level: If 21st Century Community Learning Center funds — the chief stream for academic enrichment outside of school hours — remain blocked, the "fallout will be swift and devastating," Boys and Girls Clubs of America President and CEO Jim Clark said in a statement. Up to 926 Boys and Girls Clubs could be forced to shut their doors, he said, and club sites and camps "could shutter mid-season — upending care for working parents and leaving kids without critical safety nets."
Axios
08-07-2025
- Politics
- Axios
Trump administration is withholding $35M from Utah schools
The Trump administration is withholding more than $35 million in education funding from Utah as it reviews the programs that were due to receive the money. Why it matters: The missing money has left after-school and summer programs in limbo nationwide. Driving the news: The Education Department said in a last-minute notice that the funds would not be released as planned on July 1 while the programs were under review, according to the School Superintendents Association. By the numbers: An estimated $6.2 billion in K-12 funds across five programs remains unavailable, according to the Learning Policy Institute, which conducts research to improve education policies. That includes funding for after-school and summer learning through the 21st Century Community Learning Centers program, money to support migratory children, educator development funds and more. Zoom in: The Department of Education referred Axios' questions to the Office of Management and Budget. An OMB spokesperson said no decisions have been made amid "an ongoing programmatic review of education funding." The spokesperson pointed to initial findings they said "show that many of these grant programs have been grossly misused to subsidize a radical leftwing agenda." Threat level: If unreleased 21st Century Community Learning Center funds — the chief stream for academic enrichment outside of school hours — remains blocked, "the fallout will be swift and devastating," Boys and Girls Clubs of America President and CEO Jim Clark said in a statement. Up to 926 Boys and Girls Clubs could be forced to shut their doors, he said, and club sites and camps "could shutter mid-season — upending care for working parents and leaving kids without critical safety nets." What they're saying: Jodi Grant, the executive director of the Afterschool Alliance, described the withholding of funds as "a stunning betrayal," as states and territories had already committed money to after-school and summer learning programs.
Axios
07-07-2025
- Politics
- Axios
Trump admin. withholds $94 million for Mass. K-12 schools
Massachusetts has a $94 million hole for K-12 schools as the Trump administration holds off on releasing federal education funding. Why it matters: The Department of Education's funding delay deals a major blow to Massachusetts summer school and after-school programs, as well as English-language instruction and other resources that aim to level the playing field among schoolchildren. Catch up quick: The Education Department said in a last-minute notice that the funds would not be released while the programs were under review, according to the School Superintendents Association. By the numbers: The funding in limbo includes $20.6 million in after-school and summer instruction in Massachusetts, per the Learning Policy Institute, which conducts research to improve education policies. The funding particularly goes toward programming in underserved and low-performing schools. The pause also affects $30 million in educator development funds, $20.5 million in English language programming and $1.3 million for migrant education in Massachusetts. Zoom out: Some $6.2 billion in K-12 funds across five programs remains unavailable to schools across the country, per the LPI estimates. Threat level: If unreleased 21st Century Community Learning Center funds — the chief stream for academic enrichment outside of school hours — remain blocked, the "fallout will be swift and devastating," Boys and Girls Clubs of America President and CEO Jim Clark said in a statement. Up to 926 Boys and Girls Clubs could be forced to shut their doors, he said, and club sites and camps "could shutter mid-season — upending care for working parents and leaving kids without critical safety nets." Jodi Grant, the executive director of the Afterschool Alliance, described the withholding of funds as "a stunning betrayal," as states and territories had already committed money to after-school and summer learning programs.
Axios
02-07-2025
- Politics
- Axios
Summer and after-school programs at risk under Trump's K-12 funding hold
States across the U.S. are missing billions in federal education funding that was expected to be accessible on July 1 but has yet to be released by the Trump administration. The big picture: The Department of Education's funding delay has exacerbated the uncertainty for after-school, summer and other programs, leaving schools in limbo, advocates and policy experts say. The Education Department said in a last-minute notice that the funds would not be released while the programs were under review, according to the School Superintendents Association. By the numbers: An estimated $6.2 billion in K-12 funds across five programs remains unavailable, according to the Learning Policy Institute, which conducts research to improve education policies. That includes funding for after-school and summer learning through the 21st Century Community Learning Centers program, money to support migratory children, educator development funds and more. Zoom in: The Department of Education referred Axios' questions for this story to the Office of Management and Budget. An OMB spokesperson said no decisions have been made amid "an ongoing programmatic review of education funding." The spokesperson pointed to initial findings that they said "show that many of these grant programs have been grossly misused to subsidize a radical leftwing agenda." Threat level: If unreleased 21st Century Community Learning Center funds — the chief stream for academic enrichment outside of school hours — remains blocked, the "the fallout will be swift and devastating," Boys and Girls Clubs of America President and CEO Jim Clark said in a statement. Up to 926 Boys and Girls Clubs could be forced to shut their doors, he said, and club sites and camps "could shutter mid-season — upending care for working parents and leaving kids without critical safety nets." Zoom out: Jodi Grant, the executive director of the Afterschool Alliance, described the withholding of funds as "a stunning betrayal," as states and territories had already committed money to after-school and summer learning programs. "Short term, [there are] a lot of very anxious programs and very anxious parents, because they don't know if their kids are going to be able to have after-school, but that will very quickly turn into programs reducing how many kids they can serve and or closing their doors," she told Axios. But she said "it's a long-term impact, no matter how you cut it," noting that Trump's 2026 budget proposed no funds for 21st CCLC, instead opting for a K-12 Simplified Funding Plan. Even if the funds do come back, she said, it will be much harder to recover, with ripple effects echoing throughout communities where such programs are necessary for children and working families. She emphasized that after-school programs have broad bipartisan support, and a majority of voters say they're a necessity for their communities. 21st CCLC serves nearly 1.4 million youth and their families through grants awarded by state education agencies, according to the Afterschool Alliance. What they're saying: Sen. Patty Murray (D-Wash.), the top Democrat on the Senate Appropriations Committee, said in a statement that education funding uncertainty has prompted districts to delay hiring and other initiatives. "Every day that this funding is held up is a day that school districts are forced to worry about whether they'll have to cut back on after-school programs or lay off teachers instead of worrying about how to make sure our kids can succeed," Murray said. Catch up quick: Advocates and educators were already concerned about summer and after-school programs being disrupted by cuts at the Department of Education and AmeriCorps.
