Flashing Back to Nasdaq 5000

Oh, wait a sec -- those stories weren't from early 2000, they're from early 2005.

Well, they're scary signs now or then. According to VentureOne, the median valuation of U.S. venture-backed start-ups grew to $13 million in 2004, the highest level since 2001. And as Business2.0 pointed out recently, many venture capitalists who raised money in 2000 are facing a five-year deadline to either invest it or give it back to their own investors. The magazine estimates that as much as $13.5 billion in venture money could be put into start-ups in the next several months.

Meanwhile, an IPO market that had been hostile to red-inked companies is now more forgiving. Yes, Buy.com is again braving an IPO, despite a $15.4 million loss last year. And it's not alone: ArcSoft, a maker of digital-media software, has filed after posting a $536,000 loss in its fiscal 2004. CombinatoRx, which says it's "developing new medicines built from synergistic combinations of approved drugs," filed to go public with zero revenue and a $22 million loss.

Sound familiar? So does this line in yesterday's Times: "A wide variety of indicators now suggest that the economy is in a sweet spot: business investment is soaring; inflation appears more moderate than a few months ago; employment is climbing, even if real wages are not."

All these bullish factors are accompanying the kind of irrational activity in the stock market we saw in the late 1990s. According to Baseline, more than 75 U.S. stocks have risen more than 50% so far this year, including many that have not posted a profit in recent quarters. Among them is GuruNet, a search site that saw its stock surge more than 30% Tuesday on an announcement that it would run Google ads on its site.