How Frothy Is the Tech Boom? Lots of start-ups in Silicon Valley aren't just getting rich on paper. They are cashing out, long before they get to the public market. The New York Times recently published an article on the large number of Silicon Valley companies that are not publicly traded, but that are valued at $1 billion or more by their investors. That is make-believe wealth, as many people commenting on the story noted. A company only finds its total value if it is purchased, or has an initial public offering; everything else is a combination of its funding history, a best guess compared with its peers, and a little bit of hope. A couple of recently published reports, however, back the idea that tech companies are seeing historically rich valuations. They also offer some insights into where this is headed. CB Insights, which looks at venture funding and acquisitions, published a rundown of private tech company mergers and acquisitions in 2012. There were 2,277 deals last year, it said. That was up, the company's chief executive, Anand Sanwal, said in a separate e-mail, from 1,895 private acquisitions in 2011. "Our expectation, given the cash strength of tech companies and that technology is 'encroaching' on other industries, is that 2013 should be a bigger year than 2012," Mr. Sanwal wrote. Of 331 deals last year in which the purchase price was announced, however, just eight were for $1 billion or more. If most of the companies The Times wrote about are going to live up to their $1 billion valuations, they probably won't do it through M.&A. There were 13 deals between $500 million and $1 billion. So if you can get your company halfway to a billion dollars in value, you've got a decent shot at getting it all the way there. Another way to generate wealth without an I.P.O. is to sell shares on the secondary market. The primary vehicle for this, Second Market, recently published its year in review. The firm won't say how many companies' shares it is now selling, though it does say that in 2012 it worked with more companies than ever, and listed eight different types of tech businesses it is handling, including gaming, education and financial services. That, along with the fact that software and consumer electronics were both bigger, in total transaction size, than social media like Twitter or Facebook (which was still private in the early part of last year, and was regularly the biggest business for Second Market), indicated that this shadowy private market is increasing in size and complexity. Second Market also operates a kind of wish list, in which potential buyers can indicate their appetite for different industries. This was less encouraging. Over $2 billion was nominally interested in consumer Web and social media businesses. Software and gaming was second, with just $191 million, and mobile was third with $99 million. The broad hunger on the investment side, it would seem, is still for unproven social businesses. If that is the case, the great number of enterprise hardware, software and mobility companies with valuations over $1 billion will probably have to conduct an I.P.O. to get their cash. The company also publishes a list of companies that are being closely followed by Second Market users. This can serve as a proxy for what will soon be hot (or frothy) in valuations, since this is where the private money wants to go. The leader in the fourth quarter of 2012 was Shapeways, a 3-D printing marketplace. The median market capitalization among Second Market's companies was $569 million. Call that a final note of hope. As the CB Insights report suggests, when it comes to acquisitions, the first half-billion is definitely the hardest.