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Silicon Valley has a new case of "sudden wealth syndrome."
This week's stratospheric public offering of LinkedIn Corp., the social-networking company whose shares more than doubled on Thursday, turned company founder Reid Hoffman into the nation's latest tech billionaire, with a stake valued at more than $1.7 billion. CEO Jeffrey Weiner, who joined the company in 2009, is now worth more than $200 million. With more IPOs in the offing, from Zynga Inc. to Groupon Inc. to Facebook, the social-media craze has become America's latest supernova of wealth creation, launching a new generation of millionaires and recalling the instant riches of the 1990s dot-com explosion. Terms like sudden wealth syndrome and "affluenza," which had largely vanished from the offices of Palo Alto, Calif., and the cocktail parties of nearby Atherton, are back. Yet when it comes to investing and spending their fortunes, Silicon Valley's newly rich are likely chart a different course from their predecessors. In the wake of the dot-com bust in 2001, which left many Internet millionaires with massive mortgages and worthless stock, the new tech magnates are likely to take a more cautious approach to their money. Advisers say the newbies are likely to sell as much of their holdings as possible and protect their cash.
"The folks today don't have the sense that the world will keep getting better and everyone will keep getting richer," says Keith Whitaker, a wealth counselor and president of Wise Counsel Research in Boston, which studies wealth. "There's a desire to be liquid, and less trust in financial markets and less of an appetite for risk."
"You need to start with the big questions, like what are your life goals and family goals, before you start picking an investment strategy," Ms. Hausner says. "You can't just run to someone with a vested interest in selling you something."
• Give it away. The government is offering attractive terms for gifts, raising the lifetime gift-tax exemption to $10 million from $5 million for married couples. Advisers also say today's newly rich—often in their 20s and 30s—are highly philanthropic. Many of them (like Facebook's Mark Zuckerberg) are giving away millions already.