

End of the Bubble or Just a Correction? - barce
http://www.codebelay.com/blog/2012/09/29/end-of-the-bubble-or-just-a-correction/

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natrius
CrunchBase is a useful tool, but it is not a complete data set that could
validate the sort of conclusions the author draws.

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michael_miller
I agree with your assertion. How would you go about validating the author's
conclusions in a more thorough manner?

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barce
Using the PWC or Venture One data which are comprehensive would be the way to
go. That's my plan once I get access.

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crntaylor
Data geek niggle - it's pretty deceptive to start the graph at $200 million
instead of zero. It makes the drop in 2012 look larger than it really is.
Granted, the effect isn't huge in this case, but its still very bad practice.

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diego
The fatal flaw in this article is that the author has NO IDEA how much of the
2012 investment has made it into Crunchbase. He's dividing the total
investment by the number of days as if every investment made until today had
been accounted for.

That guarantees that the projection will fall short, because many investments
are announced much later than when they're made. For example, IndexTank's
round was closed in 2010 but announced in 2011. The average lag is anybody's
guess, but it could easily be two, four or six months.

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barce
This logic applies to every year, since a round could close in 2006 and have
been announced in 2007. Regardless of the lag, the trend is clear. It is a
downward one.

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gojomo
Funding could be reported late, but then slotted at the accurate time. For
example, in January 2013, we might get news -- and then have retroactively
represented in CrunchBase -- a funding that closed in October 2012.

So even if Crunchbase is _eventually_ a full/accurate/consistent record (which
is itself a big 'IF'), such a lag in reporting could mean any 2012 numbers
aren't accurate (and comparable to 2011/2010/etc) until sometime 2-6 months
into 2013. Ergo, any 'downward trend' at this point might still just be an
artifact of the limited data.

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diego
Exactly. And it's even more complicated: the author assumes that funding is
distributed evenly over the year, when it's not. Very few deals close during
the summer, and the period September-December is particularly active.

To the OP: you are jumping to conclusions too quickly without asking the right
questions. You also seem too attached to your hypothesis. I recommend that you
read Nate Silver's new book "The Signal and the Noise."

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benologist
Last year Facebook and Twitter raised a combined $1.9 billion which should not
be overlooked. Facebook particularly accounts for a full half of last year
according to CrunchBase.

\- <http://www.crunchbase.com/company/twitter>

\- <http://www.crunchbase.com/company/facebook>

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rapind
Exactly. If you pull that investment from the graph it looks pretty boring and
business as usual.

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crntaylor
I don't think that selectively removing the single most significant data point
and then claiming that its "business as usual" will lead anywhere useful.

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rapind
I was trying to say that the conclusions being made seem to depend entire upon
a single data point...

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dschiptsov
It is end of the bubble of common folks excitement with cheap internet and
cheap gadgets.

Facebook has near exponential growth rates due to many factors, but mostly -
a) cheap digital cameras (and then mobile handsets). b) cheap ADSL technology
around the world (then mobile broadband). c) peer effect - adult population
engaged in behavior of teenagers and college students.

Now all the excitement gone, and all those gadgets, sites and self-exposing or
on-line shopping is nothing but a common boring activities.

The next big thing, by the way, is distance-everything. Distance learning is
already here, along with remote work. Distance medical diagnostics is on the
way.

As long as more people will realize that distance education is possible, they
will naturally think that almost everything else also.

That means very interesting possibilities for an economy, including bursting
of commercial real-estate, pay-walled education and even SUV-cars bubbles..

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utopkara
Just because something became common, and comfortable, doesn't mean it will
stop being economically significant. Otherwise, after the first internet
bubble burst, the web design business would crash and burn, along with the the
online advertising business, and online shopping business. Social networks,
online shopping and gadgets are here to stay, in one form or another, and they
will be huge revenue streams for companies which produce the best products.

Good luck with your business on distance learning, it sure is promising, hope
it works out as you expect.

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swang
1) Assuming this data is close to actual numbers, seems like saying
"Investments are near the levels from 2010 (which by the way was 1.4 billion),
BUBBLE!" is a bit premature.

2) Maybe it's just me but the grammar seems off. The, "end of the technology
bubble" to me can also mean that the bubble that we're supposedly in has ended
and it's A-OK.

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asanwal
The always fashionable predictions of a bubble.

The fatal flaws in this article are many (including those highlighted by
others):

\- The idea that one metric can predict a correction

\- On top of that, the metric of funding/day is simplistic and utterly
useless. A couple of mega green tech, life science or semiconductor fundings
(or absence of) will skew this metric in a totally different direction. We
track this stuff and 2012 hasn't been a great year for those areas of VC which
often see big rounds

\- Deal activity (the # of financings) in a period has to be considered in any
discussion of a correction

\- SF as the single market used is problematic. Is it representative of VC?
The Valley or stats for the valley, Massachusetts and NY would be better to
use

Shameless plug - Check out CB Insights (www.cbinsights.com). Our trends tab
has some free cuts of the financing and M&A markets which may be interesting.

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malandrew
Is there a lag in funding reporting or are fundings pretty much always
reported on the day they occur? Are there any seasonal effects? This is a
yearly graph, but 2012 is being reported at the end of September when there
are still three months left until the end of the year.

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w1ntermute
Anyone care to do this for tech startups at large, for comparison purposes? If
we're starting to see geographical diversification, that would be a (very)
positive thing. Far too much talent and far too many networks are concentrated
in the Bay Area.

