

Can It Be A Huge Bubble If Only A Few People Are Blowing It? - ssclafani
http://techcrunch.com/2010/12/06/bubble-2/

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ojbyrne
"Again, this “Bubble 2.0″, if it does exist, is mainly just troublesome for
investors."

Riiiggggght. Just ask all the non-homeowning taxpayers how that works. As I've
mentioned previously, significant amount of VC and private equity money
actually comes from "institutional investors," namely pension funds,
university endowments, etc. If they lose a bunch of value, you think taxpayers
aren't going to be on the hook?

~~~
klochner
There isn't enough scale or leverage to make this anything like the dotcom or
housing busts.

This "bubble" is mostly in early stage startups, doing $2M-$5M rounds, and
there aren't enough of these deals to add up to the size of investment in
public dotcoms or housing. At worst we're just going to see mediocre VC
returns and a lot of busted angel funds, but talking bailouts is hyperbolic.

This quote characterizes the difference:

    
    
       “Back in the ’90s, companies got funded for five times 
       the amount that Tumblr raised and didn’t have anything 
       close to a business model,” said Roger Ehrenberg, 
       founder and managing partner of IA Ventures. “People 
       were getting $50 to $200 million a pop and it brought 
       down an entire industry.”

~~~
chailatte
Secondmarket valuations:

Facebook: 50 Billions

Twitter: 3 Billions

Zynga: 5 Billions

[http://vator.tv/news/2010-11-30-facebook-valued-at-
highest-e...](http://vator.tv/news/2010-11-30-facebook-valued-at-highest-
ever-50-billion)

~~~
klochner
Those are the extreme examples, of which there are few, and they're not easily
traded by the general public. Bubbles almost without exception (please correct
me if you have a counter example) are pushed to extremes by the general public
(commonly called "mom and pop investors").

~~~
chailatte
ojbyrne already answered that, you shouldn't put fingers in your ear so much
;)

"institutional investors, namely pension funds, university endowments,
etc"....I am betting at least one invested in Facebook.

~~~
sbov
The problem with the housing bubble wasn't that pension funds, etc, invested.
The problem was everyone invested huge portions of what they had because you
will never lose money when investing in housing. There should be no such
illusion when investing in startups. Because of this, you would probably have
a hard time finding an institutional investor that has as much of their fate
tied to how well Facebook is going to do as you did with housing.

There is about 14 _trillion_ in mortgage debt out there. 50 billion doesn't
even register.

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jdp23
is it just me, or does a lot of the "bubble" discussion seem like people
sticking their fingers in the ears and saying at great length "I can't hear
you I can't hear you I can't hear you and it doesn't matter even if you're
right"?

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sabat
There is no bubble. Repeat: there is no bubble. The last time there were
Chicken Littles proclaiming a bubble it was about 2005-2007, and there was no
bubble that time either. Yes, there was a problem later on with the housing
market and with Goldman Sachs et al -- but that had absolutely nothing to do
with an internet bubble.

1- it's only a handful of investments that _seem_ excessive to outsiders

2- the investors are private and are mind-bogglingly rich

3- it's really fun to go around yelling "bubble!" to see if you can crap on
someone's parade

~~~
bertil
There is no problem as long as those investing know what they are doing, spend
cash they don't need and have valuable skills they can leverage after 50.
Chicken Littles like me simply don't want to be quoted by “an idea guy” who
wants to “make the new Facebook” in a pitch to a retired plumber.

Because anyone know of to use the web and most can sketch a couple of revenue
models, a fraction feel like they can invest - that is to say, way too many
people. If you say to external investors that high valuation for such or such
company is reasonable, they won't be able to make the difference with another
project that look very similar to them (both would be bunch of geeks in a
garage). I worked for a dishonest guy, helping him pitch: fascination for the
billion-dollar idea was alive and well a year ago, and thanks to Sorkin's
movie and Groupon financial revelations, they are getting worst.

Quick test: if you were not shocked that, in my last sentence I mentioned an
“idea” that was worth a lot because ideas are nothing, execution is
everything, do _not_ invest (and think hard before working in a start-up).

The economic specifics of Silicon Valley (namely signaling, Schelling-type
salience) change the assumptions that you need to have a bubble: if a company
raises a lot of cash, it gets attention — and that's usually what is decisive
to attract talent & revenues. Some have failed, but rarely against all
predictions.

~~~
sabat
I understand your points and pretty much agree with them. My issue is with the
term "bubble," because it means different things to different people.

Originally, "bubble" means stock market bubble, and when one of those things
bursts, it's really bad news.

You're using it to mean a relative handful of private investors who may be
over-investing. That does not have the same kind of consequences.

~~~
bertil
Never use economic terms without defining them.

OK: I cheat, it's my job to define them — actually, I should be preparing
tomorrow's lecture.

