

Is it a New Tech Bubble? Let’s See if It Pops - atularora
http://www.nytimes.com/2011/03/28/technology/28bubble.html

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kalvin
Best guess: It won't start deflating (or popping, if there ends up being even
more money) until well after Facebook et. al have their IPOs next year. Just
watch for articles in 2014ish quoting experts on the consensus "we aren't so
skeptical anymore, it's different this time!"

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jerf
It _is_ different this time, until we start funding things that _don't_ have
revenue or any real hope of revenue or a plan beyond vague advertisingness. I
don't mean this as disagreement because if we really are in a bubble this is
inevitable. On the other hand, if we never really progress to this point,
maybe it isn't a bubble. Ultimately there still is a lot of money to be made
on the web and with other new technologies, it's not out of the question that
what we're seeing today is actually well-grounded.

(Fair disclosure, my personal biases are that if we aren't right now we will
be as an inevitable result of extraordinarily loose monetary policy and
nowhere else for all the sloshing capital to go. But I don't think the
evidence actually quite justifies yelling "BUBBLE!" quite yet. As for the
_bête noire de jour_ , I don't think we know enough about Color's private
plans to make a call. If they've got nothing but vague advertising plans,
yeah, that's bubblish, but I don't think we know that for certain.)

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timr
_"Over the last five months, many venture capital players have raised giant
chunks of capital. One Facebook investor, Accel Partners, is about to raise $2
billion for investments in China and the United States, while Bessemer Venture
Partners is said to be closing in on $1.5 billion for a new fund. Greylock
Partners, Sequoia Capital, Andreessen Horowitz and Kleiner Perkins Caufield &
Byers have collectively raised more than $3 billion in the last six months."_

I keep people hearing people say things to the effect of _"it's not a bubble,
because the investment is confined to a small amount of private equity"_. And
I suppose that even rapid, multi-billion dollar growth in VC _might_ be
explained exclusively by the irrationality of a few private investors. But is
that the likely conclusion here?

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prostoalex
Contrary to what one might perceive from reading the recent press, not all
capital is flowing towards mobile photo sharing apps.

Cleantech and biotech startups are very capital-intensive.

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timr
Biotech investment tanked in 2009, and has barely begun to recover. Every
statistic I've seen says that valley software companies are still getting the
lion's share of VC investment:

[http://www.fiercebiotech.com/story/biotech-vc-investing-
grow...](http://www.fiercebiotech.com/story/biotech-vc-investing-
grows-3-percent-2010/2011-01-21)

[http://www.siliconvalley.com/venture-capital-
survey/ci_17416...](http://www.siliconvalley.com/venture-capital-
survey/ci_17416341?nclick_check=1)

~~~
prostoalex
From a 2010 report
[http://www.jointventure.org/images/stories/pdf/2010%20Index-...](http://www.jointventure.org/images/stories/pdf/2010%20Index-
final.pdf) a relevant graph <http://moskalyuk.name/wp-
content/uploads/2010/04/image13.png> By number of deals you're right, software
is huge, but by dollar amounts Better Place and others certainly raised the
bar for cleantech just by attracting nine-digit sums.

~~~
timr
Both of the articles I linked say that software is the largest VC target by
dollars invested.

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hop
If this bubble is confined to a few private equity parties and the amount
actually invested is only a few billion total (2.4 in FB's case), then you can
blow bigger ones with soapy water.

~~~
rudiger
Until dumb money and pension funds can get in on the action, the transfer of
wealth (and the bubble) will not be complete.

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jdp23
People who don't think there's a bubble focus on the very real differences
between the 1990s and now.

People who think there _is_ a bubble focus on the patterns that are similar to
the 1990s and past bubbles -- including how the optimists always say "it's all
different this time."

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il
In other words, Facebook alone is now worth more than the entire 1999
bubble(or at least the top 24 public companies).

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hop
No, not close. Its only the ones that IPO'd in that year. And in aggregate, a
horrible investment.

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rudiger
Considering the article hand-picked them from "the height of the dot-com
boom", many of those 24 companies didn't do too badly.

TD Waterhouse - $76 billion

priceline.com - $24 billion

Juniper Networks - $22 billion

Agilent - $15 billion

Red Hat - $9 billion

Akamai - $7 billion

Ok, maybe they weren't great investments, and some went to zero, but as a
group they weren't horrible.

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hop
If you invested money equally in all the 1999 IPO companies, you would have
less money now, 13 years later, than what you started with and thats not
factoring in the time value of money.

Its a horrible investment in aggregate.

~~~
wtn
But what about relative performance against other equities?

EDITED: for politesse

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BerislavLopac
It is very important not to look at tech investment isolated from the rest of
the economy. In late nineties, money was being thrown to tech startups because
everyone believed that it was a much better investment opportunity than other
methods. These days, it _is_ a better investment then the alternatives, as it
at least gives a chance to win big, while other types of investments pretty
much guarantee a loss.

That won't last forever, but I don't think it will grow to a full-blown
bubble; so far it's more akin to the growth we had in 2007-2008, when there
even were mocking songs about a "tech bubble", but the mocking ended along
with the investments in 2009.

That being said, I have no idea what will be the effect of the two big events
that will affect the Internet in the next year or two: depletion of IPv4
addresses and utter dominance of Facebook...

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colindoc84
I can't take this article seriously. How can we compare 'valuations' to actual
raised money in IPO's? All of this value of facebook is based of estimates on
the small % of assets owned by outside capital that is used to fund it.

Hypothetical vs Real. Is this really comparable?

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sudonim
What makes you think that there's anything more "real" about 1999 IPOs
relative to 2011 valuations? They are both numbers based on hypothetical best
case scenarios that some pool of idiots have imagined (a much larger pool of
idiots in the case of stock markets).

One big difference is that today money is almost free. 1 year treasuries in
1999 were between 4 and 6 percent. Today, they are 0.30%. This has a huge
influence on the availability of capital for investment... i.e. if you're a
big bank, you can get money cheaply and it's much harder to lose. Does that
sound "real"?

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x5315
What i always answer to this question:

It's not a bubble until we (Twitter) install a slide in the office.

