
Pmarca: OK, you're right, it IS a bubble - alex_c
http://blog.pmarca.com/2007/10/ok-youre-right-.html
======
jsrfded
Bite your tongue. Folks with far less to show are regularly promoted to
sainthood here.

Marc climbed up from grad student to monster IPO, rode out huge corporate
stuff at Netscape/AOL, left and started another company, raised huge money,
built a huge business during the dot-com winter, and piloted the ship home
through a dizzy chain of IPO/merger/acquisition. He is now blogging the best
stuff about entrepreneuring you can read anywhere on the net right now.

You should listen to this guy...

~~~
cglee
You have to also realize nowadays he's a VC and runs Ning. I believe, like
Mark Cuban's blog, his first interest isn't to disseminate insights, but to
server his business interests.

~~~
neilc
Is Marc A. actually a VC? I think he's been an angel investor in a few
startups, but that's not equivalent to being a VC.

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iamelgringo
I have to say that I agree with Marc.

The problem with the first bubble wasn't caused by non-profitable companies.
It was caused by hubris over stock prices. The reason why so many people lost
their shirts in the first bubble was because millions of Joe Averages took out
cash advances or cashed out home equity to buy Internet stocks. There was a
lot of hubris around the NASDAQ and average investors jumped in on the action
en masse. I personally knew at least 4-5 people who had left their jobs to
become day-traders.

I worked with a Med student who had maxed out 8-10 credit cards, bought high
tech stocks with them, and then bought a collection of motorcycles with his
stock earnings. When the bubble popped, he was left with a bunch of loans on
expensive motorcycles, $100,000 in credit card debt and a great position on
worthless Pets.com stock.

Sarb-Ox has really clamped down on the number of IPO's that are occuring now.
So, even though there might be hubris around web apps right now, the average
investor has no way of pumping money into those businesses, and that's a good
thing.

What start-ups are creating are several products in tandem: The first is
software that actually does stuff. The second is a community of users that
develop and grow around that software product. The third is a small tight-knit
group of people who have proven their capacity to produce.

Big Co is interested in all three of those things. And Big Co has proven
repeatedly that they are willing to shell out a bunch of cash to aquire the
software, the community or the people. Even if the startup isn't profitable,
the software, community and people are still very valuable to companies that
need those things.

What start-ups aren't creating this time around is IPO fever where the stock
price gets ramped up while the founders and employees cash out. This is what's
going to prevent the next big bubble from forming around web apps for quite a
while this time around. The fundamentals are much better this time around.

~~~
david927
And I have to say that I disagree.

The Web 1.0 bubble wasn't based on the way in which people found the money to
buy these stocks or the hubris in the expectation that these stocks would
always go up. It's just about fundamentals. When you buy a stock, you are
buying how much the company earns today and adjust that for how much it could
earn, say, ten years from now.

People bought Pets.com either with the naive expectation that it would earn
billions in the future or with the expectation other people would think so.
There was no evidence, just lots of hope and the eternal wish to get rich.

So you and Marc are telling me that Facebook is really worth $10 billion. You
two are saying that that's a realistic expectation based on an objective
evaluation and anyone who doesn't agree should be ridiculed. Ah... there's the
hint. Ridicule is a cover for fear. Personally, I don't need to hide. I have
the fundamentals -- and time -- on my side.

~~~
Goladus
I think iamelgringo's point is that it doesn't matter if Facebook is really
worth $10 billion or not, because no one's actually paying that much; and the
entities paying some percentage of those valuations are insulated from the
effects of a crash.

The term "bubble" scares people because of events such as those that happened
in 2000-2001. It's an imprecise term because of that. If you mean "inflated
valuations" we might be in a bubble, if you mean "reckless speculation by
average consumers" then we're probably not.

If Facebook turns out to be a dud before they ever have an IPO, who are the
big losers? A few hundred employees, and some professional investors.
Microsoft is still plenty profitable without Facebook, and VCs will bounce
back or be replaced. It'll indirectly affect many others, but the typical
portfolio of a typical working American will remain relatively stable.

Conversely, if 500,000 average consumers average $20,000 invested in Facebook
and it suddenly goes bankrupt, that's a huge problem. It causes a massive
disruption in their lives, and it will have a much more noticeable indirect
effect on everyone else. (eg nobody can afford to buy Christmas presents this
year)

~~~
iamelgringo
I concur.

It's a free market, and Facebook's valuation is whatever someone is willing to
pay for a piece of Facebook. If Big Co purchases a piece of Facebook for $500
million, then someone at Big Co made a guess that either the software, the
community or the people were worth that much.

Mind you, _I_ don't think that Facebook has a 10 billion dollar valuation, but
that's a moot point, I don't have the $500 million to purchase those shares.

My hunch on the Facebook deal, though is that Microsoft is trying to beat
Google to the punch and wants to provide search services to Facebook. The
software, community or people might not be worth that much to them, but I'm
sure that keeping Google out of Facebook probably is worth $500 million to
them.

What's the worst case scenario for Microsoft? Google doesn't get Facebook's
search, Facebook goes _poof_ in a couple of years and Microsoft is out $500
million. No big deal. Microsoft's cash reserves are well over $25 billion
anyway. They have to spend it on something. Might as well spite Google with
it.

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aston
This article is a mess. The strategy here seems to be "setup complete straw
men for all of the arguments you don't like, then dispense with them not by
making counter arguments but by showing the (straw man, distorted) arguments
to be silly." Plus it's hard to read.

~~~
dbrush
It seems to me that the strategy was to loosen some panties and inspire some
laughter. I enjoyed the fruits of both efforts.

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asmosoinio
Gotta love this: "laid-getting wankers". :)

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paul
The Colbert maneuver. Nicely done.

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henning
Eh.

Say all you want, no sustainable revenue means no business, sooner or later.

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far33d
Has there ever been an example of something incredibly popular that hasn't
made money eventually? The best I can think of is napster, and their issues
were legal.

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nanijoe
An Alien has taken over Pmarca's blog , he's had some strange posts in the
last few days.

~~~
alex_c
So THAT explains that Bionic Woman post!

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sammyo
Hmmm, most amusing, this community has a blind spot.

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allenbrunson
i don't think sarcasm is a good way to make any point, and i'm surprised to
see the otherwise unflappable marca using such a tactic.

~~~
geebee
I agree. I felt this was one of the weaker posts on a great blog.

The problem with sarcasm is that it allows the writer to frame the opposition
in exaggerated, silly terms. For instance, the post derides people who claim
VC's are "All stupid, and unnecessary to boot".

Nobody would half a brain would make that claim. Of course capital will still
matter, in many cases. But there is still an interesting emerging argument
that the cost of server space and programming tools have dropped to the point
where bootstrapping has become a real option.

I'd love to see a writer as good and experienced as Marc give me his take on
this new trend. Is it a good idea? A bad idea? When would you want to do one
rather than the other? This is all lost in the sarcasm format.

But I agree with the other posters here who have pointed out that Marc is just
having a little fun taking the piss out of the naysayers. Nothing really wrong
with that. I enjoyed the post, but I hope he gets back to his more insightful
style in his next post.

------
nurall
pmarca on crack...

