
Are we in a bubble? Your thoughts - sharpshoot

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pg
It's more bubbly than it was 2 years ago, but still nothing like the Bubble in
the late 90s. The defining quality of an investment bubble is people (a)
investing a lot of money in stupid things, in the hope that (b) other people
will pay more for them later. Neither are happening now. Though a lot of
startups are getting started, the amount being invested is small, because
startups are taking way less each. And (b) isn't happening because the IPO
market is still very small. Acquisition is still the main exit, and acquirers
are more prudent than retail investors.

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sharpshoot
As recruiting good quality talent becomes harder and it becomes cheaper and
easier to build a web application, the only competitive advantage left to
entrepreneurs who are genuinely going to create value is savvy product sense
and the ability to actually exploit a business opportunity.

I don't believe we're in a bubble (in the sense of a liquidity event) - but
certainly the number of people who have never before considered starting a web
business who are wanting to give it a go are coming back again.

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danw
_the number of people who have never before considered starting a web business
who are wanting to give it a go are coming back again_

Those people are here to stay for as long there are startups who make
succesful exits and get talked about. The process looks so damn easy. Make a
small app quickly using a nice platform like rails in only a few weeks and
then flip it for millions. Why wouldnt you give it a try?

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jaggederest
God I hope so. I just missed the last one, totally disappointing.

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Goladus
True but I'd really rather it be a bull than a bubble. It's the nature of
bubbles to burst eventually.

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jaggederest
Presumably one would be smart enough to pull the ripcord as soon as possible.
Don't wait for that 50m valuation, get out at 5m and take home a modest house
instead of a yacht and a summer home in the Hamptons.

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mdakin
No. A bubble happens when you have a huge number of trades at prices well
above the fundamental value of items being traded. In this case I assume the
items we're referring to are "small, internet-oriented companies". At least
right now there is not a high enough volume of trades happening to drive
prices up into the astronomical range characteristic of a bubble.

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sharpshoot
In this instance if we consider the variable the number of investments being
made into internet startups are we seeing bubble like behaviour? Are
valuations much higher now (artificially so - post youtube etc) than before?
Is this leading to herd-like behaviour both in entrepreneurs looking to create
opportunity and investors chasing deals?

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mdakin
There might be some deals going on in anticipation of a bubble. Sort of hedge
deals being made to guarantee a spot on the leading edge of some hypothetical
bubble. But I don't think all the deals fall into that category and many of
them are pretty legitimate investments and at fair prices.

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jaed
When business models are acquisition and AdSense and products are features for
MySpace I would venture to say yes, we are.

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sharpshoot
I don't think the successful startups this time round have adsense based
business models &/or depend upon acquisition.

For example photobucket has built a ver impressive subscription business and
facebook is finding interesting (in addition) to traditional ways to moetise
its vast userbase (facebook gifts if projected to make $15m this year)

I just feel the cheaper startpoints mean that there will be sufficient
darwinian evolution for the better startups to succeed. We're going to see
more failures but less flameouts like pets.com or boo.com which took a lot of
money but weren't nimble enough (because of the cost & state of
infrastructure) to change direction.

I argue we aren't in a bubble.

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gyro_robo
This feels a lot different. The barrier to entry has dropped a lot, so we're
seeing lots of small start-ups as opposed to the gigantic ones last time
around. Also the monetizing seems to be coming from larger tech companies
(Google, Yahoo, etc.) as opposed to non-technical outside investors.

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elad
Definitely. Unlike what pg thinks, it seems to me that there are a lot of
stupid ideas out there that get funded, and that most of them are merely
features rather than full blown products, that simply wait for someone to buy
them.

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epall
I think we're going to see far more companies fail than succeed in this
current boom, but the crazy optimism of the first bubble seems gone. The bets
are smaller and more numerous, so some are bound to take off.

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ido
Yes. Next question?

