
Silicon Valley Startups Awash in Dollars, Again (2007) - tosh
https://www.nytimes.com/2007/10/17/business/media/17bubble.html
======
mojuba
I think some interesting takeaways from reading this article in 2019 are:

\- One "black swan" doesn't happen twice. Though Taleb would disagree, i.e.
he'd say that neither the dot-com bubble nor the 2008 crash were black swan
events, but for most investors, entrepreneurs and traders they were. In any
case, we are somehow immune to big random negative-impact events repeating
themselves. We are not that stupid. The Bubble 2.0 didn't happen though
something else, unrelated, did.

\- The predictions of the time assumed that Internet was there forever. Very
soon a dramatic landscape shift happened with the release of the iPhone. We
are not living in a purely Internet era anymore, and all the surviving
Internet megacorps have managed to embrace the shift (Google, even Facebook
with its Messenger), and those who haven't are dead (Yahoo, and probably more
to come).

\- What we think will happen next is probably wrong. We can't even say whether
there will be another technological shift or both the Internet and the mobile
are here virtually forever. Something that has already failed can make a come
back. In 2007 Taleb mocked e-scooters, for example, now look at their
impressive comeback. He also thought in 2007 that Google will be replaced with
something else just as quickly and abruptly as Google replaced Alta Vista.
Bottom line: don't try to make arbitrary unsubstantiated assumptions even if
your name is Nassim Nicholas Taleb. We suck at predictions.

\- I think one key difference between entrepreneurs and investors is that the
former don't try to make predictions much, while the latter depend on
predictions. One corollary being that entrepreneurs should probably ignore the
buzz or what the most funded tech is at any given point in time (something-
dot-com, IoT, blockchain, AR, AI, ...) and just do their thing: bring their
dreams into life regardless of what everyone else is saying.

~~~
nothis
>both the Internet and the mobile

So... the internet on a big screen and the internet on a small screen?

~~~
mojuba
Not quite. One is Internet on your desk and the other is Internet in your
pocket. It makes certain things possible that would previously make little
sense. You would not tweet a video from a protest rally; you would not message
or listen to podcasts or read something or do trading while commuting; online
banking wouldn't be that safe and secure; you wouldn't have an interactive map
in your palm while in a new city; and a thousand more things that today exist
only on mobile - thanks to the compact touch interfaces and the Internet of
course.

~~~
user5994461
You could SMS and MMS from a protest, you could do banking with a phone call.

It's all progressive improvements. Networks converged to internet and TCP/IP
while devices converged to computers everywhere with colored screens of
various sizes.

~~~
mojuba
> you could do banking with a phone call

Try to do what e.g. Revolut, N26 and similar apps are offering over the phone.
It would take ages. This is a really bad comparison.

Sometimes progressive improvements become a breakthrough, though I wouldn't
call the invention of touch UIs a progressive improvement. It was a massive
one. We take it for granted today but before the release of the first iPhone
very very few people would have imagined it, let alone that it could change
the world (which it did).

~~~
paulryanrogers
IDK, we had Palm devices and the Treo before iPhone. Dropping the keyboard and
stylus for a finger was probably inevitable.

------
firasd
I saw an NYT piece about profits mattering again in Silicon Valley:
[https://www.nytimes.com/2019/10/08/technology/silicon-
valley...](https://www.nytimes.com/2019/10/08/technology/silicon-valley-
startup-profit.html)

I don't quite agree that this is actually what the issue is lately. I think
there have been two types of bubbles in the general startup ecosystem over the
past few years that are not related to whether early stage startups are
profitable:

1) One has been the under-estimating of unit economics in companies that
interact with the real world (unlike pure software companies), which caused a
lot of 'Uber-for-X' startups to go under, not to mention Uber itself
struggling to maintain its hoped-for valuation.

2) The second aspect has been the influx of late-stage money into companies
like Uber and WeWork, delaying IPOs, which has definitely caused some
irrational exuberance in the sector.

~~~
matwood
Check out Scott Galloway on Twitter
([https://twitter.com/profgalloway](https://twitter.com/profgalloway)) and his
website (linked from his Twitter bio). He's been calling out Uber and We for
awhile. He has also had some heated exchanges with SV VCs on Twitter.

In the case of We I think you are being too generous thinking the IPO is only
delayed. The S1 pulled the covers back, and I'm not sure it will ever IPO and
may end up out of business.

Uber is not in a much better position, as their financials only work by
significantly raising prices and/or driverless self-driving coming to market.
I think the later is much farther away than people assume.

~~~
agota
His blog seems really interesting, thank you for mentioning it!

------
gist
I love these cherry picked legacy articles from 'the paper of record'.

So I will cherry pick what I think are the two best parts:

> Consider Facebook, the popular but financially unproven social network,
> which is reportedly being valued by investors at up to $15 billion. That is
> nearly half the value of Yahoo, a company with 38 times the number of
> employees and, based on estimates of Facebook’s income, 32 times the
> revenue.

Facebook has a market value now of $525 billion and obviously and $30 billion
in EBITDA.

...and...

> Twitter, a company in San Francisco that lets users alert friends to what
> they are doing at any given moment over their mobile phones, recently raised
> an undisclosed amount of financing

In particular 'lets users alert friends to what they are doing'. I remember
when twitter came out people were tweeting what they ate for lunch.

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molmalo
The article is from oct 2007(*fixed), around the same time of the video: "Here
comes another bubble"

[https://m.youtube.com/watch?v=I6IQ_FOCE6I](https://m.youtube.com/watch?v=I6IQ_FOCE6I)

~~~
username90
I wouldn't say that 2007 was a bubble though, at least not in the tech world.
Social media wasn't properly realized at the time so for example Facebook
being valued at 15 billion or Linkedin at 1 billion made sense. There could
have been ten similar sized competitors to both of them and the valuation
would still have made sense since one of them would win.

~~~
maxlamb
That's what makes reading this piece 12 years later so interesting - there was
definitely fear of a bubble in 2007 (probably partly due to the trauma of the
2000 dotcom bust) even though in retrospect there definitely wasn't. It's
funny how it described Facebook's $15 billion valuation as a sign there might
be a bubble, when FB now is valued at $525 billion.

------
cookie_monsta
This piece made me very nostalgic for the days when there was no clear
connection between a massive, non-paying userbase and income generation.

~~~
joeblau
I did not see the connection, but I think private market investors did. They
saw that if you could sell web ads (Google) or sell mobile ads (Facebook) at
zero marginal cost to each additional advertiser, you'd have a company worth
10x revenue. Investors made that bet and for the most part have all been paid
very well.

~~~
cookie_monsta
In my mind the web has always had ads although maybe for a brief period this
wasn't true.

The real turnaround that happened around this time and I guess before is that
the platforms started realising how valuable user data was and the relative
value of "smart" data-driven advertising as compared to "dumb" content- based
ads.

Now when I see that a platform has amassed x million users I'm very cynical
about their motives for doing so.

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omarhaneef
I don’t think the right question is: are we reliving 2000 or 2007 in startup
investing.

I think the right question is are we looking at a Google or a Webvan _.

_ yes, I know Webvan may have been a “good idea”

~~~
sjg007
We had this debate in 2007 on hacker news (I had a different account)..

Webvan today is Instacart. FB is very valuable. Hindsight is 20:20. I think
companies stay private longer to ride out the market not being ready for them
long term. But maybe Uber waited too long.

"Consider Facebook, the popular but financially unproven social network, which
is reportedly being valued by investors at up to $15 billion. That is nearly
half the value of Yahoo, a company with 38 times the number of employees and,
based on estimates of Facebook’s income, 32 times the revenue."

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alexpetralia
Non-paywalled version: [http://archive.is/INi6u](http://archive.is/INi6u)

