
As Tech Deals Boom, Talk Turns to Bubbles - aaw
http://dealbook.nytimes.com/2010/11/19/as-tech-deals-boom-talk-turns-to-bubbles
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jswinghammer
I think this is a function of the lack of another sane place to put your
money. Right now with interest rates at 0% it's hard to say the economy is
going anywhere on sound footing. Would you put your money in treasuries?
Stocks? Cash? Past a certain point these things seem more risky than they're
worth relative to their potential reward. Investing in another Facebook or
whatever at an early stage by comparison seems to be worth a lot more and you
have more control over what happens than say owning shares in Citi.

If there is a bubble it's not much to worry about since the investments are
fueled by savings and not debt. Debt fueled bubbles make losses so much worse
for everyone. The worst case is that some investors get wiped out (or at least
what they invested was lost) and we all move on having a few good laughs about
how crazy we were back then (how many Twitter services do we need when no one
can decide if we even need Twitter).

The number of bootstrapped companies out there suggests that at least some
people feel like raising money isn't worth it even in this climate so I don't
think this time period is all bad for tech.

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trotsky
_If there is a bubble it's not much to worry about since the investments are
fueled by savings and not debt._

Do you have any evidence of that? Have you looked at the price of money these
days? 2%? 4%? Junk spread as low as 1-2? With QE the price of money is being
artificially driven down to drive investment. The dirty little secret is that
a lot of that investment comes from borrowing - why not if your numbers show
you making 10%-20% and you can borrow for 5%-10%?

The last time the fed held the yields so low and pumped money supply so
greatly was the dot-bomb. And a lot of that was shown to be driven by debt
when post-mortemed.

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c1utch
He is referring to VC investments, which ARE fueled by savings. The LP's of a
VC fund are ultra high net worth individuals and pension funds; neither of
which invest in alternative asset classes with debt.

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samratjp
It smells like a bubble, but this time around, there are fewer IPOs and the
big buys are acquiring for talent too. With the advent of facebook v google
talent grabbing, it makes sense to buy startups with crazy smart people early.

This article also needs to take in account of the super angels and the new
face of investing these days. Sure, a lot of deals are happening, but a lot of
the early funding is coming from many sources and the angels are spreading
thin. Come on, NYTimes, did you forget Angelgate?

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wuster
Question for those of you working inside of big companies:

I am sure many of you are getting recruited to join startups. What's the
general sentiment in this demographic - are you guys torn between feeling like
you should join a hot opportunity now, but in some ways afraid that you might
give up that 6-figure salary only to get hit by a burst bubble in mid-2011 and
would have to crawl back to a more stable corporate gig?

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dominostars
As someone, in their mid twenties, who is currently transitioning from a big
company to a startup:

The stability question will always be there, regardless of the existence of a
bubble. With a startup, there's always a greater risk of losing your job. If
it was about a 6 figure salary, I would just move to another big company, many
of which are hiring right now.

A fast paced high risk environment is what I'm interested in, and what I think
is best for my career and learning. This transition is a non-issue for me, and
independent of market trends.

I don't think 'crawling back to a more stable corporate gig' is a reliable
backup plan. However, if I did, why would I lament? I would probably be hired
with a comparable salary to that if I stayed on and grew from promotions. More
importantly, I will have gained more in the process.

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zalzally
The higher numbers re: valuations I've seen and heard are just under $10M
(recent YC startup). Potentially rumors of $20M (Instagram, but was apparently
untrue). Not sure which startups are seeing the $30-50M range that Fred Wilson
mentions. Clearly, he sees a lot of deal flow, but you'd assume the major tech
blogs would cover these startups.

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gamble
We're in a cheap money environment and tech companies are sitting on piles of
cash they're genetically predisposed not to distribute back to shareholders.
There's only one place for it to go: acquisitions. Meaning we see more deals
at higher valuations. It doesn't reflect anything fundamental.

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neworbit
$30-50M? Seriously, I will quit tomorrow and get a five person team of proven
entrepreneurs also put together tomorrow, if I can get a $30M valuation with a
VC coming in for 20% of that.

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colinyoung
Even if there is a bubble, what does it mean for the app economy? People
making money on facebook, twitter, and the App Store might see sales dip if
there's a bust, but people aren't going to use free services less. (Although
App Store sales won't dip because the app store was built during the last
recession).

edit: perhaps this seems naive, but please keep in mind I'm only asking about
this one small segment.

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trotsky
Seems pretty bubble like to me.

