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The top three stories on hacker news right now are about top management resignations in three high profile tech companies. Earlier, LinkedIn lost 40% of their value in a day. Deutch Bank lost 11% of their value today.

sorry to be off topic here, but these seem like crazy times.

Of course there's a bubble, and of course it has to burst at some point. There are frankly a plethora of poorly conceived and poorly executed startups on the scene right now, with no hope of ever achieving financial sanity. Just as we saw in the late '90s with any crazy idea being given a ton of VC funding, regardless of whether they had a sane business plan, only to implode when things got tight.

Unfortunately, this time around the successes of the previous rounds actually made things worse, because they succeeded too much. VC funding is now, intentionally, a casino. The RoI you can get from growing a winner fast enough to dominate some new market so outclasses what you can earn back from helping a sensible startup grow at a reasonable level that most VCs concentrate their funding to match. It's all about disrupting and breakthroughs and growing fast. This ends up bringing a lot of "unicorns" into existence even if only a few of them are ultimately viable. It also leaves a lot of smaller, more sensible startup ideas in the dust. Silicon Valley is all about stuff that's "cool", not stuff that's challenging or valuable. Sadly, even this round of the bubble bursting is unlikely to change that.

A business has to make a profit...consumers prefer quality products...investors prefer businesses who are profitable and indicate the wherwithal to ensure future profitability...businesses that sell "entertainment" are vulnerable to reductions in consumer's discretionary spending...

These are old, old maxims...

I've often wondered what percentage of current Internet "businesses" offer consumers a product they could not live without...?

Maybe we actually are adjusting to the appropriate level of risk to take. I remember blog posts from PG that if YC were really investing appropriately they'd have more failures.

I guess it's already bursting.. BTW yc could be arguably one of the chief perpetrators of this bubble..

How to investors make money on unicorns if there is no liquidity event?

It's a lottery, you only need one. One facebook, one google, etc. Those successes bring in RoI not just of double digit percentages (the sort you'd expect from high-risk investments) but in multiples, orders of magnitude even. 10x, 100x returns sometimes. And when you hit those jackpots all of your other investments are now meaningless. The result is that VC becomes a game of searching for jackpots. Everyone wants a little bit of everything, and everyone wants to have their fingers in the things that look most interesting, that seem to have the chance to blow up. VCs also push the companies they invest in to grow fast and hit the point of finding out whether or not they're a "jackpot" idea or not.

At the same time, investors have figured out innumerable ways to get paid out of companies that are obviously not going to make it and won't ever hit a traditional liquidity event. They've gamed the system to an enormous degree but they also pump so much money into it that it's hard to stand up to them.

Good summary. This is the reason tech is in bubble while economy is heading towards recession.. This and stupid fed policy

Deutsche Bank is sort of a bad example as they've gone through some troubled times lately [1]

[1] http://www.bbc.com/news/business-34567868

Could it be that the air encased in a thin spherical film of soap be escaping all over the tech market ?

I agree but I also think it is a larger scale problem. like the whole planet.

Do you think the companies that have healthy price to earnings ratios are in a bubble?

Most people will deny a bubble exists until it's incontrovertible, while they keep saying their "twitter for pets" is really worth 1bi USD.

We have to be open to the modest return, small business dot coms. A company of say, 20 people, each making about 150k or so and being completely satisfied with the state of things.

I think there's a culture of expecting reasonable businesses to seek unreasonable goals.

Until the valley can move from "always dream big" to "well sometimes, just plan sensibly", it will be perpetually unstable.

I remember a strip mall across from a corporate office park. Every couple months, a new .com would go in and another would go out of business, but in the strip mall the same places had been there for 20 years. The web isn't going anywhere, there's nothing wrong with providing for the long term.

No, the web isn't going anywhere...many have come and gone, as you correctly point out...and will again...

It's very likely that only so many "home runs" can be hit...that doesn't mean you can't do very well for yourself by focussing on a niche need, a good product, and excellent service...

A winning business model since mankind first began trading and bartering...

You make a very, very good point...

Well, then you can make a lot of money off of them by shorting publicly traded tech companies trading at massively inflated valuations.

Doesn't shorting a stock require that you select a time at which the stock will be worth less than it is now? Isn't that just a slightly different way of trying to time the market?

Presumably someone might think we are in a bubble and be right, but not have enough information to know when the market will correct or to what degree.

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