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Good points. It's hard to say what specific factors are driving the substantial influx in capital. However, I agree with the comment about investment alternatives. Where else can you invest today and expect a significant return? On this point, there might be a bit of resulting froth in the angel and venture capital markets, but I don't think this reflects an industry-wide bubble as what we witnessed in 2000.

Take Facebook as an example. Is Facebook worth $50b, per the recent Goldman Sachs investment? It's possibly worth much more, if we assume that Facebook is the winner-take-all in a network market (social networking). Are there significant uncertainties related to Facebook's revenue model and the company's ability to fend off substitution threats? Yes. But this is consistent with the risk/reward profile that comes with an equity investment in a privately held, high-growth tech company.




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