And don't forget that most of the "ridiculous valuations" come from acquisition or investment by a few companies that make huge piles of real money in the real economy. If Google, eBay, Amazon, or Microsoft want a company, it might be worth $50 million. If two or more of them want it to compete with the others, then it might be worth $1 billion. If none of them want it, it might be worth $1 million or less. Note that the product, founders, revenue, profit, technology was not one of factors I listed. Just the potential acquirers makes a 1000x difference. And it's ok for these companies to spend money like that because it's money they've already earned from their primary business. That's why it isn't a bubble. Call me when a "pointless revenue-free Web 2.0" company goes public - then we might be in a bubble.
it's very easy to just throw out that acquisitions are of inflated value as well, but as someone who's been in several acquisition discussions with big name tech companies, i can guarantee that these companies don't take the value of a million dollars lightly. these companies are either making strategic acquisitions that are valuable for the tech or hires (valued at low millions), or the user base or customer base, or a multiple of their revenues.
but the one thing these companies are not doing?? "ooh, shiny startup! here's ten million dollars!"
