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41,000,006 reasons why I think we're in a bubble

jacquesmattheij.com

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Re: 41,000,006 reasons why I think we're in a bubble

#3

Post by dclaysmith »

"A $41M investment at this stage in the life cycle of a business is normally associated with either something that is technologically complex and thus capital intensive or that requires new processes to be designed from scratch."

This is what struck me when I heard about the deal. Color is cobbling together existing technologies and not creating anything new. This deal pushed me into the "There is a Bubble" group. They had better have an ace up their sleeve.

Re: 41,000,006 reasons why I think we're in a bubble

#4

Post by iqster »

One of the arguments I've heard that state that things are different this time around goes like this: it is far less capital intensive to do a startup now rather than in the late 90s because of open source software stacks and cloud computing providers. I agree with this statement but it means that the average software startup doesn't need a lot of cash to develop their product. Apart from ads and perhaps domain names (haha), why does anyone need so much cash?

EDIT: I guess it could be patent licensing. I don't buy the technological complexity bit, personally.

Also, if you know that everyone's headed towards a bubble, what is the correct response if you are a rational entrepreneur? Riding the bubble to the top and bailing before the crash does not jive with me.

Re: 41,000,006 reasons why I think we're in a bubble

#5

Post by nadam »

scrrr wrote: post #2

Well, I am not in a bubble. If anything my software is vastly undervalued. I wouldn't know what to do with 40M. I could use 100k though..

Yes, I see that some mobile-social-consumer stuff with very good connections to investors may be overvalued (but who knows?) (and they get huge tech-media attention), they may be in a bubble, but for most startups it is still 'business as usual' I think.

Re: 41,000,006 reasons why I think we're in a bubble

#6

Post by z92 »

We might be in a bubble. But that bubble will continue to inflate as long as people are screaming Bubble! Bubble!! The danger moment appears when all those predictions appear false and everyone start to believe, maybe this time, for some reason, exponential growth will continue forever.

The moment when everyone shut up and start to join the bandwagon is when the bubble bursts. <-- That's from my experience.

Re: 41,000,006 reasons why I think we're in a bubble

#8

Post by pclark »

Hmph. If nothing else, posts like this are terribly offensive to the entrepreneurs that dedicate their lives to products like Color.

Did anyone consider that maybe Sequoia, who have invested in companies that make up over 10% of the NASDAQ know what they are doing?

Companies like Color, AdKeeper and Flipboard have "crazy" valuations based on the founders having ridiculous resumes. They have all created billions of dollars of value for their investors, hell, why wouldn't you invest in that potential again?

Rationalising this metaphorical bubble to domain prices is absurd, since domains have always been traded for eyebrow raising prices. You think that the domain color.com or path.com will be worth $10 in 5 years time? Seriously?

Color almost certainly didn't require $41M to get to the product you see today, did people ever consider the company is - gasp - launching early and has the capital to iterate and scale for the next few years? I can think of lots of startups that raised $10M - $20M at company formation and has then spent the next few years (or more) iterating.

Investors are less interested in where you are today, compared to where you are going

Re: 41,000,006 reasons why I think we're in a bubble

#9

Post by nikcub »

dclaysmith wrote: post #3

"A $41M investment at this stage in the life cycle of a business is normally associated with either something that is technologically complex and thus capital intensive or that requires new processes to be designed from scratch." This is what struck me when I heard about the deal. Color is cobbling together existing technologies and not creating anything new. This deal pushed me into the "There is a Bubble" group. Th…

don't focus on the features of the product - focus on the team. it might end up being something completely different (there is a word for that)

from the perspective of 'can these guys spin a $40M investment into something that is worth more?', the answer is probably yes (probably enough to worth investing in)

it isn't a bubble because this is still VC money, not crazy mom and pop shooting at the NASDAQ money. during the bubble this company would have already IPO'd and been worth $5B, and you parents would have called you up to ask about it.

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