Sorry, but the U.S. economy is a $14 trillion economy. Anyone who says we're in a bubble based on the aggregate Silicon Valley venture capital funding in the last year is getting ahead of themselves. Before you lecture us on a bubble, try to understand some basics on the U.S. economy.
41,000,006 reasons why I think we're in a bubble
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Re: 41,000,006 reasons why I think we're in a bubble
#92Asking the wrong question?
What about asking, "How has taking this amount of funding helped this business?"
Strategically, this much funding through all of the controversy it has generated, will guarantee this company/brand gets in front of nearly every early adopter over the next couple of weeks.
It will drive hundreds of thousands of people to try it out.
And that's before they've spent a penny of it.
Loads of Posts on HN alone excitedly linking to the app on Android etc (one on the front page right now).
After that, it will sink or swim on it's own merit.
Would that have happened if they hadn't taken this funding? No. It would have had 5 minutes on TechCrunch, and then been forgotten about because it may not have been remarkable.
Now all they need to do is implement a business model / some way to make money from it so their per-user revenue exceeds their cost of user acquisition, and use the remaining $38,000,000 as a marketing budget to spread it to everyone else. Profit.
Re: 41,000,006 reasons why I think we're in a bubble
#93jacquesm really added ads to his site.
Re: 41,000,006 reasons why I think we're in a bubble
#94Make no mistake, a big factor in the creation / encouragement of recent bubbles has been super easy monetary policy that provides cheap and easy credit. In '00 we had a market crash after a dramatic run up of stocks in general and tech in specific. In 1998-1999 rates were low and credit was easily available [1]. As we led up to the millennium changeover ("Y2K") unprecedented amounts of short term capital were made av…
Good post. It seems common for participants in an industry undergoing a bubble to concoct elaborate industry-specific theories to explain a sudden influx of new money when the real cause is, well, exactly that: a sudden influx of new money. Unfortunately, we've been trained to correlate the numbers in our bank accounts with actual value, but the link has been all but severed for a long time.
It seems unbelievable that we as a population could keep being fooled by the same trick over and over, but when you look at the sums involved for those who benefit, it starts to make sense. This racket dwarfs even the military-industrial complex. It's rule-the-world money. In my opinion, anyone who tries to portray the situation as obscure or highly complex either has a stake or has succumbed to propaganda--printing money always causes artificial booms, and artificial booms always lead to busts. It's been true since fiat money was invented and it'll be true until we evolve beyond it.
Re: 41,000,006 reasons why I think we're in a bubble
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Re: 41,000,006 reasons why I think we're in a bubble
#96The $41m injection might well kill the company. I've never seen startups with too much capital early on to become the next Google/Facebook/Twitter - you lose your chance to become "relentlessly resourceful"!
Sorry, but your company dies when you have no more cash. The $41 million will help them survive for a long time.
Re: 41,000,006 reasons why I think we're in a bubble
#97Earlier quoted context omitted.
That's really unfair. Whilst I agree there's a disconnect, I wouldn't say it's specific to HN, but rather to the entire industry. The reason why you see those Ask HN posts is because people are looking around and realizing that those types of services have been getting tons of funding and attention. There's a disconnect, but it's in the social web world, not just HN. And I would say HNers are trying to capitalize on…
I disagree. I think the reason you see those kind of posts is that those kind of applications are low-hanging fruit. The development of Yet Another File-Sharing App or Social Media Service can be accomplished by anyone with a "Learn Rails In 21 Days" book and a credit card. Companies that are also getting tons of funding right now are biotechnology and solar energy startups, but I have never seen anything along the l…
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Re: 41,000,006 reasons why I think we're in a bubble
#98Earlier quoted context omitted.
Yes but knowing what you'd do with it and that being a good thing to do with it are different things. I don't see what they need $40m for that's going to deliver real value.
The would appear to have a coherent story as to why they need $40m, and they found some VCs who agree with them and think they'll make some money (normally 10x, right?) at the end of it all. More power to 'em.
I recall that being the justification for a lot of VC stuff around 1999/2000.
Re: 41,000,006 reasons why I think we're in a bubble
#99Hmph. 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 do…
- If it is going to take them a few years to get to their eventual, profitable, goal, why invest $41M now? Why not invest $20M now and another $21M when they're on the track that will be truly profitable, once they've demonstrated where they are going? - Is calling the investment "crazy" really offensive to the entrepreneurs? It is more a compliment to them than anything else. The investment may be crazy, but the ent…
To put it into perspective, say YC are giving out an average of $17000 a startup, time 43 startups is $731000 for the round.
For the same amount as this investment you could probably set up seed funds in 10 cities and cover all of the overheads involved. I know which option I would pick.
Re: 41,000,006 reasons why I think we're in a bubble
#100Make no mistake, a big factor in the creation / encouragement of recent bubbles has been super easy monetary policy that provides cheap and easy credit. In '00 we had a market crash after a dramatic run up of stocks in general and tech in specific. In 1998-1999 rates were low and credit was easily available [1]. As we led up to the millennium changeover ("Y2K") unprecedented amounts of short term capital were made av…
I personally think that the fed now has no choice but to pump money at zero (to effectively negative) interest forever.
There's a number of reasons for this: demographics, peak oil, the massively deflationary effect of certain technologies, etc. The west really looks a lot like Japan, which has pumped cheap money since their economy went through a similar cycle of stock bubble, real estate bubble, and crash.
So expect bubble after bubble...
That being said, the existing hype is nowhere near 1999 levels. If this is a bubble, it's a mini-bubble. I lived through that time, and it was an entirely different ballgame.