the only bubble I see is in social media (instagram and zynga, mentioned a lot already in this thread). it's funny that business models which from my point of view are far more sustainable and also much more beneficial for society get considerably lower valuations (or at least media attention). i mean startups like asana, heroku, fogbugz or duolingo - whose main use case goes beyond sharing/playing with friends.
I'm calling this Bubble 2.0, and it's ready to burst
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Re: I'm calling this Bubble 2.0, and it's ready to burst
#32Saying that something is going to happen is easy, as in astrology easy. The meat of any prediction is in the timeframe. If you know for sure that the bubble is gonna burst in n months, you should bet against it in the stock/future market.
I absolutely agree. I've been hearing predictions about the startup bubble for quite a while now, no doubt the market will fall at some point. Markets are cyclical so you can safely make a prediction once a year and eventually be right. What I want to see are people stating when the bubble will burst and even better, putting money on their predictions.
Re: I'm calling this Bubble 2.0, and it's ready to burst
#33Interesting article, Mr. Stross. I think it's great to see so many people hungry for the next new thing, out hustling and working hard to try to make it happen. As awareness of startup culture grows, it is necessarily going to attract some goofiness. That's OK. Not every idea is a good one, and not every good idea is going to work. We need these stories to make the successes stand out so much brighter. You may be rig…
I was in the web/dotcom 1.0 biz from early 1995 through late 2001. I am reading the news these days with a strong sense of deja vu for late 1999. Kickstarter and crowdsourced funding is great news for artists, but I don't see it scaling much bigger than AFP and "Iron Sky" without attracting fraudsters. Again: hacker/maker culture is great, it has brought us great things in the past, and I expect great things to come…
I appreciate how your experience in the late 90s has given you a heuristic for picking up on the signals and leading indicators of a bubble, but I question how relevant it is in this case.
The poetry blog post is just one bad idea that a couple guys had in an attempt to gain a small amount of funding from a notable startup indicator. That's not to say that there aren't more small teams with laughable ideas out there, but I think it's important to note that nobody gave them money. I suspect they went home empty handed because the folks who manage VC funds did learn from the mistakes of the 90s, even if a new generation of wantrepeneurs have no clue.
Which brings me to my point. The niche based thinking expressed by the poetry disruptors and many others is an expression of the realization that individual programmers have the ability to work alone to create products and businesses that are capable of supporting them financially in much the same way that a sole proprietorship would in the physical world.
I'm fairly certain that this wasn't possible in the 90s without outside help, but I think that it explains a lot of the misguided enthusiasm from people who want to build lifestyle businesses, but don't realize that venture capital is not the way to go about it.
Re: I'm calling this Bubble 2.0, and it's ready to burst
#34Unfortunately I'm starting to agree with the bubble 2.0. Last year I didn't believe it that much, but this year I'm starting to see crazy company evaluations, highly inflated that don't generate any revenue at all, so I don't know how can they be worth billions of dollars, but I know math and little about economics. But if bursts, it's a good thing. It brings perspective, a thing that's missing a lot these days, wher…
So let's be clear about this: these kinds of startups are arbitrary containers for investment dollars. They could be corn, or property, or jelly futures. But as it happens, technology companies are where a lot of people are putting their money right now. As a result, it's not the startups with the secure bottom line that are getting investment: it's shiny startups that happen to be very popular. Because those are the…
From what I understand, bubbles bursting in the past (e.g. Tulips, Dotcom) have been triggered by a specific event rather than a new, more exciting outlet for money.
In the Tulip bubble it was a failed auction in Haarlan, in the DotCom bubble it was the Fed raising interest rates, paired with the judgement in the US vs Microsoft trial.
So, its interesting to hypothesize what the 'trigger' event could be in this case. I doubt it will be the Facebook float, as I think we have a while to run yet.
Re: I'm calling this Bubble 2.0, and it's ready to burst
#35I've been written a summary about all bubble theories here: http://blog.trejdify.com/2012/05/summary-do-we-have-new-tech...
Isn't it absurd to suggest that there cannot be a bubble if everyone agrees we are in a bubble?
Re: I'm calling this Bubble 2.0, and it's ready to burst
#36Unfortunately I'm starting to agree with the bubble 2.0. Last year I didn't believe it that much, but this year I'm starting to see crazy company evaluations, highly inflated that don't generate any revenue at all, so I don't know how can they be worth billions of dollars, but I know math and little about economics. But if bursts, it's a good thing. It brings perspective, a thing that's missing a lot these days, wher…
So let's be clear about this: these kinds of startups are arbitrary containers for investment dollars. They could be corn, or property, or jelly futures. But as it happens, technology companies are where a lot of people are putting their money right now. As a result, it's not the startups with the secure bottom line that are getting investment: it's shiny startups that happen to be very popular. Because those are the…
here's a scenario for you - end of 2012, and for some reason ad spending is down and consumer spending has not increased as much as was forecast. the major platforms that capture that ad money suffer hits to their stock. FaceBook will be public by then, and if they suffer a decline in profits, much less a decline in revenue, this early in their history, the luster will come right off, taking them from $100 to $30 in a few days.
the reverse halo effect of FB will cause optimism about the resale value of shiny startups to decrease. by this time next year, PG is blogging about "sanity and wisdom" and how he has seen it all before.
Re: I'm calling this Bubble 2.0, and it's ready to burst
#37It is temerity to pass this prediction based on extremely small sample data. Instagram, Colors, Zynga and others like that are still exceptions rather than a rule. Indeed media attention for these social apps/gaming companies tend to be high which might give the illusion that internet industry as a whole is moving towards valuations without any base underneath.
There's certainly some bubblish stuff going on, but you're right that it'd be nice to have more data.
Re: I'm calling this Bubble 2.0, and it's ready to burst
#38Earlier quoted context omitted.
So let's be clear about this: these kinds of startups are arbitrary containers for investment dollars. They could be corn, or property, or jelly futures. But as it happens, technology companies are where a lot of people are putting their money right now. As a result, it's not the startups with the secure bottom line that are getting investment: it's shiny startups that happen to be very popular. Because those are the…
here's a scenario for you - end of 2012, and for some reason ad spending is down and consumer spending has not increased as much as was forecast. the major platforms that capture that ad money suffer hits to their stock. FaceBook will be public by then, and if they suffer a decline in profits, much less a decline in revenue, this early in their history, the luster will come right off, taking them from $100 to $30 in…
So you are saying that the bubble can burst if, when it comes time for the shiny new things to be working businesses, they fail. I completely agree.
Re: I'm calling this Bubble 2.0, and it's ready to burst
#39the only bubble I see is in social media (instagram and zynga, mentioned a lot already in this thread). it's funny that business models which from my point of view are far more sustainable and also much more beneficial for society get considerably lower valuations (or at least media attention). i mean startups like asana, heroku, fogbugz or duolingo - whose main use case goes beyond sharing/playing with friends.
With the exception of duolingo, these are all companies which make products for other businesses, so we should ask: What do their clients make? If their clients get popped in this (hypothetical) bubble, won't they?
Re: I'm calling this Bubble 2.0, and it's ready to burst
#40Earlier quoted context omitted.
So let's be clear about this: these kinds of startups are arbitrary containers for investment dollars. They could be corn, or property, or jelly futures. But as it happens, technology companies are where a lot of people are putting their money right now. As a result, it's not the startups with the secure bottom line that are getting investment: it's shiny startups that happen to be very popular. Because those are the…
From what I understand, bubbles bursting in the past (e.g. Tulips, Dotcom) have been triggered by a specific event rather than a new, more exciting outlet for money. In the Tulip bubble it was a failed auction in Haarlan, in the DotCom bubble it was the Fed raising interest rates, paired with the judgement in the US vs Microsoft trial. So, its interesting to hypothesize what the 'trigger' event could be in this case.…
Right - I think my first bullet is probably triggered by an event. Facebook could be it, but I think you're right: it'll probably be something further down the line. Wouldn't surprise me at all if it turned out to be SOPA-like legislation coupled with a ruling on sales tax.