It's hard to use this poetry startup anecdote as proof of a bubble since the guy wasn't funded.
If YC had accepted the application, I could see it used as evidence that too much money is chasing too few ideas. But they didn't.
I'm calling this Bubble 2.0, and it's ready to burst
111–120 of 135 posts
Re: I'm calling this Bubble 2.0, and it's ready to burst
#112I go by the taxi driver litmus test. If a taxi driver tells me about (insert bubble) easy investment, then that's my cue to sell.
Re: I'm calling this Bubble 2.0, and it's ready to burst
#113The Poetry startup seems to be a very healthy idea. There is a large audience of poets; writing poetry is a very social process; and they use Internet extensively . Right now they are scattered thru a million of small resources and communities in social networks. But what if you can bring them all in one place? There might be a sufficiently large audience to monetize even if we forget about readers at all. So his bub…
This reaoning is why it's a bubble - the idea that selling services to poets scales in the way that selling poetry to consumers would (in theory).
Poets are consumers, consumers are poets.
Also, you can target every poet out there, in the past you could not target every consumer or producer.
It does not have to be big for seed funding. Might as well pay dividents.
Re: I'm calling this Bubble 2.0, and it's ready to burst
#114TBH I don't know
I was certain this charade was going to explode in 2008/9 but it didn't and it even got bigger.
A guy I know mentioned the only thing that's going to pop this bubble is the Fed raising interest rates, which are near zero. That will severely limit the amount of money available for investments like these.
The problem is with a shitty job market and an economy that's doing bad almost everywhere else but tech odds are the government wont do anything that could risk heavily indebted California sinking into the sea because SV imploded.
Back to jobs, the amount of ex-something-else (not coders) turned watrepreneurs is staggering, and that's because they all want to ride the gravy train and "get paid". This is one aspect that's almost exactly like during the 1.0 bubble.
One scenario I think could pop this bubble is a new bubble in another industry siphoning the money from tech VCs to that other industry's investments. But it would've to be a revolution to beat the insane returns of some tech M&As.
But as long as there's people rushing in because they are afraid of missing the next instagram-like opportunity this is going to keep going.............until the "nextagram" explodes in a ball of fire burning everyone involved...
Then again chances are the guys who started this will get out mostly in one piece, since they already made their money. But like when the previous bubble collapsed there are going to be a lot of actually good startups with great ideas caught in the shitstorm, seeing their valuations drop to the price of a used geometro, and no way to get a loan let alone investments.
And the culprits? they'll be back the moment valuations get crazy again, and they'll make more money, again.
Re: I'm calling this Bubble 2.0, and it's ready to burst
#115Here's a thought experiment I found interesting.
Assume Charlie is right: this is a bubble and the pop is imminent. What would the you in 2014 or 2017 wish you had done now to prepare?
What will happen to your primary source of income when bubble2 pops? How much runway do you have to secure another source of income? What expenses would you wish you had cut? What relationships does 2014-you wish you had cultivated to help find new sources of income?
Then, I suggest you make it a priority now to do those things while you have the chance. If this is a bubble, and if it pops, you won't have any more warning than you do now.
Re: I'm calling this Bubble 2.0, and it's ready to burst
#116Earlier quoted context omitted.
We're 12 years past the .com bubble. A large portion of the people who're creating and moving money today are in their twenties, they didn't experience 1999 in an economic point of view so there are no signals for them. Having said that, let's not forget that a lot of the uncharted terrain from 1999 is now thoroughly explored with a microscope. If you're talking about a bubble, don't forget to mention which subset of…
The financiers are, in general, folks that lived through the dotcom bust. That's the perplexing part right now. You'd think they would know better.
True, I didn't consider that.
Re: I'm calling this Bubble 2.0, and it's ready to burst
#117Earlier quoted context omitted.
Maybe it's not a bubble per se, maybe it's just overinvestment? The world economy really sucks right now, and people are seeking havens for their cash. The tech industry is one of the few bright spots in the world economy, and there's an evergreen hope of some runaway hit. So it could be possible for there to be overinvestment even in the face of widespread skepticism. We also have a lot of supercool mobile electroni…
Too many people are throwing around the "people are just seeking a place to park their cash because the economy sucks" misguided idea. Startups offer investors exactly the opposite of what a capital preservation strategy seeks: high risk with low possibility of considerable returns. Even if the world economy were in recession (its not [1]) most asset managers would recommend dozens of other asset classes before recom…
Investment in a single startup is very risky, but if you were supplying the capital for a venture capital firm, I would imagine the investment would be much more consistent. I haven't done any real research, but I strongly suspect that a lot of VC firms are making good returns across their portfolios.
Re: I'm calling this Bubble 2.0, and it's ready to burst
#118Earlier quoted context omitted.
"It's a 'social, generate zero or near zero revenue bubble.'" Can you point to a few high profile examples of this besides Instagram? There are SO MANY new ways to make money now and new low-friction ways to get distribution. We'll always have the next hot social thing (Instagram, Twitter, Facebook, Turntable.fm, FormSpring). But Zynga? Groupon? Social games in general? PaaS plays like Parse and Heroku? Fab.com? Zuli…
Can you point to a few high profile examples of this besides Instagram? There are SO MANY new ways to make money now and new low-friction ways to get distribution. I agree and it's why I think if there is a bubble it's a very narrow one and not a total tech bubble. There are lots of companies making good money right now as you point out. Of course who really knows if Groupon is in the zero revenue group or not since…
since no one has any idea what their financials really look like
I'm guessing the SEC has a good idea. http://www.sec.gov/Archives/edgar/data/1490281/0001047469110...
Re: I'm calling this Bubble 2.0, and it's ready to burst
#119I've been thinking a lot about this as we finish up our tenure at a Canadian accelerator and are getting our seed round together. In MBA school, you learn about stuff like discounted cash flows and how they are ultimately what is used to value a company. (Comparables and multipliers are really just proxies for the notion of what the present value of a company's cash flow is) Then you get out and start raising a round…
I upvoted you for being a voice of reason. I also find it interesting how much the startup community in general hates on MBAs, and yet they also know so little about finance. (I don't know much about finance, either, but from just a little bit of self-education I feel like I know more than the average Techcrunch etc blogger.)
Re: I'm calling this Bubble 2.0, and it's ready to burst
#120As the old saying goes, history never repeats itself, but it often rhymes. Asset bubbles occur when people are more interested in acquiring assets rather than effort to acquire the money used to buy the assets. Basically, people start throwing money around just to get that asset. It usually occurs when money is easily acquired through loans, etc, and as the asset prices increase, the general idea is "I can borrow the…
We may or may not be in a bubble (though I think we are) but I am sick of people using Instagram as their proof of this.
Instagram was a purely defensive purchase by Facebook. They were not buying them for their revenue, or their ability to make money in the future. They were buying them because they thought there was some chance (5% maybe?) that they could become a big competitor with them. They spent 1% of their value with 70% of that being stock to take out the possibility of a quality company taking on their entire business.
We can debate the merits of buying competition to kill them, but this is not new, and it is clearly far different than valuing them per user or per revenue. Facebook wasn't buying their users. They were killing their competition.