I'm calling this Bubble 2.0, and it's ready to burst • Hacker News Board

Re: I'm calling this Bubble 2.0, and it's ready to burst

#121

Post by wtvanhest » Wed, May 09, 2012, 6:17 PM UTC

olefoo wrote: post #108

rpeden wrote: post #91

Earlier quoted context omitted.

I see a lot of people who are inside the industry as employees agreeing that it is a bubble. But I see a lot of people inside the industry as investors saying it isn't. I'm not sure if that means anything, though.

I would take the words of the employees over that of the investors, you tend to be a little more clear eyed and less inclined to gamble when it's your livelihood at stake. That said, the bubble we're in is mostly a media creation; people want to hear good financial news from somewhere, and if it's based on someone paying for popularity ( Facebook buying Instagram )in the mobile cat-picture-sharing space; it will stil…

Maybe, but I didn't see anyone in the real estate business (employees, not investors) in any vertical or business saying there was a bubble until mid 2007. By that point, valuations had started coming down and financing was being much, much more selective. I stand by my point that it is strange for an industry to call out bubble repeatedly when there isn’t any real evidence of a bubble besides a few anecdotal acquisitions at what people believe to be high prices because they use a non-revenue metric.

Again, I don’t know if there is a bubble or not, but it seems odd for a group to call a bubble so early unless there is already drying liquidity. I really have no idea. It just doesn’t seem as self-evident to me.

Re: I'm calling this Bubble 2.0, and it's ready to burst

#122

Post by [deleted] » Wed, May 09, 2012, 6:17 PM UTC

olefoo wrote: post #108

rpeden wrote: post #91

Earlier quoted context omitted.

I see a lot of people who are inside the industry as employees agreeing that it is a bubble. But I see a lot of people inside the industry as investors saying it isn't. I'm not sure if that means anything, though.

I would take the words of the employees over that of the investors, you tend to be a little more clear eyed and less inclined to gamble when it's your livelihood at stake. That said, the bubble we're in is mostly a media creation; people want to hear good financial news from somewhere, and if it's based on someone paying for popularity ( Facebook buying Instagram )in the mobile cat-picture-sharing space; it will stil…

[deleted]

Re: I'm calling this Bubble 2.0, and it's ready to burst

#123

Post by F_J_H » Wed, May 09, 2012, 6:29 PM UTC

dkrich wrote: post #103

F_J_H wrote: post #67

Earlier quoted context omitted.

hmmm.... Here's an exaggeration to make a point: “The housing bubble didn’t really hurt anyone who already owned their home, or those who never owned a home in the first place.” Yes, a tech/start up bubble burst would not have near as much impact as the housing bubble for the reasons you point out, but when you suggest that it won’t hurt “anyone here” (i.e. people who frequent HN), I’m not sure I agree. Let’s say Ang…

> Let’s say Angel and VC money dries up, and Series A funding also dries up. You then have a bunch of start ups that don’t get funded at all, or who burn through their first Angel/VC raise, and then can’t get any further funding. They then can’t afford to hire or keep talent (hackers, system admins, designers, etc. – i.e. the people here) and there are only so many positions at companies like Apple, Google, Facebook,…

hmmm...not sure I agree that "you can't raise money for your startup and you aren't making enough to pay your employees, your business sucks".

When funding dries up, even good businesses have a very difficult time raising capital, and it's not uncommon for a "good" business to be unprofitable for a couple of years (or more) as it ramps up. (See Amazon, Twitter, etc.)

Re: I'm calling this Bubble 2.0, and it's ready to burst

#124

Post by ajross » Wed, May 09, 2012, 6:34 PM UTC

jasonkester wrote: post #63

So what exactly is supposed to happen when this Bubble bursts that in any way affects anybody here? The 1999 bubble was only an issue because it happened with publicly traded companies that lots of people were investing in and making unrealistic gains on. You couldn't watch television without seeing ads for online brokers showing how easy it was to get rich quick, and your "My Account" page on said brokerage site was…

But you're skipping a bubble: the 2008 collapse wasn't like that at all. Everyone ("everyone") knew we were in a housing bubble. Everyone expected housing prices to collapse. No one expected what happened.

As it turned out, all of the big investment banks were insanely leveraged in the housing market. And when it went sound just a little bit they went belly up first. No one outside the inner sanctums of those companies had any clue this was going to happen.

So the question here isn't "is there a bubble?", but "what unforseen side effects will it have?".

Re: I'm calling this Bubble 2.0, and it's ready to burst

#125

Post by 2pasc » Wed, May 09, 2012, 6:39 PM UTC

Lots of interesting points made here. If I could add only a few data points, I would say the following.

I have taught a very successful class on Investor pitching in SF for 6 months. I have had between 10 and 50 students per class, always sold out, even when I raised prices... (http://fundraisingviparisoma.eventbrite.com/)until end of March. Then, in April, I had to cancel two classes because I had too few students, and I only have 10 next week in a venue when I never had less than 20. It just tells me that we are at the end of a cycle, when everybody who drunk the "Social Network Movie kool aid" thought they could create a Groupon for India, a language learning start up or an Opentable for Hair Salons. It's a good thing for everybody actually.

Now as for Facebook's valuations, the question is - will Facebook bring as much traffic to applications in the future than Google did to commerce websites. My belief is yes (look at Viddy, SocialCam, Zynga, Pinterest, Draw Something if you need examples). In that case, Facebook, like Google in 2004-2008, will grow into a 100B-$200 valuation (which does not mean that I think it is the best stock purchase to do, the big money on Facebook has been made already by earlier investors). Same for Pinterest. If Pinterest users convert like crazy, then they will be able to demand emerchants to "pay to play" and... they will.

Re: I'm calling this Bubble 2.0, and it's ready to burst

#126

Post by georgemcbay » Wed, May 09, 2012, 6:58 PM UTC

My favorite of the new justifications is "in 1999, the Internet was niche, but now EVERYONE uses it".

So a relatively large audience then with no revenue meant nothing, but today a much larger audience still with no revenue is somehow different, somehow worth a lot more.

This sounds to me exactly like the (very old) "we'll make up for it with volume" joke, except people aren't using it as a joke! They believe it!

Re: I'm calling this Bubble 2.0, and it's ready to burst

#127

Post by dkrich » Wed, May 09, 2012, 7:09 PM UTC

F_J_H wrote: post #123

dkrich wrote: post #103

Earlier quoted context omitted.

> Let’s say Angel and VC money dries up, and Series A funding also dries up. You then have a bunch of start ups that don’t get funded at all, or who burn through their first Angel/VC raise, and then can’t get any further funding. They then can’t afford to hire or keep talent (hackers, system admins, designers, etc. – i.e. the people here) and there are only so many positions at companies like Apple, Google, Facebook,…

hmmm...not sure I agree that "you can't raise money for your startup and you aren't making enough to pay your employees, your business sucks" . When funding dries up, even good businesses have a very difficult time raising capital, and it's not uncommon for a "good" business to be unprofitable for a couple of years (or more) as it ramps up. (See Amazon, Twitter, etc.)

When has Amazon or Twitter ever had any trouble raising cash?

Re: I'm calling this Bubble 2.0, and it's ready to burst

#128

Post by F_J_H » Wed, May 09, 2012, 7:15 PM UTC

dkrich wrote: post #127

F_J_H wrote: post #123

Earlier quoted context omitted.

hmmm...not sure I agree that "you can't raise money for your startup and you aren't making enough to pay your employees, your business sucks" . When funding dries up, even good businesses have a very difficult time raising capital, and it's not uncommon for a "good" business to be unprofitable for a couple of years (or more) as it ramps up. (See Amazon, Twitter, etc.)

When has Amazon or Twitter ever had any trouble raising cash?

I should have been more clear. What I meant by those example is that the companies were not profitable in their early years, and paying employees may have been difficult without the capital they had raised.

Re: I'm calling this Bubble 2.0, and it's ready to burst

#129

Post by dkrich » Wed, May 09, 2012, 7:47 PM UTC

F_J_H wrote: post #128

dkrich wrote: post #127

Earlier quoted context omitted.

When has Amazon or Twitter ever had any trouble raising cash?

I should have been more clear. What I meant by those example is that the companies were not profitable in their early years, and paying employees may have been difficult without the capital they had raised.

Well my point was that if you can't raise money and you aren't making profits, then your business sucks. That was poorly worded, but Amazon and Twitter never had a problem raising capital when they needed it because there was a huge amount of competition to get into them.

The companies that aren't profitable in their early years and simultaneously can't raise cash are screwed and probably shouldn't be funded in the first place.

Re: I'm calling this Bubble 2.0, and it's ready to burst

#130

Post by heelhook » Wed, May 09, 2012, 8:01 PM UTC

Androsynth wrote: post #117

heelhook wrote: post #99

Earlier quoted context omitted.

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.

Yes, portfolio diversification is investing 101 (kinda curious how most of us here, when working on a new startup, will invest close to 100% of our awake time for months with no diversification)

Your post is somewhat related to what I said. The point I was making was that saying that startups are getting funded because there are no better assets for capital preservation are misguided. You are talking about "making good returns across their portfolios", that's not the goal of capital preservation, that's the goal of capital appreciation.