Why This Tech Bubble is Worse Than the Tech Bubble of 2000 • Hacker News Board

Re: Why This Tech Bubble is Worse Than the Tech Bubble of 2000

#41

Post by jff » Wed, Mar 04, 2015, 11:56 PM UTC

ghshephard wrote: post #7

encoderer wrote: post #4

> Broadcast.com, AOL, Netscape, etc. Today its, Uber, Twitter, Facebook Even mentioning his company in the same breath as Uber, Twitter and Facebook shows how out of touch he is IMO. Broadcast.com was hardly a business! Those companies have BILLIONS of dollars of real revenue.

I'd never heard of Broadcast.com before this post. Checking http://en.wikipedia.org/wiki/Broadcast.com , I see that "In April 1999, Yahoo! acquired the company for $5.7 billion (or over $10,000 per user) in stock and renamed it Yahoo! Broadcast Solutions. The company had 570,000 users. " I"m comfortable calling that a Bubble.

$10,000 paid per user. Damn.

Re: Why This Tech Bubble is Worse Than the Tech Bubble of 2000

#42

Post by [deleted] » Wed, Mar 04, 2015, 11:58 PM UTC

tosseraccount wrote: post #25

karmacondon wrote: post #9

This is why most angels have to be accredited investors, meaning that they need to have $1MM in assets. Millionaires investing in new ideas aren't exactly naive widows and orphans (though they could be). With public stocks there is indeed high liquidity, but there was also strikingly high volatility during the tech bubble. It's good to be able to sell your shares, but less so if the price can drop 80% in a day. That'…

accredited investors? Who accredits investors? Is there legal status for this?

[deleted]

Re: Why This Tech Bubble is Worse Than the Tech Bubble of 2000

#43

Post by shockzzz » Wed, Mar 04, 2015, 11:58 PM UTC

sixQuarks wrote: post #23

I think Cuban is wrong. It's WORSE when ordinary investors are risking their money. Today, you've got angels and VCs that have risked their money. And this is money they don't need. Big deal if everything implodes, what do they lose? Simply their bets. Back in 2000s, a lot of ordinary people lost money they couldn't afford to lose.

What he seems to be implying is that there are investment funds that exist solely for private equity investments, i.e. investments in startups as "VC" money. If that's true, and it's true that stuff like pension funds are sinking money into these "Equity Crowd Funds," then we're in real big trouble.

Re: Why This Tech Bubble is Worse Than the Tech Bubble of 2000

#44

Post by DownvoteMeToWin » Wed, Mar 04, 2015, 11:59 PM UTC

I bet this is about liquidity.

(reads article)

Yep, it's about liquidity.

I bet the HN comments don't mention liquidity categories.

(reads comments)

Nope, not a single one.

How did I know!!!!??!!11

He's right that sub 25M is dead. You're either the next Uber or you're not getting anything. And if that's the case, then money will be on the sidelines waiting for the next big thing, not the next incremental thing. That will cause a shortage of liquidity for new proposals (the dreamers) and keep those capable of bigger proposals busy. (the titans) You will have a liquidity shortage for the dreamers.

He is right. Incremental investment is no longer possible. All you have is a gigantic bar-to-entry for dreamers and when the titan shortage becomes apparent (no amount of liquidity will reveal more titans to keep the game going), the dreamers will be flushed out. A few titans might go down in the fallout as well.

You either solve everything or nothing today. It's an untenable position that will keep liquidity on the sidelines and stifle innovation. It's also very bubbly as you have more money than there are opportunities (As classified by laws) to chase.

Re: Why This Tech Bubble is Worse Than the Tech Bubble of 2000

#45

Post by TheMagicHorsey » Thu, Mar 05, 2015, 12:00 AM UTC

sixQuarks wrote: post #23

I think Cuban is wrong. It's WORSE when ordinary investors are risking their money. Today, you've got angels and VCs that have risked their money. And this is money they don't need. Big deal if everything implodes, what do they lose? Simply their bets. Back in 2000s, a lot of ordinary people lost money they couldn't afford to lose.

Exactly. Dude has some sort of axe to grind. The situation could get bad ... yes ... but not for the reasons he explains. These Angels aren't going to bring down the economy when they lose their bets. When the market crashed after the dotcom boom regular people lost significant parts of their savings, and that contracted demand across the economy.

The only part of the economy that contracts in the Cuban scenario is the market for Yachts and Teslas (exaggerating, but you get the point).

The only way it spreads is if there are other macro factors that we haven't been told about by Cuban (because he doesn't know or understand them).

Re: Why This Tech Bubble is Worse Than the Tech Bubble of 2000

#46

Post by itsallthesame » Thu, Mar 05, 2015, 12:00 AM UTC

imjk wrote: post #21

karmacondon wrote: post #9

This is why most angels have to be accredited investors, meaning that they need to have $1MM in assets. Millionaires investing in new ideas aren't exactly naive widows and orphans (though they could be). With public stocks there is indeed high liquidity, but there was also strikingly high volatility during the tech bubble. It's good to be able to sell your shares, but less so if the price can drop 80% in a day. That'…

Well he explicitly mentions equity crowd funding which allows people to bypass those rules. Also, from personal experience as an angel investor, there isn't really a great authority out there enforcing accredited investor requirements. All the times I've invested in private companies, I simply had to sign a one-page document self-proclaiming myself as an accredited investor.

If you were to sign that document but not have the $1 million in assets to qualify as an accredited investor wouldn't you be committing some sort of securities fraud?

Re: Why This Tech Bubble is Worse Than the Tech Bubble of 2000

#47

Post by eroo » Thu, Mar 05, 2015, 12:03 AM UTC

austenallred wrote: post #37

So Cuban started (what became) Broadcast.com, ramped it up to $13.5 Million revenue per quarter [1], and sold it to Yahoo for $5.7 billion (in stock, but we'll disregard that fact for now). On track to do $54 million in a year, means he sold for 1,000x one year's revenue. 15 years later, Facebook brings in $3.2 Billion in revenue and has a market cap of ~$41 Billion, or about 12.8 times one year's revenue. [2] And we…

He isn't arguing firms are overvalued by a greater degree now relative to 1999. He's arguing that investments in private firms, which are far more popular now, are worse for small players due to their lack of liquidity.

If things start going south in a private investment, a share holder may not be able to exit even at a large loss.

Re: Why This Tech Bubble is Worse Than the Tech Bubble of 2000

#48

Post by itsallthesame » Thu, Mar 05, 2015, 12:03 AM UTC

Could someone please point out something smart Mark Cuban has ever written? Because everything I read of his comes off as out of touch.

Re: Why This Tech Bubble is Worse Than the Tech Bubble of 2000

#49

Post by DINKDINK » Thu, Mar 05, 2015, 12:03 AM UTC

sixQuarks wrote: post #23

I think Cuban is wrong. It's WORSE when ordinary investors are risking their money. Today, you've got angels and VCs that have risked their money. And this is money they don't need. Big deal if everything implodes, what do they lose? Simply their bets. Back in 2000s, a lot of ordinary people lost money they couldn't afford to lose.

>what do they lose? Simply their bets.

They will definitely lose their bets but it would be excessively simplistic to assume that if a bunch of VC's bust, their bust will not affect the market (stock market, etc) in any way.

Re: Why This Tech Bubble is Worse Than the Tech Bubble of 2000

#50

Post by dogma1138 » Thu, Mar 05, 2015, 12:08 AM UTC

sixQuarks wrote: post #23

I think Cuban is wrong. It's WORSE when ordinary investors are risking their money. Today, you've got angels and VCs that have risked their money. And this is money they don't need. Big deal if everything implodes, what do they lose? Simply their bets. Back in 2000s, a lot of ordinary people lost money they couldn't afford to lose.

VC's are not risking their money they are risking yours. VC's get money from your insurer, pension provider, 401K and similar saving options. While you might invest and gamble with your own money, VC's are literally gambling with everyone's future. And these days the regulations limiting insurance companies and private pension providers in investing their money in a VC or other types of risky capital are looser than ever.

While I won't to pretend to understand the details behind the article, but just looking at the many "startups" without a clear business plan, revenue stream not to mention profits which are valued in billions of dollars all of a sudden should make everyone's eyebrows rise if just a little.

10-15 years ago if you made an exit in 100's of millions it would be a worldwide sensation, these days it seems you sneeze and get 100M in funding and the WSJ posts an article about your company being valued higher than the GDP of some developing nations.

I remember when in the mid 90's Checkpoint got like 70M $ in it's NASDAQ IPO which was then a sensation which was talked about for year, these days that's considered a cold round 2 funding run for the next sexting app. Even with "inflation" and all that other nonsense the fact that since 2006-2007 you could probably count at least 40 US techstartups which got valued for over 1bln should hint a that something stinks.

Heck evernote which their current business model seems to be more focused around selling 70$ socks and 200$ messenger bags instead of you know their own actual techonlogy is valued these days at what 4-5bln, really? A company with 18M in yearly revenues after almost 8 years with no real assets to speak off, with a user base smaller than even marginally popular online games with almost no profit that hasn't even returned it's initial investment runs is valued at 300 times their pre-tax income?