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

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

#71

Post by austenallred »

eroo wrote: post #47
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.

He's assuming everything will go to zero. So while his post is about liquidity, he throws in "oh by the way all of tech will obviously come crashing down." Except for the tech companies he invested in, of course.

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

#72

Post by sharkweek »

dogma1138 wrote: post #62
sixQuarks wrote: post #54

Earlier quoted context omitted.

Pension funds and similar investment vehicles put a tiny percentage of their money into VC funds. Those losses shouldn't affect the individuals much.

http://www.bloomberg.com/bw/articles/2014-09-23/are-public-p... Insurance companies and pension funds make up 50% and upwards of an average VC. The rest of the money also comes from sources which directly affect you such as local government, banks, and other "public" institutions. "Rich individuals" on the other hand do make up only a fraction of the VC source funding with less than 2% on average. And while it's true…

CalPERs only allocates ~1% to VC (still billions). VC is actually a pretty soft risk in the big picture of their private allocations:

https://www.calpers.ca.gov/eip-docs/investments/policies/inv...

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

#73

Post by tjradcliffe »

DownvoteMeToWin wrote: post #44

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. T…

The sub-25M market is dominated by the sub-100K market, near as I can tell. The cost of startups is so low that people are doing stupid things, just like they were in dotcom-1.0, but they're mostly doing it on their own dime.

This isn't necessarily a bad thing, but it has created some pretty extreme weirdness at the low end. A friend sent this "Shaming-people-into-taking-cold-showers As A Service" thing to me a while back: http://coldshowertherapy.com/ (to be clear, he was mocking it.)

It's hard to look at that and not ask yourself, "Is it getting kind of bubbly out there?"

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

#74

Post by tuna-piano »

vijayboyapati wrote: post #58
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…

Facebook's market cap isn't 41B, it's about 223B, as of today (using yahoo/google finance): * https://www.google.com/finance?q=fb * http://finance.yahoo.com/q?s=fb

And last years revenue was $12.5B. Market cap is 18x rev.

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

#76

Post by tuna-piano »

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…

Cuban actually admits that his company was part of the 1999 bubble.

"In a bubble there is always someone with a “great” idea pitching an investor the dream of a billion dollar payout with a comparison to an existing success story. In the tech bubble it was Broadcast.com..."

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

#77

Post by dogma1138 »

sharkweek wrote: post #72
dogma1138 wrote: post #62

Earlier quoted context omitted.

http://www.bloomberg.com/bw/articles/2014-09-23/are-public-p... Insurance companies and pension funds make up 50% and upwards of an average VC. The rest of the money also comes from sources which directly affect you such as local government, banks, and other "public" institutions. "Rich individuals" on the other hand do make up only a fraction of the VC source funding with less than 2% on average. And while it's true…

CalPERs only allocates ~1% to VC (still billions). VC is actually a pretty soft risk in the big picture of their private allocations: https://www.calpers.ca.gov/eip-docs/investments/policies/inv...

It's their target not sure if those are actually the figures because in 2014 they were to scale from 7 to 1% in 5 years. There's info on that in the article. It was also not because of risk but because of low returns.

Besides public funds you also have corporate and private funds which also risk a huge portion of their money in risky capital not only VC.

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

#78

Post by bluedevil2k »

adventured wrote: post #35
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.

Yep, Cuban glosses over that obvious detail when it comes to median net worth individuals ($50k - $100k). Like when ordinary people invest into the stock market, and buy a company like Adept Technologies (ADEP) that goes from $21 to $6 in ten months (ADEP has been publicly traded for 20 years). Or buy into a company like Dendreon (DNDN) which goes from $40 / share and a ~$10 billion market cap, to literally worthless…

Someone in the public market could lose a lot, but they also have the option to sell at any time, preventing losses. Private markets with no liquidity will simply cause total loss, as selling is not even an option.

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

#79

Post by tlogan »

dogma1138 wrote: post #50
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…

I 100% agree with you. Majority of companies in the private market will go to zero.

The other problem is that today's so called "tech companies" have very little with tech. And, sadly, many companies including Evernote found out that hype pays more that actual working product. So they sell socks: why not? It gives them more revenue then Evernote subscription.

So there will be no new Oracle, new Cisco, new Sun in this bubble... Just bubble...

3rd in my life.... I hope will make money in next one.

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

#80

Post by seanflyon »

jonnathanson wrote: post #61
imjk wrote: post #21

Earlier quoted context omitted.

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.

The way the system works, the burden/penalty is on the company, not you, to verify your accreditation status. If you lie on your self-accreditation form, that's the company's problem for selling private securities to unaccredited individuals (and a huge problem it may well be). This is actually one of the big pain points that platforms like AngelList, with their syndicate deals and their self-reporting requirements,…

There is no investing through crowd-funding sites. It is all either donations, or pre-purchasing a product.
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