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We are in a Bubble

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Re: We are in a Bubble

#3

Post by samstave »

I am not interested in any of the "we are in a bubble" posts as much as I am interested in "What the fuck will happen when this bubble bursts!"

I have been in tech in SV since 1997. I was here for the build, frenzy and pop of the last bubble.

In 2001 I had a BBQ at my place - 50 people came and we ate and drank by the pool. Of those 50 - all tech workers - 4 had jobs.

I was out of work for 18 months (6 of which I traveled the world) - and luckily I have more than just tech skills which I was able to fall back on.

On HN we are really focused on technical ability - but there are millions of employees in all our tech companies that are not technical: think of any department outside of IT and Development == Sales, Facilities, HR, Marketing, Finance (although this is the class of people most responsible for this problem), etc...

ALL of these people are at the greatest risk - what will happen if this bubble bursts. We will be FUCKED.

What will it look like

Re: We are in a Bubble

#4

Post by damoncali »

samstave wrote: post #3

I am not interested in any of the "we are in a bubble" posts as much as I am interested in "What the fuck will happen when this bubble bursts!" I have been in tech in SV since 1997. I was here for the build, frenzy and pop of the last bubble. In 2001 I had a BBQ at my place - 50 people came and we ate and drank by the pool. Of those 50 - all tech workers - 4 had jobs. I was out of work for 18 months (6 of which I tra…

I don't expect the same level of carnage. THE bubble, the late 1990s, was so enormous that I have trouble explaining it to my younger peers who did not live through it as an adult. They just can't grasp what was going on because it was so damn crazy.

Re: We are in a Bubble

#5

Post by lonnyk »

>comparing yourself to another company’s valuation based on some metric like registered users

I really doubt anyone does valuation like this. What is more interesting is engagement and time using product. # of people is more a 'vanity metric' - it looks nice, but it doesn't mean much.

Re: We are in a Bubble

#6

Post by _sentient »

I've seen a lot of this back-and-forth on HN of late, but I can't help but wonder what difference it all makes.

Even if we are in a bubble, I doubt we have any real chance of turning things around gracefully. Everyone participating and benefiting from this bubble are inclined to support it, while those outside the bubble have no power to change the current trajectory.

The true losers in this scenario are the entry level players, and other support folk who become collateral damage when things finally come tumbling.

Re: We are in a Bubble

#8

Post by stcredzero »

Each incremental company, to some extent, dilutes the values of others.

Ask yourself: Are you part of a herd? Is your company doing what the next one is doing, just slicker and faster and with a twist? If the answer is yes, and you're trying to do a startup, then you are part of the bubble that will pop. (In a bad way. Worse still, you may be part of a "reputation bubble" as in the music or fashion industry.)

Also ask yourself: Is there an information asymmetry on your side? Do you know something that most everybody else doesn't? Is there something that scares everyone else away, or that everyone else hasn't seen yet? If not, then you might be in the part that pops.

For those standing off to the side: Are there an awful lot of startups doing similar looking things?

Re: We are in a Bubble

#9

Post by wtvanhest »

lonnyk wrote: post #5

>comparing yourself to another company’s valuation based on some metric like registered users I really doubt anyone does valuation like this. What is more interesting is engagement and time using product. # of people is more a 'vanity metric' - it looks nice, but it doesn't mean much.

You should discontinue doubting that. Valuations are done using every available metric (users, revenue, etc) and some metrics that have to be "triangulated".

Valuation experts select the one they think is most relevant or mix several metrics to arrive at a value. Some acquirers view different metrics as important depending on what they need. Some companies need top line growth to keep their multiple so they buy less profitable companies with a better chance to grow revenue for example.

You can argue all day whether you think that is right/wrong, dumb/smart, but that is the way it is currently done and the smartest people in finance constantly work on new ways to value companies but most of those ways involve coming up with new metrics.

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