4 ms·

I think it's possible to draw a line between angel/VC with sane valuations and the "unicorn" phenomenon. The former does not seem to be in a bubble per se, tho

by api 10y ago

I think it's possible to draw a line between angel/VC with sane valuations and the "unicorn" phenomenon. The former does not seem to be in a bubble per se, though we have seen a cool down. A "hot" market is not a "bubble" and a cool down is not a "crash." Bubbles are violent and insane and that's not what we've seen in seed/series A. The latter may well be a bubble. What I'm hearing about right now is that it's getting a lot harder to raise money in later stages if you don't have great revenue numbers and real revenue growth. Earlier stages have cooled a bit but not catastrophically.

stcredzero 10y ago
A "hot" market is not a "bubble" and a cool down is not a "crash." Then instead of a bubble, how about a "Foam?" It occurred to me about a year ago that an "ecosystem" where you had a lot of startup companies serving the needs of other startup companies would be the perfect place for one to pump-up the size and perceived potential of the "ecosystem" in a way which attracts yet more money and increases the perception of further value creation in a positive feedback loop. However, since no one company, no single investment instrument is involved, there is no single perpetrator to blame. It's exploiting the same social proof dynamics, but in a highly distributed fashion. It's technically and legally not a Ponzi scheme, even though it's powered by the same mechanisms. So this should probably be the next frontier in the startup world -- preventing or at least mitigating this form of corruption. Or is it just to be adopted as the "startup business cycle" -- justified by the minority of companies that come out of such foam-swells that actually create value?
- rory 10y ago
  > Then instead of a bubble, how about a "Foam?" "Froth" is the standard terminology for this concept.
  - stcredzero 10y ago
    That works. It also works with "hot" markets. The market gets so hot, it starts boiling then foams over.
- omegaham 10y ago
  > justified by the minority of companies that come out of such foam-swells that actually create value? I think that this is, ultimately, the way that this will either remain or be replaced by something else. If the foam-swell actually ends up producing value despite all of the other garbage that gets produced, it might very well be better than anything else that we can come up with. In the startup world, more crap is perfectly fine if it leads to more value.
- api 10y ago
  You hit on a major question: how many startup-startups are there? (a.k.a. economic incest) Things like Product Hunt, Clerky, etc. obviously qualify, but what about Stripe? They started that way but have diversified quite a bit into more stable and traditional businesses. Lots of startup-startups: hard landing Not very many: soft landing / minor correction Economic incest via marketing was a major cause of the 2000-2001 dot.com crash. Many dot.coms had revenue based on selling ads to other dot.coms, so when then bottom started to fall out there was a massive cascade effect. Of course the other major cause of 2000-2001 was that it was a leveraged public market bubble. Public markets are notoriously panicky and leverage multiplies movements. 2012-2016 is neither leveraged nor public. It's private cash investors mostly. Movements will be slower and less violent due to lack of leverage amplification.

by api 10y ago

stcredzero 10y ago

A "hot" market is not a "bubble" and a cool down is not a "crash." Then instead of a bubble, how about a "Foam?" It occurred to me about a year ago that an "ecosystem" where you had a lot of startup companies serving the needs of other startup companies would be the perfect place for one to pump-up the size and perceived potential of the "ecosystem" in a way which attracts yet more money and increases the perception of further value creation in a positive feedback loop. However, since no one company, no single investment instrument is involved, there is no single perpetrator to blame. It's exploiting the same social proof dynamics, but in a highly distributed fashion. It's technically and legally not a Ponzi scheme, even though it's powered by the same mechanisms. So this should probably be the next frontier in the startup world -- preventing or at least mitigating this form of corruption. Or is it just to be adopted as the "startup business cycle" -- justified by the minority of companies that come out of such foam-swells that actually create value?

rory 10y ago
> Then instead of a bubble, how about a "Foam?" "Froth" is the standard terminology for this concept.
- stcredzero 10y ago
  That works. It also works with "hot" markets. The market gets so hot, it starts boiling then foams over.
omegaham 10y ago
> justified by the minority of companies that come out of such foam-swells that actually create value? I think that this is, ultimately, the way that this will either remain or be replaced by something else. If the foam-swell actually ends up producing value despite all of the other garbage that gets produced, it might very well be better than anything else that we can come up with. In the startup world, more crap is perfectly fine if it leads to more value.
api 10y ago
You hit on a major question: how many startup-startups are there? (a.k.a. economic incest) Things like Product Hunt, Clerky, etc. obviously qualify, but what about Stripe? They started that way but have diversified quite a bit into more stable and traditional businesses. Lots of startup-startups: hard landing Not very many: soft landing / minor correction Economic incest via marketing was a major cause of the 2000-2001 dot.com crash. Many dot.coms had revenue based on selling ads to other dot.coms, so when then bottom started to fall out there was a massive cascade effect. Of course the other major cause of 2000-2001 was that it was a leveraged public market bubble. Public markets are notoriously panicky and leverage multiplies movements. 2012-2016 is neither leveraged nor public. It's private cash investors mostly. Movements will be slower and less violent due to lack of leverage amplification.