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The thing that troubles me most about this article is that I'm not in the valley at the moment. I'm not reaping multi-million dollar bonuses for not quitting,

The thing that troubles me most about this article is that I'm not in the valley at the moment. I'm not reaping multi-million dollar bonuses for not quitting, I'm not getting money for my startup with no due diligence... To me this isn't a warning, it's an opportunity - now is the time, we are almost at the peak of the bubble, get in now. (Get in on the entrepreneurial side where values are high; get out on the VC side where values are low - but I'm on the former side)) There is a lot of money floating around in the US economy right now courtesy of Quantitative Easing. Yields on most asset classes (especially safe ones) are low, and the stock market is lackluster... so it wouldn't surprise me to hear a lot of money is flowing into the entrepreneurial side of the economy - isn't that about the best possible outcome? I don't see this bubble bursting as hard. Most companies involved (Google, at least) have solid incomes, and are not running on hopes, dreams and borrowed money. VCs might find they paid too much, and Google might wind up with a slightly too expensive (but quite possibly rationally priced) employee base. But a VC that paid too much gets a haircut, the fund gives bad returns... so what? New funds spring up. It is not that bad.

jdp23 16y ago
as you say, it's an opportunity -- no matter where you are. but to the extent it's a bubble, people who get in this late in the game rarely come out very far ahead. i wouldn't lose too much sleep about not being in the valley right now. if it's a bubble, that's the last place you want to be; if it's sustainable, it'll continue to be an option.
- JimboOmega 16y ago
  As for it being a bubble - would you rather get in now, when (if you assume it's a bubble) VCs and angels are throwing money at people in an unsustainable way - or wait a few years until things have died down and they don't have money to throw? With almost any financial transaction, there are ways to bet both sides. With this one, you get in as an entrepreneur - you do a VC round, you tell Google Facebook made you an offer. Now is the time. Next year Google might be happy to let people go to Facebook. With stock market bubbles, it's selling short. With the real estate bubble, it was buying default swaps against the mortgage bonds. As VC is by definition a private market, it's much harder to short; instead, if it's overheated, you need to be selling assets into it (which is what taking a VC round is), assets you have to be creating. If you wait for the bubble to burst (and it is a bubble), you might be locked out for years.
SkyAtWork 16y ago
Seriously, I'm doing my best to raise angel funding or project financing in Seattle and I can't get the time of day from folks despite having a sizable contract to execute against with the target raise. I have heard explicitly that angel, private equity and bridge financing deals have dried up. I figured this was a pure valley bubble but if Fred is encountering the same things - why on earth can't I find even a subset of that? My network is not THAT terrible...
- fredwilson 16y ago
  i need to spend more time in seattle!
fredwilson 16y ago
i agree with all that you say and i did get a haircut yesterday :)

jdp23 16y ago

as you say, it's an opportunity -- no matter where you are. but to the extent it's a bubble, people who get in this late in the game rarely come out very far ahead. i wouldn't lose too much sleep about not being in the valley right now. if it's a bubble, that's the last place you want to be; if it's sustainable, it'll continue to be an option.

JimboOmega 16y ago
As for it being a bubble - would you rather get in now, when (if you assume it's a bubble) VCs and angels are throwing money at people in an unsustainable way - or wait a few years until things have died down and they don't have money to throw? With almost any financial transaction, there are ways to bet both sides. With this one, you get in as an entrepreneur - you do a VC round, you tell Google Facebook made you an offer. Now is the time. Next year Google might be happy to let people go to Facebook. With stock market bubbles, it's selling short. With the real estate bubble, it was buying default swaps against the mortgage bonds. As VC is by definition a private market, it's much harder to short; instead, if it's overheated, you need to be selling assets into it (which is what taking a VC round is), assets you have to be creating. If you wait for the bubble to burst (and it is a bubble), you might be locked out for years.

SkyAtWork 16y ago

Seriously, I'm doing my best to raise angel funding or project financing in Seattle and I can't get the time of day from folks despite having a sizable contract to execute against with the target raise. I have heard explicitly that angel, private equity and bridge financing deals have dried up. I figured this was a pure valley bubble but if Fred is encountering the same things - why on earth can't I find even a subset of that? My network is not THAT terrible...

fredwilson 16y ago
i need to spend more time in seattle!

fredwilson 16y ago

i agree with all that you say and i did get a haircut yesterday :)