5 ms·

"Again, this “Bubble 2.0″, if it does exist, is mainly just troublesome for investors." Riiiggggght. Just ask all the non-homeowning taxpayers how that works.

by ojbyrne 16y ago

"Again, this “Bubble 2.0″, if it does exist, is mainly just troublesome for investors." Riiiggggght. Just ask all the non-homeowning taxpayers how that works. As I've mentioned previously, significant amount of VC and private equity money actually comes from "institutional investors," namely pension funds, university endowments, etc. If they lose a bunch of value, you think taxpayers aren't going to be on the hook?

ceejayoz 16y ago
On top of that, the last thing the economy needs right now is a bunch of VCs and other investors afraid to invest. We're teetering between job growth and job losses already.
klochner 16y ago
There isn't enough scale or leverage to make this anything like the dotcom or housing busts. This "bubble" is mostly in early stage startups, doing $2M-$5M rounds, and there aren't enough of these deals to add up to the size of investment in public dotcoms or housing. At worst we're just going to see mediocre VC returns and a lot of busted angel funds, but talking bailouts is hyperbolic. This quote characterizes the difference: “Back in the ’90s, companies got funded for five times the amount that Tumblr raised and didn’t have anything close to a business model,” said Roger Ehrenberg, founder and managing partner of IA Ventures. “People were getting $50 to $200 million a pop and it brought down an entire industry.”
- chailatte 16y ago
  Secondmarket valuations: Facebook: 50 Billions Twitter: 3 Billions Zynga: 5 Billions http://vator.tv/news/2010-11-30-facebook-valued-at-highest-ever-50-billion http://vator.tv/news/2010-11-30-facebook-valued-at-highest-e...
  - klochner 16y ago
    Those are the extreme examples, of which there are few, and they're not easily traded by the general public. Bubbles almost without exception (please correct me if you have a counter example) are pushed to extremes by the general public (commonly called "mom and pop investors").
    - chailatte 16y ago
      ojbyrne already answered that, you shouldn't put fingers in your ear so much ;) "institutional investors, namely pension funds, university endowments, etc"....I am betting at least one invested in Facebook.
      - klochner 16y ago
        you shouldn't put fingers in your ear so much ;) That's on par with "I'm rubber and you're glue . . . ", it's not a logically grounded argument, so there's really no counter argument. "institutional investors, namely pension funds, university endowments, etc"....I am betting at least one invested in Facebook. Again, you're missing the scale required for a market-wide bubble. We're not going to see federal bailouts just because one or two pension funds lost money on facebook.
      - sbov 16y ago
        The problem with the housing bubble wasn't that pension funds, etc, invested. The problem was everyone invested huge portions of what they had because you will never lose money when investing in housing. There should be no such illusion when investing in startups. Because of this, you would probably have a hard time finding an institutional investor that has as much of their fate tied to how well Facebook is going to do as you did with housing. There is about 14 trillion in mortgage debt out there. 50 billion doesn't even register.
  - hugh3 16y ago
    Sure, but the actual amount of real money which has ever changed hands for facebook stock is tiny compared to the $50 billion valuation. Besides, even $50 billion is only equivalent to a fifty-buck-a-share swing in the price of AAPL, something that seems to happen every couple of months. So the total amount of money floating around in this bubble is tiny; nothing to be concerned about unless it's your money.
- jdp23 16y ago
  It's a fair critique of the funding environment in the 1990s ... although I don't remember any companies with pre-IPO valuations of $45B back then.
  - klochner 16y ago
    I think it will become a bubble if a lot of these companies start to IPO (presuming that investors pile in at those valuations).
okaramian 16y ago
The comparison to the previous tech bubble isn't fair though. A lot of these companies are actually profitable and the capital cost is far lower than it was a decade ago. That is not to say that things aren't overvalued. But bubble behavior relies on investors investing in things because other people are investing in them so the price bubbles up ("housing is never a bad investment!"). I'd say that, while some of the valuations are high, a lot of these companies are at least profitable, which is more than we can take away from the previous bubble. Prices may end up settling down, but at the end of the day I'd say value is created so it's not too bad.

by ojbyrne 16y ago

ceejayoz 16y ago

On top of that, the last thing the economy needs right now is a bunch of VCs and other investors afraid to invest. We're teetering between job growth and job losses already.

klochner 16y ago

There isn't enough scale or leverage to make this anything like the dotcom or housing busts. This "bubble" is mostly in early stage startups, doing $2M-$5M rounds, and there aren't enough of these deals to add up to the size of investment in public dotcoms or housing. At worst we're just going to see mediocre VC returns and a lot of busted angel funds, but talking bailouts is hyperbolic. This quote characterizes the difference: “Back in the ’90s, companies got funded for five times the amount that Tumblr raised and didn’t have anything close to a business model,” said Roger Ehrenberg, founder and managing partner of IA Ventures. “People were getting $50 to $200 million a pop and it brought down an entire industry.”

chailatte 16y ago
Secondmarket valuations: Facebook: 50 Billions Twitter: 3 Billions Zynga: 5 Billions http://vator.tv/news/2010-11-30-facebook-valued-at-highest-ever-50-billion http://vator.tv/news/2010-11-30-facebook-valued-at-highest-e...
- klochner 16y ago
  Those are the extreme examples, of which there are few, and they're not easily traded by the general public. Bubbles almost without exception (please correct me if you have a counter example) are pushed to extremes by the general public (commonly called "mom and pop investors").
  - chailatte 16y ago
    ojbyrne already answered that, you shouldn't put fingers in your ear so much ;) "institutional investors, namely pension funds, university endowments, etc"....I am betting at least one invested in Facebook.
    - klochner 16y ago
      you shouldn't put fingers in your ear so much ;) That's on par with "I'm rubber and you're glue . . . ", it's not a logically grounded argument, so there's really no counter argument. "institutional investors, namely pension funds, university endowments, etc"....I am betting at least one invested in Facebook. Again, you're missing the scale required for a market-wide bubble. We're not going to see federal bailouts just because one or two pension funds lost money on facebook.
    - sbov 16y ago
      The problem with the housing bubble wasn't that pension funds, etc, invested. The problem was everyone invested huge portions of what they had because you will never lose money when investing in housing. There should be no such illusion when investing in startups. Because of this, you would probably have a hard time finding an institutional investor that has as much of their fate tied to how well Facebook is going to do as you did with housing. There is about 14 trillion in mortgage debt out there. 50 billion doesn't even register.
- hugh3 16y ago
  Sure, but the actual amount of real money which has ever changed hands for facebook stock is tiny compared to the $50 billion valuation. Besides, even $50 billion is only equivalent to a fifty-buck-a-share swing in the price of AAPL, something that seems to happen every couple of months. So the total amount of money floating around in this bubble is tiny; nothing to be concerned about unless it's your money.
jdp23 16y ago
It's a fair critique of the funding environment in the 1990s ... although I don't remember any companies with pre-IPO valuations of $45B back then.
- klochner 16y ago
  I think it will become a bubble if a lot of these companies start to IPO (presuming that investors pile in at those valuations).

okaramian 16y ago

The comparison to the previous tech bubble isn't fair though. A lot of these companies are actually profitable and the capital cost is far lower than it was a decade ago. That is not to say that things aren't overvalued. But bubble behavior relies on investors investing in things because other people are investing in them so the price bubbles up ("housing is never a bad investment!"). I'd say that, while some of the valuations are high, a lot of these companies are at least profitable, which is more than we can take away from the previous bubble. Prices may end up settling down, but at the end of the day I'd say value is created so it's not too bad.