4 ms·

This is a good sign that we aren't in another tech bubble - the market is correctly pricing poor performers on their base metrics rather than speculation and hy

This is a good sign that we aren't in another tech bubble - the market is correctly pricing poor performers on their base metrics rather than speculation and hype.

pyoung 14y ago
Or that we were (note: past tense) in a bubble, but that bubble consisted of a handful of companies and only affected a small number of investors/VCs. This was a common theme in the HN threads on SV bubble speculation, and ultimately I think that's what turned out to be the case. I definitely agree that in the long run, this is a good thing. It sheds some of the hype and gets people focusing on the fundamentals.
- wtvanhest 14y ago
  Calling that a bubble severely discounts past real bubbles.
- samstave 14y ago
  Also, some of the companies that were holding that bubble inflated were pre-IPO, like Facebook... I think that FB is the real indicator of where we are with respect to market valuation/sanity.
dredmorbius 14y ago
The problem with bubbles is the expectations they lead to, and the broken expectations they leave behind. In this case, we may well have seen more of an expectations (and pre-IPO investment) bubble than an IPO/investment bubble. The angels, incubators, and VCs are burnt. But also founders and early hires latching onto social, advertising, gaming, and SEO start-ups who're finding that reality isn't matching the pitch. Even solid ideas are going to find capital harder to come by if a bigger chill hits. Of course, that's what everyone was saying in the fall of 2008 with "RIP Good Times". And while the recent boomlet hasn't been huge, it also wasn't quite the four horsemen of the apocalypse either. http://www.slideshare.net/eldon/sequoia-capital-on-startups-and-the-economic-downturn-presentation http://www.slideshare.net/eldon/sequoia-capital-on-startups-... I'm still rather dismayed that so many startups are so inconsequential, and are largely aimed at value extraction, capturing more wealth than they create, rather than value creation, creating a greater societal benefit and capturing a smaller (but sufficient) share of this. Tim O'Reilly's OSCON keynote hits a few of these notes beautifully: https://plus.google.com/107033731246200681024/posts/bhKxn9NbJz1 https://plus.google.com/107033731246200681024/posts/bhKxn9Nb... https://www.youtube.com/watch?v=Kbcgmf6eDKU&feature=player_embedded https://www.youtube.com/watch?v=Kbcgmf6eDKU&feature=play...
- DividesByZero 14y ago
  Perhaps what's needed to establish rational expectations about tech companies is another success from value-creation. Then again, there are a few lately that fit that criteria - Dropbox, GitHub being big examples of that. I think this distinction will serve everyone better - founders, employees, angels, VCs and the tech community in general.
  - dredmorbius 14y ago
    AirBnB (despite some serious issues with the concept). A few others. The usual suspects gathering most or all of the headlines, and flooding my voicemail and inbox with, frankly exceptionally unappealing pitches, really leave me cold.
notlisted 14y ago
Hmmmm, the last bubble deflated in a similar way... despite some big bangs it never really 'popped' all at once. Instead there was a prolonged period of slowly deflating companies (all of 2001 really, yet the decline started in May 2000), with investors scrambling to reduce the burn rates and companies slowly running out of money and/or fools to invest in later rounds. I was in the VC biz back then. Traveled the world to save what was left, sell what we could, hoping against hope that it was just a temporary slump. Ultimately we failed miserably. Lost my shirt and my life savings, so it's safe to say I wasn't a very good (prescient) investor... (I blame my nerd-core) Note: there is one big difference with the last bubble: some of these companies actually make serious money, whereas at the time this often wasn't the case, but I feel that's merely a function of the role of the internet in our present-day lives. The crazy P/E ratios from back then still exist. FB, GRPN, ZNGA et al. are hopelessly overvalued. Edit: added some details.
- DividesByZero 14y ago
  Some companies made it out of the 2001 era very strongly, though most didn't. The main difference I see here is that the stock of most of the companies which crashed in 2001 initially rose strongly on the back of speculation. In the case of FB/ZNGA etc, the stock has consistently fallen since IPO. The market mechanism appears to be working here in a way it failed in 2001.

This is a good sign that we aren't in another tech bubble - the market is correctly pricing poor performers on their base metrics rather than speculation and hype.

pyoung 14y ago

Or that we were (note: past tense) in a bubble, but that bubble consisted of a handful of companies and only affected a small number of investors/VCs. This was a common theme in the HN threads on SV bubble speculation, and ultimately I think that's what turned out to be the case. I definitely agree that in the long run, this is a good thing. It sheds some of the hype and gets people focusing on the fundamentals.

wtvanhest 14y ago
Calling that a bubble severely discounts past real bubbles.
samstave 14y ago
Also, some of the companies that were holding that bubble inflated were pre-IPO, like Facebook... I think that FB is the real indicator of where we are with respect to market valuation/sanity.

dredmorbius 14y ago

The problem with bubbles is the expectations they lead to, and the broken expectations they leave behind. In this case, we may well have seen more of an expectations (and pre-IPO investment) bubble than an IPO/investment bubble. The angels, incubators, and VCs are burnt. But also founders and early hires latching onto social, advertising, gaming, and SEO start-ups who're finding that reality isn't matching the pitch. Even solid ideas are going to find capital harder to come by if a bigger chill hits. Of course, that's what everyone was saying in the fall of 2008 with "RIP Good Times". And while the recent boomlet hasn't been huge, it also wasn't quite the four horsemen of the apocalypse either. http://www.slideshare.net/eldon/sequoia-capital-on-startups-and-the-economic-downturn-presentation http://www.slideshare.net/eldon/sequoia-capital-on-startups-... I'm still rather dismayed that so many startups are so inconsequential, and are largely aimed at value extraction, capturing more wealth than they create, rather than value creation, creating a greater societal benefit and capturing a smaller (but sufficient) share of this. Tim O'Reilly's OSCON keynote hits a few of these notes beautifully: https://plus.google.com/107033731246200681024/posts/bhKxn9NbJz1 https://plus.google.com/107033731246200681024/posts/bhKxn9Nb... https://www.youtube.com/watch?v=Kbcgmf6eDKU&feature=player_embedded https://www.youtube.com/watch?v=Kbcgmf6eDKU&feature=play...

DividesByZero 14y ago
Perhaps what's needed to establish rational expectations about tech companies is another success from value-creation. Then again, there are a few lately that fit that criteria - Dropbox, GitHub being big examples of that. I think this distinction will serve everyone better - founders, employees, angels, VCs and the tech community in general.
- dredmorbius 14y ago
  AirBnB (despite some serious issues with the concept). A few others. The usual suspects gathering most or all of the headlines, and flooding my voicemail and inbox with, frankly exceptionally unappealing pitches, really leave me cold.

notlisted 14y ago

Hmmmm, the last bubble deflated in a similar way... despite some big bangs it never really 'popped' all at once. Instead there was a prolonged period of slowly deflating companies (all of 2001 really, yet the decline started in May 2000), with investors scrambling to reduce the burn rates and companies slowly running out of money and/or fools to invest in later rounds. I was in the VC biz back then. Traveled the world to save what was left, sell what we could, hoping against hope that it was just a temporary slump. Ultimately we failed miserably. Lost my shirt and my life savings, so it's safe to say I wasn't a very good (prescient) investor... (I blame my nerd-core) Note: there is one big difference with the last bubble: some of these companies actually make serious money, whereas at the time this often wasn't the case, but I feel that's merely a function of the role of the internet in our present-day lives. The crazy P/E ratios from back then still exist. FB, GRPN, ZNGA et al. are hopelessly overvalued. Edit: added some details.

DividesByZero 14y ago
Some companies made it out of the 2001 era very strongly, though most didn't. The main difference I see here is that the stock of most of the companies which crashed in 2001 initially rose strongly on the back of speculation. In the case of FB/ZNGA etc, the stock has consistently fallen since IPO. The market mechanism appears to be working here in a way it failed in 2001.