Image via WikipediaFred Wilson: The Word Bubble: There will come a time when the environment we are in will be in the rear view mirror. And entrepreneurs should be crystal clear about that. This is a time to raise money and sock it away for a rainy day. Because it will rain. ...... deals are actually companies and most venture investments are held for five to seven years. I've likened them to marriages over the years. Don't let the lust for the deal lead to a bad marriage that you have to be in for the next decade. ...... we are in the glass is half full part of the cycle. Investors are focusing on the upside and ignoring the downside. That part of the investment cycle lasts for a while and then things change and investors focus on the downside and ignore the upside. Markets are defined by greed and fear. We are in the greed mode right nowI will have to agree. A lot of people sat on a lot of money for about two years. But money does not want to sit still. Money wants to grow. And right now it feels like the basketball that was held at the bottom of the pool was let go. It is not going to end at the surface. It will eventually. But first it will go into the air a little. We are in the air a little phase.
But this is no bubble. I don't see an imminent industry wide collapse. Going out of business also happens in the restaurant business, all the time, but that does not mean the restaurant business is going through a bubble.
In the late 1990s the internet was a haze, a promise. But now the internet is going everywhere, into every sector, all over the world. A lot of very real wealth is being created. This ride will last at least six, seven years, I think.
"The fundamentals are strong," like Chris Dixon likes to say. One third of his companies are profitable on seed money.
The music business is a good one to look at. Very few of the aspiring bands will end up a U2 or a Madonna, but many, many will make a living making music full time, more so than in the previous eras. Something similar will happen in the internet sector. There will be lots and lots of companies that will get profitable and stay there. They will not get bought, they will not go IPO. What's there to complain?
There will be plenty of failed companies. Investors will lose money. Sure. The best ones will. Union Square Ventures was recently called officially the best VC firm in the world based on the kind of returns they have shown on their money, and they expect fully one third of their companies to go down. And that's a good VC firm. There are bad ones that expect none of their companies to go down, and all their companies go down. The failures will be there, guaranteed.
But overall the internet sector is in great shape. At the end of the decade we will call this a boom decade.
A Mini Bubble Burst In Three Years
And even this glass half full phase I don't expect to end by Christmas. This phase might have a good two, three year run. And then corrections will kick in. Right now the mistake to make is to get too optimistic, then the mistake to make will be to get too pessimistic.
To You I Offer Buddhism And Yoga
The most important thing to note right now is some very real wealth is being created. There is good to great news.
Bubble, Boom Or Froth?
Bubble Talk Goes On: It's An Overshoot
Is It A Bubble?
Mike Arrington: We’re In The Middle Of A Terrible Blubble!: because they were out buying Internet stocks in 2000 instead of doing their jobs and reporting on the fairly obvious signals that the Nasdaq was about to implode. They won’t get caught with their pants down and their hand out again. Declare a bubble early and declare it often. ...... whatever is happening today in tech is absolutely nothing like what happened in 1999-2000. If you weren’t in the industry then, it’s understandable that you’d be concerned when you see Facebook being valued at up to $70 billion in private transactions ...... a Blubble. Because there is a lot of whining going on. ...... It was clear by the late 90s that this Internet thing had legs. And everyone wanted to be at the party. People flocked to Silicon Valley to take jobs like “Business Development Manager.” ...... When I left the law firm I was working at I became VP of Business Development the startup I joined, a former client. I was running the sales group too within a few months. I was 29 and had never sold anything in my life. But there I was, doing deals and in the thick of things. My stock options, Morgan Stanley told me, were worth over $40 million. ........ by 2001 I was basically broke and moved to London where I learned to appreciate drinking heavily at lunch every day because that’s what you did in London. ....... As a lawyer I sat in board meetings for my clients. And in those meetings I saw very well known venture capitalists tell these companies to spend as much money as they could as fast as they could, and then raise a bunch more and spend that as fast as they could ...... 2000 Bubble: Raise at least $100 million in venture capital. Spend! Hire everyone (particularly sales people)! Get revenue by any means necessary! Go Public! Sell Your Stock! Run! ........ 2011 Blubble: Drag blubbering angel investors into Series A rounds valuing your company at $6 million instead of $4 million. Hire engineers, lots of them, as many as you can. Don’t hire non-engineers or other overhead people unless you absolutely have to (thus the dearth of VP Biz Devs around). Balance fast growth with low burn (through cost controls or profitability). If you happen to have started Facebook, Groupon or Zynga, capitalize on your massive profitability by doing big late stage rounds that value you at something like 30x forward profits (which isn’t that crazy). If you’ve founded Twitter and have no revenue, capitalize on the massive worldwide cultural impact you’ve created instead.
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