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The “B” Word

You know it’s serious when KQED invites PhDs to talk about the “B” word.


Of course, the starting point during every bubble conversation is what happened 14 years ago in 2000, during the dot-com bubble. Any time you compare the current market to 2000, you start with a lost argument. What happened in 2000 will not happen again, not in that same manner at least. The Valley learned its lesson and will not make foolish decisions (let’s hope).

And yes, the numbers are not there yet, but the perception is.

In 2000, there were 261 Tech IPOs with a median age of 5. Many IPOs in an infant industry are trying to rush to market; maybe VCs forced them or the founders wanted out. In 2013, there were only 43 Tech IPOs with a median age of 9 years. Fewer IPOs and more mature business models. Do you see the difference? It’s a clear indication that startups and VCs are not rushing to IPO.

Let’s not bother with the first-day pops and EPS. That’s all relative.

I think there is one person here we can all blame for this bubble talk. We all love to hate him. He is this T-Shirt wearing Harvard dropout who happens to be the CEO of Facebook.

With his high-profile acquisitions, Instagram, Whatsapp, and Oculus, he has created an environment of “eyeballs-more-valuable-than-revenue.” One of the indications of a bubble is no revenue but a high evaluation based on the future revenue probability. But that reason alone isn’t enough to call it a bubble, at least not yet.

Economists spend every waking moment trying to understand markets and predict the next bubble or recession. Yet, most of the time, either they fail, or their warning falls short. Let’s not do their job for them.

Keep calm and geek on.

Photo Credit: Paulina Eli