So when do you guys think the inevitable burst will come?
Facebook Valued $151B with $1.5B annual profit (100x)
Whatsapp valued $16B with ~$20M annual profits (950x)
Occulus Rift valued $2B with ~$0 annual profit
With valuations like that looking scarily like those of the early 2000’s it can’t be too far off?
<p>Bubbles are less about valuations and more about willing buyers. It's all based upon greater fools. When the greater fools dry up, we have a problem.</p>
<p>The biggest difference, in my opinion, is that today's companies actually make money. Online purchasing was non-existent in 1999. Today, these are "real" companies.</p>
It's like a ponzy scheme. As long as investors keep investing, startups keep starting and established companies keep gobbling up these startups, this will continue. Once one of those slows down, the whole house of cards, comes tumbling down.
I do agree that the valuations need to get in check. I understand that there is a element of perception of value that seems to over inflate these things. I do find it concerning.
Fred Wilson covered this recently: http://avc.com/2014/03/the-bubble-question/
Most players in today's bubble were in HS in 2000, and the rest is professional hypsters.
I am not a financial specialist and this isn't financial advice, but just judging from the business cycle, my guess would be that we're due for a downturn around 2016. If things get particularly rough the gravy train could stop this year.
But just the fact that there's talk of a bubble tends to be a "contrarian indicator".
P/E on all the flagship tech stocks is just totally insane. My guess is that they're in for a Time-Warner, Meet AOL moment. Twitter looks like a great candidate for the Pets.com of the 2010s.
But remember: markets can stay irrational longer than players can stay solvent.
That said, part of the reason I suspect that the 'startup' model might 'survive' is that to investors, funding dollars are pocket change. Likewise the startup model essentially allows a capital firm to externalize risk, management, R&D, etc. while maintain a minimal but guiding presence via the board and whatever bizarre equity structure they dreamed up. Even more to the point, most companies are holding historically large cash reserves, which is one source, I suspect, of the dollars getting thrown at startups. I'd expect that to dry up when the economy contracts, or when cash starts flowing into more traditional investments.
<p>Great analysis.</p>
CB Insights also rounded up thoughts on this.
https://www.cbinsights.com/blog/tech-bubble-opinions