Re:We didn't start the Fire (2.0)
by pchristensen on Wednesday December 05, 2007 @11:17AM
(#86309)
And don't forget that most of the "ridiculous valuations" come from acquisition or investment by a few companies that make huge piles of real money in the real economy. If Google, eBay, Amazon, or Microsoft want a company, it might be worth $50 million. If two or more of them want it to compete with the others, then it might be worth $1 billion. If none of them want it, it might be worth $1 million or less. Note that the product, founders, revenue, profit, technology was not one of factors I listed. Just the potential acquirers makes a 1000x difference. And it's ok for these companies to spend money like that because it's money they've already earned from their primary business. That's why it isn't a bubble. Call me when a "pointless revenue-free Web 2.0" company goes public - then we might be in a bubble.
it's very easy to just throw out that acquisitions are of inflated value as well, but as someone who's been in several acquisition discussions with big name tech companies, i can guarantee that these companies don't take the value of a million dollars lightly. these companies are either making strategic acquisitions that are valuable for the tech or hires (valued at low millions), or the user base or customer base, or a multiple of their revenues.
but the one thing these companies are not doing?? "ooh, shiny startup! here's ten million dollars!"
Facebook and a dozen imitators going public with their stock prices subsequently soaring out of control as people rush to get in on the action, that would be cause for alarm.
Time Magazine covers are the wrong place to look for bubble clues.