Poll: Tech Bubble? Y Combinator's Paul Graham: There's no bubble. The "B" word keeps resurfacing like a menacing gopher that we can't chase out of our golf course.
With Facebook hovering around a valuation of $50 billion and climbing, and Twitter being valued at more than 200 times its annual revenue, the facts seem to be glaring us in the face. Last week, Eric Schmidt finally called it in an interview with Swiss magazine Bilanz when he stated: "There are clear signs of a bubble.
" But Y Combinator founder Paul Graham took to Hacker News on Thursday to refute the claims that we're headed into another tech bubble. "I was here in the Valley for the original Bubble, and the situation now is nothing like that was. Back then people were saying there was a 'new economy' driven by the Internet, and that productivity was going to go up like a step function, which justified higher p/e ratios for any company that could claim to be a participant," wrote Graham, adding: "What's happening now is a lot more localized.
Image source: flickr.com. It’s Not a Bubble, People; It’s a Pyramid Scheme. Mark Cuban knows a thing or two about bubbles, having profited handsomely from an earlier Internet boom.
But ask him if we’re seeing Bubble 2.0 and he’ll give you a different theory. “It’s almost the 2011 version of a private equity chain letter,” says Cuban, who sold Broadcast.com to Yahoo in 1999 for $5.7 billion and went on to buy the the NBA’s Dallas Mavericks. “Remember the old chain letter, where you put up some money, then you got other people to put up some money, and you gave it to the people who were in the deal before you? That’s what’s happening today,” says Cuban. “The early [VCs] are getting the new [VCs] to invest enough money at high enough valuations that they get most, if not all of their money back.
It’s a valid point. Over the last three months alone, Facebook’s roughly $33 billion valuation has roughly doubled, to an estimated $60 billion. Tech IPO Bubble? Nope. Facebook valued at $52 billion, Twitter $9 billion, Zynga $7 billion, Groupon $6 billion?
The valuation of these privately held companies — determined through recent private sales to VCs and others of insider shares — has raised enthusiasm for initial public offerings of technology companies. The tech IPO market began to bounce back late in 2010, and the momentum has continued. From just four tech IPOs in 2008 and 17 in '09, last year the number rose to 42, and IPO trackers say that could double this year. "I'm feeling like it will be significantly better than what we've seen in the last four or five years, somewhere in the range of 75 to 80 tech IPOs," said William Quigley, managing partner at Clearstone Venture Partners, a venture capital firm.