Signs: It's Not A Bubble Until... Posted by Tom Foremski - June 2, 2011 I say Silicon Valley is in a boom period rather than a bubble. Others might disagree but everyone has some kind of warning sign to look for. For example: Mike Butcher, from Techcrunch Europe, Tweeted earlier today: Signs of tech bubbles: Journos leaving for Startups; investment bankers in tech; Startups which try to change user behavior. That's a pretty good indicator, or should I say precursor...? My sign of a tech bubble comes from going through the Big One in the late 1990s. Its shares jumped from $7 to $49.50 over a two week period. If we see this kind of behavior, in a more modern format, then we are in a bubble. Signs are just signs -- no one knows when the music stops and you have to find your seat... What are the signs you are looking for? Also, what year is it? Updated: Dan Scheinman, who heads Cisco's Media Solutions Group responded in a tweet: I am going with 1997.
What Year Is It? VC True Ventures co-founder: There is no bubble, period. Connect with leaders from the companies in this story, in real life: Come to the fourth annual VentureBeat Mobile Summit April 14-15 in Sausalito, Calif. Request an invitation. There is no bubble forming around Silicon Valley or tech startups because white-hot companies like Twitter and Facebook are able to show they have fundamental value and are capable of making money, Phil Black, co-founder at early stage venture capital outfit True Ventures told me today. “There is no bubble at current moment. There are very successful Internet businesses being created that are growing very rapidly and are making a lot of pretax profit,” said Black. The biggest red flag VCs need to worry about is when valuations seem out of whack with what investors understand about what the company actually does, he said.
“We need to worry about a bubble when there are businesses being valued at sky high prices with no underlying fundamentals,” he said. Top PayPal Alumni: "Silicon Valley Lacks Radical Innovation" Posted by Tom Foremski - February 3, 2011 It was a sold out event: Peter Thiel and Max Levchin at the Inforum Club SF - the club for under 36 year old members of the Commonwealth Club. Mr Thiel and Mr Levchin are two prominent members of what some call the "PayPal Mafia. " This is a large number of unbelievably successful entrepreneurs; the Paypal alumni have gone on to help found an extraordinary number of successful startups. The first time I met Messrs Thiel and Levchin I was working at the Financial Times, not long before the PayPal IPO. The IPO was successful and soon after, Ebay bought the company for $1.5 billion.
A big chunk of that Ebay money went back into the Silicon Valley economy, funding dozens of startups, such as Facebook, Twitter, LinkedIn, Tesla, etc. The pair were slightly bashful Wednesday evening in San Francisco, sitting under bright lights as Brad Stone from BusinessWeek ran through a list of questions. Here are some of my notes from the evening: On valuations: Quest Venture Partners: Current VC investing not “irrational” The hand-wringing continues over whether or not there is a venture capital bubble forming around hot new Silicon Valley startups.
But the increased VC investing in tech is more likely the consequence of investors burned by the stock market getting into alternative investments, Marcus Ogawa, managing partner at venture capital firm Quest Venture Partners, told me today. “Is there more capital flowing into investments? Yes. Are valuations increasing as a consequence? Yes. Would I call it a ‘bubble’? “I feel what we are ultimately observing is a direct result of prolonged and depressed interest rates flooding the market with cheap capital,” he said. Quest, or QVP, typically aims to deliver the first round of institutional investment in early stage companies, investing $100,000 to $1.5 million, with a “sweet spot” around $500,000. It says two-thirds of its investment capital remains outstanding in startups including CrowdFlower, Sociable Labs, Retailigence. VCs Agree: "No Bubble" ... But Is Twitter A Sign? Posted by Tom Foremski - March 10, 2011 "Double, double toil and trouble; Fire burn, and caldron bubble," chanted the witches of Shakespeare's Macbeth, cooking up trouble.
Similarly, are the VCs of Silicon Valley cooking up trouble by helping to fuel a new bubble? Valuations for venture backed companies are certainly higher than they've been in a long time but are we in a bubble? The answer seems to be no. At least, not yet. Yesterday I spoke with veteran VC Bill Davidow: "When I look at companies such as Facebook, Zynga etc, I see high valuations but at least these companies have business models with proven revenues. Over on VentureBeat, Riley McDermind spoke with Phil Black, co-founder of True Ventures VC firm: "We need to worry about a bubble when there are businesses being valued at sky high prices with no underlying fundamentals," he said. At Y Combinator Paul Graham, a veteran investor in early-stage companies, says there is no bubble. "What's happening now is a lot more localized. Silicon Valley Veteran VC Bill Davidow Says "No Bubble"
Posted by Tom Foremski - March 9, 2011 I just finished an interview with Bill Davidow on the subject of his new book "Overconnected: The Promise and Threat of the Internet. " I'll post the interview later. I took the opportunity of asking Mr Davidow about the state of Silicon Valley and questions such as "are we in a bubble? " Mr Davidow is 75 years old and he is the founder of one of Silicon Valley's oldest and most respected VC firms, Mohr Davidow Ventures, which specializes in early-stage investments.
Mr Davidow disagrees with many Silicon Valley watchers that see a bubble emerging and that we may be repeating the mistakes of the dotcom boom. "When I look at companies such as Facebook, Zynga etc, I see high valuations but at least these companies have business models with proven revenues. He says that much of the VC industry has moved into mezzanine funding and so the rise of the Angels fills the gap in early stage investing -- which is Mohr Davidows' expertise.