Bubble Talk: Let's not shoot ourselves in the foot

Cosmo: Posit: People think a bank might be financially shaky.
Martin Bishop: Consequence: People start to withdraw their money.
Cosmo: Result: Pretty soon it is financially shaky.
Martin Bishop: Conclusion: You can make banks fail.
Cosmo: Bzzt. I've already done that. Maybe you've heard about a few? Think bigger.
Martin Bishop: Stock market?
Cosmo: Yes.
Martin Bishop: Currency market?
Cosmo: Yes.
Martin Bishop: Commodities market?
Cosmo: Yes.
Martin Bishop: Small countries?
Cosmo:  I might even be able to crash the whole damn system.

- Sneakers

Fred wrote a little while ago about the tough times that are ahead for the web.   Even my partner has a habit of saying that he worked for some startups during the "first bubble", which, to me, presumes a second.

Fred gives a number of macro factors that could effect the cycle and says, "none of those factors directly affects web/tech and the venture
markets. But it does directly affect the psychology of the investors
who fund the market and to a lesser extent the entrepreneurs who drive

Well, if that's the case... and it's about psychology, should we be feeding that psychology with all sorts of talk about a looming crisis?  We shouldn't be naive, of course, but every investment has risk and dumb money will always lose money.  There will always be startups that go under, but that doesn't mean that when the first big one does, we should yell "fire".   That's going to make it worse, because then you'll clear the strategics and the public money out of the room, and you'll wind up choking your own portfolio and your own company.

So, on a positive note, here are five reasons why I don't think we're going to see "Bubble 2.0".  The macro economy is definitely a shakey, but I think you're going to see the tech sector show some resilience this time around.  Here's why:

  1. Burn is significantly lower.  In the late 90's, companies raised hordes and hordes of cash because they were spending a lot more than you're average Web 2.0 company.  There were a lot of high burn networking equiptment companies and the dot com's were advertising on television.  Now, you're seeing companies like Mozy get sold to EMC for $75 million after only raising less than two.  Even a company building boxes like SlingMedia only raised about $55 million, making their $380 million acquisition probably a nice win for all involved.  How much would they have raised if this was '99?  $200 million? 
  2. VC's aren't tossing around cash like they used to.  In the late 90's a lot of VC funds were up in the $750 million range, and this was for
    EARLY stage investing.  They were actively competing with the public markets for deals, causing ridiculous valuations and overfunding.  They blew through those '99 funds, often times, in
    just a year.  This time, you're seeing VC's complain that they just
    can't get that much into their companies because they just don't need them and you're not seeing too many companies take more than they need, mostly because they don't want all that preferred money sitting on top of them.
  3. Incest is low.  In other words, back in the late 90's, there was a lot ponzi action going on.  You had lots of startups selling equipment and services to other startups.
  4. No Year 2000 bug.  Millions, probably billions of dollars were spent on internet consultants to fix the Year 200