In the wake of FaceTagram and Zynga/OMGPOP and in anticipation of Facebook’s May IPO, we convened our first Forum and asked the members the inevitable bubble question:
Pundits and others are using the B word — bubble — more than ever. Is it time to stop, or will this gain even more traction in 2012?
Shervin Pishevar Managing Director, Menlo Ventures
No and Yes.
No because companies are becoming significant companies faster than at any other time in history. From Dropbox, Zynga, Facebook, Twitter, Uber, Airbnb, Fab.com, companies are scaling at breakneck speeds. The distribution is now there to grow to hundreds of millions of users, especially on mobile. Significantly, these are users who are now willing to put their credit cards in and buy from companies with great products and services like Uber. The world is a start-up and every sector is being disrupted and unlocking value.
Yes because these are companies with exceptional founding teams married with beautifully designed products that are beloved by their users. These are the elite seal team 6's of tech. For every Uber or Instagram there will be a long tail of companies that will wither in the shadows of emerging giant default services. Investors should be cautious of investing in the onslaught of "me too" companies that are merely mirages. The number of companies who graduate to these levels of greatness are few and far between. A flight to quality for both investors and founders is already in place and in motion. Don't let the mirage of billion-dollar valuations trick you into investing in every idea that rushes to market without the vision and execution needed to deliver.
The greatest founders never mention the billion number. They are too busy executing and focused on doing something meaningful every day to make a dent in the universe.
Gina Bianchini Founder and CEO, Mightybell
There is no question that there are frothy expectations from entrepreneurs and these expectations are -- in many cases -- being enthusiastically met by investors. That being said, any ultimately valuable company with momentum and dramatic growth looks more expensive in the moment. For example, people thought Accel was insane when they invested in Facebook at ~$100M pre-money valuation. Now? Not so much. Especially with so much capital chasing so few of these success stories, there is a supply and demand problem, with large funds needing to put their money to work.
During this period of rapid change, people are placing bets. There will be winners and losers. I'm just not sure all the hand wringing over whether this is or isn't a bubble is going to change either entrepreneur expectations or investor check writing in the short-term. Seems to me, we should just get on with building great, resilient companies. Anything else seems like analyzing a relationship to death.
Dan Gillmor Director, Knight Center for Digital Media Entrepreneurship, Arizona State University
Valuations haven't reached their peak yet. The Smart People are insisting there is no bubble -- "This time it's different. Really!" -- while angel investing becomes a fad and YCombinator startup-accelerator knockoffs (with everything except the talent of Paul Graham and his team) pop up like dandelions. Meanwhile, the so-called "JOBS Act" will give regular folks a chance to gamble recklessly the way they did in public markets back in the late 1990s. The con artists of the financial industry are smiling. If you're an entrepreneur, get the money while you can.
Om Malik Founder, GigaOm and Partner, True Ventures
2012 will be a big year for technology companies and their valuations, especially those we tend to label as start-ups. Why? Because right now most of the asset classes across the world are sucking wind and are unattractive investments. As a result we are going to see a lot more money shift into technology sector. I think to call this rapid shift of money as "investments" is wrong. We have a lot of people looking to trade technology companies, including early stage companies.
This in turn is going to inflate valuations and that is why I am pretty convinced that Facebook's IPO will prove to act like an accelerant for the technology ecosystem. More "acquhires," more angel fundings, bigger and bigger valuations for successful and high-growth start-ups. Of course, that does't match up with the real world valuations being accorded to publicly traded Internet companies.