Bubbles, unicorns, massive new funding rounds, that's all
you hear of in the news these days. Even if you stay off the news to avoid all
the bubble talk, you can't. It's usually on the front page of the site of your
browser's homepage. Too much negative bubble talk and even bigger funding round
news following it up, about the next startup to have "unicorn" status
or potential raising a million dollars (or add some zeroes, matter of fact, add
two zeroes) from some VC firm made up of dumb money, or smart money. you can't really
tell the difference these days.
Yes there is a bubble, because you can find a startup for
almost anything imaginable that has raised millions of dollars, and worse,
there is still too much VC money chasing these startups. It's difficult to
raise $50,000. Extremely difficult. Try raising $1,000,000 and booom, you've
been funded.
On what grounds am I making these claims though? Sentiment
and hear-say. I told a founder friend that I needed to raise $50,000 to test a
new mobile media idea and he said, "well, I don't know about that, there
are many VCs that would give you a million dollars but I can't think of anyone
that is willing to do a small round like that." And, yes, he has raised
around $2 million for his niche social networking startup.
About sentiment, I really do feel there's a bubble. And so
does every other person who's screaming there is a bubble and it is going to
burst. Yeah, some back up their sentiment with some data and they look
convincing.
A few years back I did a lot of bubble reading, I read about
the canal mania, railway mania, the great crash and the housing collapse. And
even though I didn't witness the dotcom bubble, I remember what it was like in
1999 and 2000. I remember Boo.com dying and resurrecting and then finally
getting the silver bullet, I remember those Nortel Networks adverts with songs
from the Beetles which they must have paid a fortune for the royalties of, and
last but not the least, I remember the AOL Time Warner merger, a desperate move
by Time Warner to get in on it. Whenever people and companies start feeling
they've missed out if they don't get in on something, it's probably a bubble.
There's too much influx of money into startups, Crunchbase sometimes
captures more than a billion dollars of funding in a day. Every money bag is
shoving cash into the next startup that hails manicurists. That is definitely
another red flag. There's probably more money than value in these startups.
Valuation is not equal to value.
New ways of making and spending money go along with bubbles.
Tulipmania, the roaring 20s that lead to the great crash and the
depression. Vanity. Yes there's too much of it. But I don't want to go on
record screaming bubble yet. We could see this last through the year and even
2016. May the smart ones eat the dumb and weak while coming out of it.
