Are you ready for another Tech Bubble like the one that you experienced in late 90's and early 2000's?
Facebook valued at $76 billion [more than the value of Boeing and Ford]
LinkedIn valued at more than $3 billion [potential market valued at $30 billion, more than the value of entire beer industry in US. Remeber the biggest revenue streams for LinkedIn are thru recruitment services/advertisements]
Microsoft buys skype for $8 billion [10 times the value of skype's sales last year]
Groupon valued at $25 billion [Groupon's underlying technology is good old 'E-Mail']
Twitter valued at $7 billion
Some of the interesting questions these valuations rise:
1. Are these companies really worth the $value or Are we entering a fresh phase of a new Tech Bubble?
2. If so, Is this new bubble different from the one that we experienced during last decade?
3. What kind of impact this bubble could create globally, in case it pops?
And there are several industry observations across Economist, BusinessWeek and Wharton such as:
1. Most of these startups or start performers are consumer-centric, technology-based utility companies than creating something foundational / core technology advancing companies [e.g. Clean Tech/Life Sciences]. Simply because the VCs or Investors are not ready to fund those non-populist business proposals. So, in a way, Silicon Valley is morphing like a Hollywood business.
2. The number of startups have increased due to affordable access to computing infrastructure - Cloud Computing (Infrastructure, platform, apps) and Wannabe startups follow the easy route of social networking, recruiting and Advertising.
3. There is a tremendous uncertainty around the revenue stream of these companies. People are willing to place bets on their upside revenue potential in future.
4. These ludicrous valuations could set precedence for unrealistic valuations of startups elsewhere in the globe - be it china or India or Europe. [E.g. Finland's Rovio - Maker of angry birds game - aspires to be next Walt Disney :-) ]
5. These companies typically work around advertising / other services. Hence they dont create many jobs. Certainly, there is a loss of manufacturing or design knowhow in services, as they are built on existing platforms/technologies.
6. Investments on very few companies mean we are not diversifying our risks and we dont have options to fall back.
So, What is the Conclusion?
As Economist says - Wait and watch with caution and Have the Wisdom to sell the stocks before its gets too late! :-) - and start to Invest in companies that create 'Thick Value'. [Value that is meaningful, created authentically and sustainable]
Also for my fellow Enterprise IT colleagues, if you are investing in any of the new age solutions such as enterprise social computing/activity stream or unified communications, make sure you have identified the opportunity/need in your company. And you are not investing just because you are inspired by the stupendous success of these above mentioned web 2.0 companies.
If Techbubble 1.0 promised that dotcoms will replace brick-and-mortar enterprises, Techbubble 2.0 claims that there is goldmine behind people who lead virtual lives in online social habitats.