After the crash in 2001 and the dark days the years after that, the web is filled with opportunistic and enthusiastic entrepreneurs again and series A investments are rising at higher and higher valuations. I hear a lot of people talking about raising money and having meetings with venture capitalists, but in the end not that many get funded.
Let’s take a short look at the bubble in 2001. What exactly crashed anyways? The internet? I don’t think so, we’re all using it more and more everyday, we spend more money on the web and the number of people who have access is also rising at impressive pace. The crash in 2001 didn’t change a thing to the seemingly unstoppable rise of the web.
So what did crash? Well the stock market crashed, meaning that people like you and me lost a lot of money on Webvan, Healtheon, pets.com WorldOnline, etc.. Afterwards dot-com investment funds dried up and people started to work at the companies who survived the Bubble (Google, Amazon, eBay, Yahoo etc.). The Web grew further and a new breed of young entrepreneurs stood up to make the web a better place: Web2.0 was born.
Now companies are acquired or raise money at sometimes disputable valuations, and yes you can see signs with BUBBLE written on the foreheads, but the big difference is that there is no peoples money involved via the stock market. Professional investors pump their money into hot startups, but they are aware of the risks involved and they even know that more than half of their investments will vaporize. A lot less money is involved compared to 7 years ago.
There is another thing, these stories about ridicule valuations and bubble2.0 mainly come from the US. How about Europe? According to Yoav Leitersdorf (YL Ventures) European Startups raise capital for Series A at a valuation anywhere between 500k EUR and 2m EUR, depending on many criteria (traction, technology, hype, etc). So valuations are here still pretty low (in comparison to the US). A lot of entrepreneur I know in Europe are truly in love with the web, have real talents and are passionate about this business.
I don’t think we will see a bubble anytime soon, the Web lives up to its expectations and will continue to do so. As Marc Andreessen said it: “For the first time in history, you have a global market of 1+ billion people, all connected over an interactive network where they’re all a click away from you. That’s amazing.
And 100 million new people are being added to that count every year, and that will continue for the next 30 years”
bubble or not, my guess is that we are only at the beginning of all opportunities and cool stuff that will happen on the web. Of course, tons of money will be thrown away at companies born to fail, but does that make it a bubble?
BTW this is a very funny video on ‘the next bubble’