Thought-provoking article about what's possibly becoming the next round of "irrational exuberance" - what may become the next dot-com bust ... about which some of the top tech and biz people have been talking - on the same lines - for a while now ...
Seen on the International Herald Tribune:Dot-com fever stirs sense of déjà vu
The article starts off by saying:"Silicon Valley's math is getting fuzzy again.
Internet companies with funny names, little revenue and few customers are commanding high prices."
I like the part about "funny names" - or, in a variation, funnily-spelled names - many of these startup sure do have them. A lot of them seem to be just copying and modifying the names of the few successful ones like Flickr
(one of the first successful ones with such a name (apart from Google
itself :-), maybe hoping that having a similar name might bring them "luck". Go on, do a quick check, how many sites have you seen, whose names end in an 'r' without a preceding 'e'?
Saw a post on, I think TechCrunch or Mashable, recently, about one of these, I think it was Tumblr
, getting a Series-A funding recently; TechCrunch commented - "now they can spend some cash to buy themselves an 'e'".
Good one :-) ... And sites with a double "o" - a la Google of course - or double "e" in the name are even more common :-)
Kidding about them apart, its not so much the often silly sounding names as the lack of an original idea or a business model that seems like it could lead to real revenues and profits - other than the very common one of ads as the revenue model). This is like a teenager trying to act "cool" by being different - the only problem about that is that most often, the teens end up desperately copying each other - or some particular teen - or film star or sports star - so all they're doing, really, is trying to "belong" by looking like a member of some group - not really being individual or creative at all ...
Exactly the same phenomenon seems to be the case with many (though not all) of these startups ... Oddly enough, the last time around, a lot of supposedly level-headed business leader types reportedly got carried away by the frenzy as well - both in the sense of some of them leaving good "old economy" jobs (yes, everyone was calling the dot-com economy "The New Economy" - capitalized, natch - sounds More Important that way :-) and others investing in dot-coms - and then, of course, the vast majority of them "went down with their ships" when the bust came ... that was the time when the acronym B2B took on a new meaning - Back to Bangalore - meaning a lot of Indian techies who were working in the US for dot-coms on H1B visas, were laid off and had to return to India. And all this was just in 2000 and 2001 ...
I'm not against startups and entrepreneurship at all, per se, in fact am strongly in favor of it, in fact - I'm an independent consultant myself - am just voicing my opinion about startups who only do the copycat thing or seem to lack a business model.
I've done tech contract/consulting work to quite a few startups by now, some of them have a good biz/revenue model, others don't seem to have a clear idea where they're coming from or going to ...
The article goes on to describe how its starting to look like a return of the madness of the first dot-com era all over again.
It quotes Tim O'Reilly as saying:"There's definitely a lot of betting going on, and it's not rational," said Tim O'Reilly, a technology conference promoter and book publisher."
And:O'Reilly, who is credited with coining the phrase "Web 2.0," said he thought that Silicon Valley was creating a new set of society-altering tools. But that has not stopped him from worrying that the industry is now minting too many copycat companies, half-baked business plans and overpriced buyouts.
More good points from the article:"Some trace the start of the new bubble to eBay's $3.1 billion acquisition of the Internet telephone startup Skype in 2005. EBay's chief executive, Meg Whitman, reportedly outbid Google for the company. EBay acknowledged this month that it had overpaid for Skype by about $1.43 billion, and Niklas Zennstrom, a Skype co-founder, left the company."
Not exactly a rounding error in the valuation (its almost 50%) ...' When the bubble inevitably pops, he said, "there are going to be a lot of people out of work again." '
In a somewhat contrarian view to its first half, the article goes on to say that people like Marc Andreessen
(one of the creators of the original Netscape browser
) and a few other well-known tech people, think that just getting a large number of subscribers / users for such sites, is itself the main goal, and that the money-making business ideas will "somehow" follow, and make it all work.
Not too sure of that, it might or might not be the case - though there are a few cases, like Amazon, where they went ahead and built a very large user base despite warnings from the "pundits", they also did invest in site scalability, warehouses, logistics for despatch, etc. - not just in getting users. [ And in fact Amazon has now parlayed that site scalability knowhow they built up, into other sites with clear revenue models like Amazon S3 (Simple Storage Service) and Amazon EC2 (Elastic Compute Cloud). ] But overall, its not really that clear if that idea of just getting a lot of users can work or not - I'd say that it should be combined with some way of making money from that user base. Should be interesting to see how it turns out for some of these sites after a year or two ...
I think developers who are considering taking a job with a startup should do a sanity check - ask the management what their product is, what the business model is, how much and by whom they are funded (until they become profitable or get acquired or do an IPO, its their initial funds that are going to pay your salary, buddy).Vasudev Ram