A while back, I had a conversation with a friend of mine about startups and venture capital and the topic of whether we are currently in a bubble or not came up. After the call, I emailed him some notes of several blog posts I recently read by some well respected Venture Capitalists and Investors. I decided to repost here as well.
So are we in a bubble?
If I tried to summarize:
- Sam says no, there’s not the irrationality,
- Brad is more cynical and thinks he’s seeing the bubble signs,
- Paul doesn’t care but knows about the macro level implications for raising money as a startup,
- Marc says were in a bubble but we’ll be fine, and
- Ben says no, and he'll bet anyone all his money that the Nasdaq will not go down 80% in the next 5-years.
Here's the links from the VC blogs:
- Sam Altman from YCombinator: Bubble Talk
- Brad Feld from Foundry Group / TechStars: The Beginning of the End or the End of the Beginning
- Marc Suster from Upfront Ventures (2011 post): On Bubbles.. and Why We’ll be Just Fine
- Paul Graham founder of YCombinator: He answers a Question in the Startup Class (lecture 3) (skip to: 36:22 and ignore his scathing remark to the one who asked the bubble question… this was a startup class in which that is a completely irrelevant query, hence his outburst.. but stick around after and for about 180 seconds he talks about his experience in the dot com bubble and how the irrationality that existed then does not exist now…) But in general he says “Prices are high, valuations are high, but that does not mean we’re in a bubble.” Listen until 37:51 when he talks about China’s economy exploding as an analogy of if the worst would happen (which is rather ironic considering the 500+ point dip in the Dow recently and China’s volatile stock markets of late).
Ben Horowitz chimed in during a Product Hunt Live Chat on this question
Bubble schumble. While I believe macro economic and geo-political concerns do matter, they matter less to the startup that's building product, bootstrapping, and/or recently raised money. It means a lot more when you're a startup looking to raise money now and the markets have tanked. If there is pervasive fear and risk aversion, then capital will dry up and investors will seek security (bonds, gold) over higher-yielding returns (stocks, venture deals). I generally follow the markets (much less then I did when I worked full time in Banking), but I read a lot more about startups and building products then I do the economy. If you're a startup founder, I suggest you do the same.