Bubblicious – Warning, Entrepreneurs! Social media valuation bubble distorts the entire market

Color raises $41M in a series A round with no revenue.  Twitter is valued at $7.7B with $45M  revenue (171 times revenue) in 2010. Facebook is now valued at $65B up 30% over 6 weeks relative to the valuation when Goldman Sachs invested.  Hiring a couple of hot software engineers today is Silicon Valley is the equivalent of the Red Sox signing Adrian Gonzalez and Carl Crawford. Another Internet Bubble: that’s what it looks like to me. The difference this time is that the companies have revenue and might be profitable when they are valued at crazy high valuations.  The predicted IPOs of Groupon and Facebook will be for revenue-generating and profitable companies. Google has proven that high valuations can be sustained. However, a bubble — is still a bubble. Can a photo sharing site that hasn’t launched really need or justify $41M? Facebook was reported to have a trailing price to earning (P/E) ratio of 125 @ a $50B valuation.  Today it … Continue reading →

Bending iron in a facebook world

I like software companies. I really do. In fact, I sit on the board of a software company, consult to another, advise a couple more and I am in the early stages of building a web based business. Super Angels such as Ron Conway are investing into up to four businesses (generally software/social media plays) a month looking for the next facebook or more likely the next company sold to facebook, Google and the like. I spend a lot of my time in a different world running BPG Motors, a start-up that is building a compact self-balancing motorcycle. My team spends their days bending and cutting metal, whirling motors and designing systems that encompass long lead-time parts. Rapid prototyping a product for us usually takes months if not years and not days. This is not a business where you set up a good developer with a case of Coke, and a Mac Book Pro and you get a working demonstration of your product finished … Continue reading →

Web2.0 Businesses, Adam Lambert, pizza parlors, Google

There is no doubt that the Web 2.0 ecosystem has dramatically shrunk the development time to launch a web-based business. My friend Robin Chase has written several blog posts (Web 2.0 is like Yeast: Rampant Growth Possible) recently about just how easy it is to create these businesses. So, my question is, how do investors and entrepreneurs think about Web 2.0 business models? What kind of investor is right for your business? I see three buckets of businesses: 1) The American Idol businesses. Investing in the next face book app, iphone app or web 2.0 idea that takes less than 6 months to develop and has no differentiation other then it is a cool idea. The entrepreneur is hoping for rapid viral adoption like www.fiverr.com. Investing in these businesses is no different than being a talent agent or a record producer. You are betting that the entrepreneur has talent and a hope that you have the next great singer under … Continue reading →