More Investment. Too Much? October 17, 2007
Posted by ianmartinez in : Trends, What's New? , trackbackI noticed an interesting number of items in the media today, new and old, that, taken individually, likely wouldn’t be all that significant. But together, they resonated.
Today’s New York Times says tech investors may be showing signs of irrational exuberance and overvaluing startups.
Consider Facebook, the popular but financially unproven social network, which is reportedly being valued by investors at up to $15 billion. That is nearly half the value of Yahoo, a company with 38 times the number of employees and, based on estimates of Facebook’s income, 32 times the revenue.
Google, which recently surged past $600 a share, is now worth more than I.B.M., a company with eight times the revenue.
More broadly, Internet start-ups are drawing investment based on their ability to build an audience, not bring in revenue — the very alchemy that many say led to the inflation and bursting of the dot-com bubble.
It’s tough language, though there’s no evidence we need to “sell high” just yet. But in light what the early part of this decade saw in tech and telecom, it’s almost worth note.
Meanwhile, TechCrunch today pointed to several interesting venture funding items. New Enterprise Associates and Index Ventures dropped $12.5 million into San Francisco-based weather insurance site WeatherBill. Insurance, risky? High-tech, competitive? Naaah.
Also at TechCrunch, I’m reading that financial planning startup Mint received $4.7 from Shasta Ventures (which led the round), First Round Capital, and angels including Google investor Ram Shriram, and executives from eBay, Intuit, Google, Yahoo, Charles Schwab, Wilson Sonsini, Reuters, Adteractive, and Weblogic/BEA.million for its first round of venture capital. According to Mint CEO Aaron Patzer, Google backer Ram Shriram couldn’t give them money fast enough.
One thing is clear: with all the changing dynamics, it’s good that our industry has achieved, and maintained, a level of regulatory certainty that simply wasn’t the case before. The question remains whether that certainty translates to investment confidence, or cockiness.
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