( Via AlwaysOn) Tom Evslin writes, Vonage has just raised an awesome $200 million in additional venture capital. Skype has built a huge networks of users, most of whom contribute nothing to the company’s coffers; but Skype is rumored to have turned down nine digit buyout offers. New companies are forming around new paradigms like the blogosphere, tagging, folksonomy, podcasting and search term optimization. Today seed as well as venture money is available. Irrational exuberance is back! For Tom - That’s good news as nothing great is achieved without irrational exuberance. Excerpts with heavy edits:
For Tom, "reasonable rational people don’t create or fund breakthroughs; they fund proven technologies and yesterday’s winners". They are absolutely needed to take over at the point where entrepreneurs lose interest and run past the limits of their competence. If the world were left just to entrepreneurs and intrepid early stage investors, all their breakthroughs would be wasted for want of competent management to bring their innovations to scale and commercial viability. The bubbles look different. A very important difference between today’s bubble and the dot com bubble is the lack of early-stage IPOs. The great IPO success story is Google which had significant revenues and profits before going public. Vonage and Skype look like being funded in private and ay not go public soon.
Bubble One saw companies routinely going public without being profitable & in some cases without revenues. Enterprises needed to take public IPO route as they needed to be one up on competition and to attract and retain talent. The things needed to run a public company – including the time required by the basic regulatory requirements – are at odds with what is needed to build a new business based on a new paradigm. Public investors want predictability. It is hard for established companies with huge momentum, known customers, known processes, and known markets to predict their performance. It is simply impossible for start-ups. Some start-ups which aren’t yet grown-ups are now going private to avoid some of these burdens.
So the hope is that, since Internet Bubble Two is so soon after Internet Bubble One, we should see deferred IPO fever. Startups will be able to do a better job of company building if they do it on private capital than if they go public before profitability. They will gain by being able to discuss their plans privately with their private investors and still being free to change those plans more dynamically. They can focus on their customers and competitors and not on "the Street". In short they can learn from their mistakes rather than defending them.
Category : Bubble