Tuesday, December 7, 2010

Stock Making Money


Rethinking Money: Breaking Up Currencies

from the different-purposes dept

I remember when I was quite young, my father predicted to me that we'd probably see the end of cash within our lifetimes, as all money would move to electronic money in the form of credit cards (or credit card-like interfaces). Every so often this idea has been discussed, but it usually gets shot down by those who like the anonymity of cash (which is one reason why some governments don't like it). So it's interesting to hear via Slashdot that an Estonian economist is recommending that the country go completely electronic as it adopts the Euro. I would imagine there are some issues with doing so (including the fact that cash and coins from other Eurozone countries would inevitably bleed in).



That said, there have been a few other stories lately that have me thinking about the future of money, and I actually could see a way that countries could move in this general direction without actually getting rid of cash entirely. Last year, we wrote about the question of whether or not the world would move to a single world currency, while simultaneously considering whether or not we'd actually start to see growth in very localized currencies, which are increasingly common in various cities to encourage people to shop locally. Again, neither situation seemed ideal, but were definitely interesting to think about.



Recently, however, Umair Haque wrote up an interesting post, positing that money could be split into three types of currencies which serve three separate functions. The idea is not to break them up by region -- as described above -- but by function. Umair's writeup is a bit opaque, but he notes that currency is used as a store of value, as a medium of exchange and as a unit of account, but those functions can be separated. The end result, would be as follows:


You have three kinds of notes in your wallet. The first you use at the grocery store. The second, at the bank and in the financial markets. The third, between your employer, the state, and public services. Each has very different volatilities and trajectories, because each has very different levels of supply, demand which are, crucially, independent from one another--but interdependent on real wealth, long-run productivity, etc.

Now, this may be difficult to comprehend in the abstract. How would that actually work and why would each have different volatilities and trajectories? Well, the good news is that we actually have a real world example of this. A few weeks back the always excellent Planet Money team at NPR did a wonderful episode on how "fake money" saved Brazil from rampant inflation. The story is fascinating, and I highly recommend listening to it. But, it was basically a simplified version of what Haque is suggesting. Brazil had crazy inflation, so crazy that every day, stores had to remark their entire stock to raise prices, and people would rush ahead of the clerk with the price stickers to get "yesterday's" prices.



The way Brazil "solved" the issue was to effectively issue a made up new currency to handle some functions of money: mainly the unit of account. You couldn't actually get paid in it, or pay with it, but all the goods in all the stores were suddenly priced with it. Then, rather than having to change the prices every day, each day, the government would put out a rate card with the exchange rate, and people would work off of that. Now, you might say this shouldn't make a difference, but it actually did. It got people thinking in terms of the new "stable" rates, and got them past their general distrust of monetary value. (One side note: this upset some of the wealthy, who were simply making a ton in interest -- and they complained about how this new system meant they actually had to innovate and invest to make money -- which reminded me of certain industries in the US who like to avoid innovating and investing themselves...).



Either way, you had a situation where the currency for prices was perfectly stable at the same time the other currency was still dealing with massive inflation. As Haque points out, you have different currencies with different volatility. Eventually, Brazil switched entirely over to this new currency and made the fake currency a real currency, but there's no reason why you couldn't keep multiple currencies, and break them up into a third bucket as well, as Haque suggests.



I can definitely see how there could be some value in doing so, providing a lot more flexibility, and removing certain risk elements. However, I do wonder if the greater level of confusion might be a problem for many, and lead to huge potential arbitrage opportunities, where the more financially sophisticated folks took advantage of much less financially sophisticated individuals, to swap these different levels of currency around. I'm not convinced either way on this, but it does seem fun to think about the possibilities...



32 Comments | Leave a Comment..



The New York Times ran a page one story today about how Silicon Valley appears to be in the midst of a new bubble, driven by the enthusiasm that venture capitalists and angels have for social networking and mobile apps businesses.


It cited the recent reports about how Twitter’s value has been pegged at $4 billion in its rumored round of investment. The story also pointed to the more than $5 billion valuation of Zynga, the creator of social games such as FarmVille on Facebook. And it pointed to Google’s willingness to pay $6 billion for Groupon, which was valued at $1.35 billion only eight months ago. Groupon evidently rejected the offer on Friday because it believes it is worth more.


Other signs, the newspaper said: A new pack of startups are coming in behind: Yammer raised $25 million; Tumblr raised $30 million; GroupMe raised $9 million; and Path raised $2.5 million. Those deals are causing some bearish investors to shake their heads.


The topic of a reinflating bubble has become a popular one at recent events such as the Web 2.0 Summit before Thanksgiving. There, John Doerr, managing director at VC firm Kleiner Perkins Caufield & Byers, said he believes we are in the midst of another tech boom driven by the vast changes in society caused by social networking and mobile technology. Bing Gordon, a partner at Kleiner Perkins, said that the firm hired Wall Street analyst Mary Meeker as part of an attempt to stay on top of the coming internet boom.


Fred Wilson, who was quoted in the New York Times story, wants to throw cold water on the froth. A partner at Union Square Ventures, Wilson had the foresight to invest in Twitter when Kleiner Perkins made the mistake of failing to do so (forcing Kleiner to try to invest now at a much higher valuation). He said in a debate with Doerr at the Web 2.0 Summit that we’re in the midst of a bubble. Angel investor Chris Sacca was also quoted in the Times as saying he has put a freeze on investments until startup valuations come down.


But the paper notes this is not a stock market bubble, since none of the companies mentioned have gone public. They’re raising big rounds from venture capitalists. Then they raise even larger secondary rounds from big private equity investors such as DST. Those investments allow them to keep growing their businesses without going public. And the outcome for many of these companies is to be acquired by the likes of Cisco, Intel, Microsoft, Google, or Apple. Those companies are sitting on mountains of cash. If the stock market crashes, those acquirers will be hurt as will the valuations of startups, but the acquisitions will probably continue.


Another difference is that in the age of Web 2.0, web-based companies are able to amass audiences very quickly — Zynga has more than 215 million monthly active users for its games even though it is just shy of four years old — and become profitable early on. By contrast, startups such as Pets.com in the frothy days of the dotcom bubble had no chance of making money. Angel investors are feeling the heat because they are getting priced out of a lot of early-stage deals as venture capitalists try harder to find “the next Facebook” earlier.


Which side of the fence are you on? The bears may eventually be right. But they may also miss out on a lot of money-making in the meantime if they sit on the sidelines of this latest gold rush. Please take our poll and comment on why you voted the way you did.



Next Story: WikiLeaks documents lay bare vast hacking attempts by Chinese leaders Previous Story: Week in review: Amazon takes down Wikileaks





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Facebook Profile Changes: More Media Play Than <b>News</b>?

Facebook sure has arrived when it comes to the traditional media set as it used 60 Minutes (in more ways ...

Denver Broncos <b>News</b>: Horse Tracks - 12/7/10 - Mile High Report

Your Daily Cup Of Orange and Blue Coffee - Horse Tracks!

This Week in Credit Card <b>News</b> - MoneyBuilder - making sense of <b>...</b>

Provided by LowCards.com More Than Eight Million People Drop Out of Credit Card Use More than eight million consumers stopped using credit cards over the past year, according to a new study by TransUnion. The use of general purpose ...



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Facebook Profile Changes: More Media Play Than <b>News</b>?

Facebook sure has arrived when it comes to the traditional media set as it used 60 Minutes (in more ways ...

Denver Broncos <b>News</b>: Horse Tracks - 12/7/10 - Mile High Report

Your Daily Cup Of Orange and Blue Coffee - Horse Tracks!

This Week in Credit Card <b>News</b> - MoneyBuilder - making sense of <b>...</b>

Provided by LowCards.com More Than Eight Million People Drop Out of Credit Card Use More than eight million consumers stopped using credit cards over the past year, according to a new study by TransUnion. The use of general purpose ...



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Facebook Profile Changes: More Media Play Than <b>News</b>?

Facebook sure has arrived when it comes to the traditional media set as it used 60 Minutes (in more ways ...

Denver Broncos <b>News</b>: Horse Tracks - 12/7/10 - Mile High Report

Your Daily Cup Of Orange and Blue Coffee - Horse Tracks!

This Week in Credit Card <b>News</b> - MoneyBuilder - making sense of <b>...</b>

Provided by LowCards.com More Than Eight Million People Drop Out of Credit Card Use More than eight million consumers stopped using credit cards over the past year, according to a new study by TransUnion. The use of general purpose ...



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Facebook Profile Changes: More Media Play Than <b>News</b>?

Facebook sure has arrived when it comes to the traditional media set as it used 60 Minutes (in more ways ...

Denver Broncos <b>News</b>: Horse Tracks - 12/7/10 - Mile High Report

Your Daily Cup Of Orange and Blue Coffee - Horse Tracks!

This Week in Credit Card <b>News</b> - MoneyBuilder - making sense of <b>...</b>

Provided by LowCards.com More Than Eight Million People Drop Out of Credit Card Use More than eight million consumers stopped using credit cards over the past year, according to a new study by TransUnion. The use of general purpose ...



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Facebook Profile Changes: More Media Play Than <b>News</b>?

Facebook sure has arrived when it comes to the traditional media set as it used 60 Minutes (in more ways ...

Denver Broncos <b>News</b>: Horse Tracks - 12/7/10 - Mile High Report

Your Daily Cup Of Orange and Blue Coffee - Horse Tracks!

This Week in Credit Card <b>News</b> - MoneyBuilder - making sense of <b>...</b>

Provided by LowCards.com More Than Eight Million People Drop Out of Credit Card Use More than eight million consumers stopped using credit cards over the past year, according to a new study by TransUnion. The use of general purpose ...



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Rethinking Money: Breaking Up Currencies

from the different-purposes dept

I remember when I was quite young, my father predicted to me that we'd probably see the end of cash within our lifetimes, as all money would move to electronic money in the form of credit cards (or credit card-like interfaces). Every so often this idea has been discussed, but it usually gets shot down by those who like the anonymity of cash (which is one reason why some governments don't like it). So it's interesting to hear via Slashdot that an Estonian economist is recommending that the country go completely electronic as it adopts the Euro. I would imagine there are some issues with doing so (including the fact that cash and coins from other Eurozone countries would inevitably bleed in).



That said, there have been a few other stories lately that have me thinking about the future of money, and I actually could see a way that countries could move in this general direction without actually getting rid of cash entirely. Last year, we wrote about the question of whether or not the world would move to a single world currency, while simultaneously considering whether or not we'd actually start to see growth in very localized currencies, which are increasingly common in various cities to encourage people to shop locally. Again, neither situation seemed ideal, but were definitely interesting to think about.



Recently, however, Umair Haque wrote up an interesting post, positing that money could be split into three types of currencies which serve three separate functions. The idea is not to break them up by region -- as described above -- but by function. Umair's writeup is a bit opaque, but he notes that currency is used as a store of value, as a medium of exchange and as a unit of account, but those functions can be separated. The end result, would be as follows:


You have three kinds of notes in your wallet. The first you use at the grocery store. The second, at the bank and in the financial markets. The third, between your employer, the state, and public services. Each has very different volatilities and trajectories, because each has very different levels of supply, demand which are, crucially, independent from one another--but interdependent on real wealth, long-run productivity, etc.

Now, this may be difficult to comprehend in the abstract. How would that actually work and why would each have different volatilities and trajectories? Well, the good news is that we actually have a real world example of this. A few weeks back the always excellent Planet Money team at NPR did a wonderful episode on how "fake money" saved Brazil from rampant inflation. The story is fascinating, and I highly recommend listening to it. But, it was basically a simplified version of what Haque is suggesting. Brazil had crazy inflation, so crazy that every day, stores had to remark their entire stock to raise prices, and people would rush ahead of the clerk with the price stickers to get "yesterday's" prices.



The way Brazil "solved" the issue was to effectively issue a made up new currency to handle some functions of money: mainly the unit of account. You couldn't actually get paid in it, or pay with it, but all the goods in all the stores were suddenly priced with it. Then, rather than having to change the prices every day, each day, the government would put out a rate card with the exchange rate, and people would work off of that. Now, you might say this shouldn't make a difference, but it actually did. It got people thinking in terms of the new "stable" rates, and got them past their general distrust of monetary value. (One side note: this upset some of the wealthy, who were simply making a ton in interest -- and they complained about how this new system meant they actually had to innovate and invest to make money -- which reminded me of certain industries in the US who like to avoid innovating and investing themselves...).



Either way, you had a situation where the currency for prices was perfectly stable at the same time the other currency was still dealing with massive inflation. As Haque points out, you have different currencies with different volatility. Eventually, Brazil switched entirely over to this new currency and made the fake currency a real currency, but there's no reason why you couldn't keep multiple currencies, and break them up into a third bucket as well, as Haque suggests.



I can definitely see how there could be some value in doing so, providing a lot more flexibility, and removing certain risk elements. However, I do wonder if the greater level of confusion might be a problem for many, and lead to huge potential arbitrage opportunities, where the more financially sophisticated folks took advantage of much less financially sophisticated individuals, to swap these different levels of currency around. I'm not convinced either way on this, but it does seem fun to think about the possibilities...



32 Comments | Leave a Comment..



The New York Times ran a page one story today about how Silicon Valley appears to be in the midst of a new bubble, driven by the enthusiasm that venture capitalists and angels have for social networking and mobile apps businesses.


It cited the recent reports about how Twitter’s value has been pegged at $4 billion in its rumored round of investment. The story also pointed to the more than $5 billion valuation of Zynga, the creator of social games such as FarmVille on Facebook. And it pointed to Google’s willingness to pay $6 billion for Groupon, which was valued at $1.35 billion only eight months ago. Groupon evidently rejected the offer on Friday because it believes it is worth more.


Other signs, the newspaper said: A new pack of startups are coming in behind: Yammer raised $25 million; Tumblr raised $30 million; GroupMe raised $9 million; and Path raised $2.5 million. Those deals are causing some bearish investors to shake their heads.


The topic of a reinflating bubble has become a popular one at recent events such as the Web 2.0 Summit before Thanksgiving. There, John Doerr, managing director at VC firm Kleiner Perkins Caufield & Byers, said he believes we are in the midst of another tech boom driven by the vast changes in society caused by social networking and mobile technology. Bing Gordon, a partner at Kleiner Perkins, said that the firm hired Wall Street analyst Mary Meeker as part of an attempt to stay on top of the coming internet boom.


Fred Wilson, who was quoted in the New York Times story, wants to throw cold water on the froth. A partner at Union Square Ventures, Wilson had the foresight to invest in Twitter when Kleiner Perkins made the mistake of failing to do so (forcing Kleiner to try to invest now at a much higher valuation). He said in a debate with Doerr at the Web 2.0 Summit that we’re in the midst of a bubble. Angel investor Chris Sacca was also quoted in the Times as saying he has put a freeze on investments until startup valuations come down.


But the paper notes this is not a stock market bubble, since none of the companies mentioned have gone public. They’re raising big rounds from venture capitalists. Then they raise even larger secondary rounds from big private equity investors such as DST. Those investments allow them to keep growing their businesses without going public. And the outcome for many of these companies is to be acquired by the likes of Cisco, Intel, Microsoft, Google, or Apple. Those companies are sitting on mountains of cash. If the stock market crashes, those acquirers will be hurt as will the valuations of startups, but the acquisitions will probably continue.


Another difference is that in the age of Web 2.0, web-based companies are able to amass audiences very quickly — Zynga has more than 215 million monthly active users for its games even though it is just shy of four years old — and become profitable early on. By contrast, startups such as Pets.com in the frothy days of the dotcom bubble had no chance of making money. Angel investors are feeling the heat because they are getting priced out of a lot of early-stage deals as venture capitalists try harder to find “the next Facebook” earlier.


Which side of the fence are you on? The bears may eventually be right. But they may also miss out on a lot of money-making in the meantime if they sit on the sidelines of this latest gold rush. Please take our poll and comment on why you voted the way you did.



Next Story: WikiLeaks documents lay bare vast hacking attempts by Chinese leaders Previous Story: Week in review: Amazon takes down Wikileaks





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Facebook Profile Changes: More Media Play Than <b>News</b>?

Facebook sure has arrived when it comes to the traditional media set as it used 60 Minutes (in more ways ...

Denver Broncos <b>News</b>: Horse Tracks - 12/7/10 - Mile High Report

Your Daily Cup Of Orange and Blue Coffee - Horse Tracks!

This Week in Credit Card <b>News</b> - MoneyBuilder - making sense of <b>...</b>

Provided by LowCards.com More Than Eight Million People Drop Out of Credit Card Use More than eight million consumers stopped using credit cards over the past year, according to a new study by TransUnion. The use of general purpose ...



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Facebook Profile Changes: More Media Play Than <b>News</b>?

Facebook sure has arrived when it comes to the traditional media set as it used 60 Minutes (in more ways ...

Denver Broncos <b>News</b>: Horse Tracks - 12/7/10 - Mile High Report

Your Daily Cup Of Orange and Blue Coffee - Horse Tracks!

This Week in Credit Card <b>News</b> - MoneyBuilder - making sense of <b>...</b>

Provided by LowCards.com More Than Eight Million People Drop Out of Credit Card Use More than eight million consumers stopped using credit cards over the past year, according to a new study by TransUnion. The use of general purpose ...



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Facebook Profile Changes: More Media Play Than <b>News</b>?

Facebook sure has arrived when it comes to the traditional media set as it used 60 Minutes (in more ways ...

Denver Broncos <b>News</b>: Horse Tracks - 12/7/10 - Mile High Report

Your Daily Cup Of Orange and Blue Coffee - Horse Tracks!

This Week in Credit Card <b>News</b> - MoneyBuilder - making sense of <b>...</b>

Provided by LowCards.com More Than Eight Million People Drop Out of Credit Card Use More than eight million consumers stopped using credit cards over the past year, according to a new study by TransUnion. The use of general purpose ...



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Facebook Profile Changes: More Media Play Than <b>News</b>?

Facebook sure has arrived when it comes to the traditional media set as it used 60 Minutes (in more ways ...

Denver Broncos <b>News</b>: Horse Tracks - 12/7/10 - Mile High Report

Your Daily Cup Of Orange and Blue Coffee - Horse Tracks!

This Week in Credit Card <b>News</b> - MoneyBuilder - making sense of <b>...</b>

Provided by LowCards.com More Than Eight Million People Drop Out of Credit Card Use More than eight million consumers stopped using credit cards over the past year, according to a new study by TransUnion. The use of general purpose ...



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Facebook Profile Changes: More Media Play Than <b>News</b>?

Facebook sure has arrived when it comes to the traditional media set as it used 60 Minutes (in more ways ...

Denver Broncos <b>News</b>: Horse Tracks - 12/7/10 - Mile High Report

Your Daily Cup Of Orange and Blue Coffee - Horse Tracks!

This Week in Credit Card <b>News</b> - MoneyBuilder - making sense of <b>...</b>

Provided by LowCards.com More Than Eight Million People Drop Out of Credit Card Use More than eight million consumers stopped using credit cards over the past year, according to a new study by TransUnion. The use of general purpose ...



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Facebook Profile Changes: More Media Play Than <b>News</b>?

Facebook sure has arrived when it comes to the traditional media set as it used 60 Minutes (in more ways ...

Denver Broncos <b>News</b>: Horse Tracks - 12/7/10 - Mile High Report

Your Daily Cup Of Orange and Blue Coffee - Horse Tracks!

This Week in Credit Card <b>News</b> - MoneyBuilder - making sense of <b>...</b>

Provided by LowCards.com More Than Eight Million People Drop Out of Credit Card Use More than eight million consumers stopped using credit cards over the past year, according to a new study by TransUnion. The use of general purpose ...



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Rethinking Money: Breaking Up Currencies

from the different-purposes dept

I remember when I was quite young, my father predicted to me that we'd probably see the end of cash within our lifetimes, as all money would move to electronic money in the form of credit cards (or credit card-like interfaces). Every so often this idea has been discussed, but it usually gets shot down by those who like the anonymity of cash (which is one reason why some governments don't like it). So it's interesting to hear via Slashdot that an Estonian economist is recommending that the country go completely electronic as it adopts the Euro. I would imagine there are some issues with doing so (including the fact that cash and coins from other Eurozone countries would inevitably bleed in).



That said, there have been a few other stories lately that have me thinking about the future of money, and I actually could see a way that countries could move in this general direction without actually getting rid of cash entirely. Last year, we wrote about the question of whether or not the world would move to a single world currency, while simultaneously considering whether or not we'd actually start to see growth in very localized currencies, which are increasingly common in various cities to encourage people to shop locally. Again, neither situation seemed ideal, but were definitely interesting to think about.



Recently, however, Umair Haque wrote up an interesting post, positing that money could be split into three types of currencies which serve three separate functions. The idea is not to break them up by region -- as described above -- but by function. Umair's writeup is a bit opaque, but he notes that currency is used as a store of value, as a medium of exchange and as a unit of account, but those functions can be separated. The end result, would be as follows:


You have three kinds of notes in your wallet. The first you use at the grocery store. The second, at the bank and in the financial markets. The third, between your employer, the state, and public services. Each has very different volatilities and trajectories, because each has very different levels of supply, demand which are, crucially, independent from one another--but interdependent on real wealth, long-run productivity, etc.

Now, this may be difficult to comprehend in the abstract. How would that actually work and why would each have different volatilities and trajectories? Well, the good news is that we actually have a real world example of this. A few weeks back the always excellent Planet Money team at NPR did a wonderful episode on how "fake money" saved Brazil from rampant inflation. The story is fascinating, and I highly recommend listening to it. But, it was basically a simplified version of what Haque is suggesting. Brazil had crazy inflation, so crazy that every day, stores had to remark their entire stock to raise prices, and people would rush ahead of the clerk with the price stickers to get "yesterday's" prices.



The way Brazil "solved" the issue was to effectively issue a made up new currency to handle some functions of money: mainly the unit of account. You couldn't actually get paid in it, or pay with it, but all the goods in all the stores were suddenly priced with it. Then, rather than having to change the prices every day, each day, the government would put out a rate card with the exchange rate, and people would work off of that. Now, you might say this shouldn't make a difference, but it actually did. It got people thinking in terms of the new "stable" rates, and got them past their general distrust of monetary value. (One side note: this upset some of the wealthy, who were simply making a ton in interest -- and they complained about how this new system meant they actually had to innovate and invest to make money -- which reminded me of certain industries in the US who like to avoid innovating and investing themselves...).



Either way, you had a situation where the currency for prices was perfectly stable at the same time the other currency was still dealing with massive inflation. As Haque points out, you have different currencies with different volatility. Eventually, Brazil switched entirely over to this new currency and made the fake currency a real currency, but there's no reason why you couldn't keep multiple currencies, and break them up into a third bucket as well, as Haque suggests.



I can definitely see how there could be some value in doing so, providing a lot more flexibility, and removing certain risk elements. However, I do wonder if the greater level of confusion might be a problem for many, and lead to huge potential arbitrage opportunities, where the more financially sophisticated folks took advantage of much less financially sophisticated individuals, to swap these different levels of currency around. I'm not convinced either way on this, but it does seem fun to think about the possibilities...



32 Comments | Leave a Comment..



The New York Times ran a page one story today about how Silicon Valley appears to be in the midst of a new bubble, driven by the enthusiasm that venture capitalists and angels have for social networking and mobile apps businesses.


It cited the recent reports about how Twitter’s value has been pegged at $4 billion in its rumored round of investment. The story also pointed to the more than $5 billion valuation of Zynga, the creator of social games such as FarmVille on Facebook. And it pointed to Google’s willingness to pay $6 billion for Groupon, which was valued at $1.35 billion only eight months ago. Groupon evidently rejected the offer on Friday because it believes it is worth more.


Other signs, the newspaper said: A new pack of startups are coming in behind: Yammer raised $25 million; Tumblr raised $30 million; GroupMe raised $9 million; and Path raised $2.5 million. Those deals are causing some bearish investors to shake their heads.


The topic of a reinflating bubble has become a popular one at recent events such as the Web 2.0 Summit before Thanksgiving. There, John Doerr, managing director at VC firm Kleiner Perkins Caufield & Byers, said he believes we are in the midst of another tech boom driven by the vast changes in society caused by social networking and mobile technology. Bing Gordon, a partner at Kleiner Perkins, said that the firm hired Wall Street analyst Mary Meeker as part of an attempt to stay on top of the coming internet boom.


Fred Wilson, who was quoted in the New York Times story, wants to throw cold water on the froth. A partner at Union Square Ventures, Wilson had the foresight to invest in Twitter when Kleiner Perkins made the mistake of failing to do so (forcing Kleiner to try to invest now at a much higher valuation). He said in a debate with Doerr at the Web 2.0 Summit that we’re in the midst of a bubble. Angel investor Chris Sacca was also quoted in the Times as saying he has put a freeze on investments until startup valuations come down.


But the paper notes this is not a stock market bubble, since none of the companies mentioned have gone public. They’re raising big rounds from venture capitalists. Then they raise even larger secondary rounds from big private equity investors such as DST. Those investments allow them to keep growing their businesses without going public. And the outcome for many of these companies is to be acquired by the likes of Cisco, Intel, Microsoft, Google, or Apple. Those companies are sitting on mountains of cash. If the stock market crashes, those acquirers will be hurt as will the valuations of startups, but the acquisitions will probably continue.


Another difference is that in the age of Web 2.0, web-based companies are able to amass audiences very quickly — Zynga has more than 215 million monthly active users for its games even though it is just shy of four years old — and become profitable early on. By contrast, startups such as Pets.com in the frothy days of the dotcom bubble had no chance of making money. Angel investors are feeling the heat because they are getting priced out of a lot of early-stage deals as venture capitalists try harder to find “the next Facebook” earlier.


Which side of the fence are you on? The bears may eventually be right. But they may also miss out on a lot of money-making in the meantime if they sit on the sidelines of this latest gold rush. Please take our poll and comment on why you voted the way you did.



Next Story: WikiLeaks documents lay bare vast hacking attempts by Chinese leaders Previous Story: Week in review: Amazon takes down Wikileaks





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Facebook Profile Changes: More Media Play Than <b>News</b>?

Facebook sure has arrived when it comes to the traditional media set as it used 60 Minutes (in more ways ...

Denver Broncos <b>News</b>: Horse Tracks - 12/7/10 - Mile High Report

Your Daily Cup Of Orange and Blue Coffee - Horse Tracks!

This Week in Credit Card <b>News</b> - MoneyBuilder - making sense of <b>...</b>

Provided by LowCards.com More Than Eight Million People Drop Out of Credit Card Use More than eight million consumers stopped using credit cards over the past year, according to a new study by TransUnion. The use of general purpose ...



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Facebook Profile Changes: More Media Play Than <b>News</b>?

Facebook sure has arrived when it comes to the traditional media set as it used 60 Minutes (in more ways ...

Denver Broncos <b>News</b>: Horse Tracks - 12/7/10 - Mile High Report

Your Daily Cup Of Orange and Blue Coffee - Horse Tracks!

This Week in Credit Card <b>News</b> - MoneyBuilder - making sense of <b>...</b>

Provided by LowCards.com More Than Eight Million People Drop Out of Credit Card Use More than eight million consumers stopped using credit cards over the past year, according to a new study by TransUnion. The use of general purpose ...



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Facebook Profile Changes: More Media Play Than <b>News</b>?

Facebook sure has arrived when it comes to the traditional media set as it used 60 Minutes (in more ways ...

Denver Broncos <b>News</b>: Horse Tracks - 12/7/10 - Mile High Report

Your Daily Cup Of Orange and Blue Coffee - Horse Tracks!

This Week in Credit Card <b>News</b> - MoneyBuilder - making sense of <b>...</b>

Provided by LowCards.com More Than Eight Million People Drop Out of Credit Card Use More than eight million consumers stopped using credit cards over the past year, according to a new study by TransUnion. The use of general purpose ...



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