Wednesday, 24 August 2011
It's Getting Cold Outside
Within the last two weeks, billions of pounds were wiped off the financial equity markets, volatility hit record highs, technology IPOs went through controlled delays (e.g. Zynga), and hot tech startups are beginning to show cracks (e.g. Groupon). This sharp contrast from 6 months ago, as well as valuation multiples that no financial analyst we respect can justify, is enough evidence to us that not only are we in a bubble but it is about to pop. We are not calling for panic. It is simply a warning shot to all tech entrepreneurs with businesses that have questionable or non-revenue-generating business models to return to the drawing board before it becomes too late.
There will be survivors: Google, Amazon, Lastminute.com and a handful of others rode out the last dot com boom. Boo.com, Pets.com and many more were crushed by the waves. History is there to learn from. There will always be venture capital funding for first class teams, with exceptional startups, who comprehend from day zero that they need to create a world-class business.
By our estimate, this Winter could be particularly chilly for the technology startup scene. Batten down the hatches - the storms are coming.