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Boom or Bubble?

BOOM or BUBBLE? LET'S LOOK AT THE DATA Rampant speculation. Overvaluation. Unrealistic growth expectations. With such language being used to describe current market conditions we can't help but wonder-are we headed for another Dot-Com bubble? Here's the data so you can decide for yourself. VENTURE INVESTMENT IN TECH COMPANIES 1995-2011 Source: PWC/NVCA Moneytree report Although it may seem that recently (2009-2011) startups haven't had problems raising capital, the level of venture investment currently pales in comparison to levels during the .com bubble. A lot of people are talking about an early stage bubble, but even in early stage deals, we're nowhere near the .com bubble. Peak - 1Q 200o $27 billion 1 QUOTABLE "There is, in my opinion, a bubble in the earlier stages, where companies that don't even have products yet are raising tens of millions of dollars" $9 в THERESIA RANZETTA (Accel Partners) Overall investment - Early stage investment $6.8 B $4.5 B In addition to the stock market and overall tech investment bubbles, financial markets also experienced a bubble in early stage (seed) investments. $2.3 B $o '95 €o, '04 '05 '06 '07 01, 60, 80, Q2 '11 96, L6, 86, 66, 0o, zo, NUMBER OF TECH IPOS BY YEAR 1997-2011 IPO = initial public offering Source: Renaissance Capital Even with the seemingly high number of recent tech IPOS, historical data suggests that the number of current tech IPOS is drastically smaller than during the .com bubble. PRICELINE.COM • IPO: 3/1999 • $483 per share • Opening day market cap: $28 BUY.COM . IPO: 1/2000 • $13 per share Opening day market cap: $28 SHUTTERFLY 308 LinkedIn • IPO: 9/2006 • $15 per share • Opening day market cap: $35OM GOOGLE • IPO: 8/2004 • 585 per share • Opening day market cap: $230 • IPO: 5/2011 • $45 per share • Opening day market cap: $8n 221 90 61 58 49 32 35 19 19 15 17 25 '01 "04 'os '10 Q2 '11 90, 80, L6, zo, 86, Lo, 66, 0, €o, б0, Bubble Bubble? During '98, '99, and 'oo there were a total of 619 tech IPOS During 'o9, '10, and Q2 '11 there were 84 tech IPOS. THE NASDAQ 100 INDEX 1995-2011 Source: Yahool Finance When most people think of the .com bubble of the 9o's, they think of the giant run-up in tech stocks. The pace at which the Nasdaq 100 index shot up (1ox in 4 years) was impressive and every individual investor wanted a piece of the action. Fortunately we don't seem to be approaching the craziness of that time. TECH BUBBLE TRIVIA The Dot-Com Bubble bursts $5 TRILLION 4816 is sold for $7.5 million The Stock Market Crash of 2000-2002 caused the loss of $5 trillion in the market value of companies (3/2000 to 8/2002). 3717 Microsoft declared a monopoly by US District Judge There are 20 million websites on the Internet-twice the number Another bubble? of websites 6 months prior Netscape and Microsoft share almost 100% of Apple surpasses one billion ITunes downloads 2618 browser market launches 1519 Windows 95 released 420 1995 1997 1999 2001 2003 2005 2007 2009 Q2 2011 BIGGEST FAILURES OF THE DOT COM BUBBLE Source: Wikipedia Below are some of the biggest com bubble failures. These companies raised a lot of money, but they failed in spectacular fashion- sometimes in as little as a year. They had incredible offices, threw lavish parties, and generously paid their employees. They did not, however, have a market of customers wanting their product. DOT COM BUBBLE FAILURES RELATIVE AMOUNT OF CAPITAL RAISED RAISED A SIMILAR AMOUNT AS TESLA MOTORS Webvan Founded: 1999 Bankrupt: 2001 $830 milion better place $790 million Founded: 1995 Bankrupt: 2001 twitter PayByTouch Founded: 2003 Bankrupt: 2008 $340 million kozmo com GILT Founded: 1998 Bankrupt: 2001 $280 million GROUPE eToys .com KAYAK Founded: 1999 Bankrupt: 2000 $220 million All PayPal AlIAdvantage Founded: 1999 Bankrupt: 2000 $200 million O Palantir CueCat Founded: 1998 Bankrupt: 2001 $185 million Bai du B Founded: 1998 Bankrupt: 2000 $135 million event brite Founded: 1998 Bankrupt: 2000 $82.5 million flooz yelp3 Founded: 1999 Bankrupt: 2001 $so million * Still operating, but $790M has been written off THE CURRENT INTERNET HOTTIES (2011) Sorted (in descending order) by relative valuation Source: Wikipedia, S-1 Filings Unlike the com busts (above), the companies below (for the most part) have actual revenue and provide services that people want. RELATIVE VALUATION (2011) RELATIVE REVENUE (2010) CURRENT HOTTIES REVENUE MULTIPLE SAME MARKET CAP AS Goldman Sachs facebook. 37-5X $75 billion $2 billion BEST BUY GROUPON 26х $13 billion $800 million Azynga WHOLE FOODS 40x $10 billion $850 million Linked in 37X TIFFANY & CO. ....... ........... $9 billion $243 million skype 9.8x SOUTHWEST $8.5 bilion $860 million twitter 55X MOLSON Coors $150 million $8.5 billion REVENUE PER USER Company revenue (2010) divided by the number of users Linked in Azynga skype twitter facebook. GROUPON $0.50 $2.40 $3.40 $4 $5.10 $16 WORLDWIDE INTERNET PENETRATION 1996-2011 Today, tech companies have access to a relatively large pool of potential customers-something that the tech companies of the .com bubble didn't have. Source: Internet world stats r NUMBER OF INTERNET USERS (in millions) The number of people without toilets is equal to the number of total internet users 2011. 2160 TECH BUBBLE TRIVIA 1800 10 TIMES In 2010, there were 10 times the number of internet users there were in 2000. The current population of China (201) is equal Internet users there were in 2007. to the number of total 1440 1080 The number of people with cars (2011) is equal to the number of total internet users there were in 2003. 720 The current number of active Facebook users (2011) is equal to the number of total internet users there were in 2002. 360 The current number of iPhone owners (2011) is equal to the number of total internet users there were in 1997. 00, '01 €o, '04 '05 '06 б0, '10 '11 zo, Lo, 96, L6, в6, 66, 80, DESIGNED BY IN PARTNERSHIP WITH AKISSmetrics FEZ FIGHTERS %24

Boom or Bubble?

shared by smohnot on Aug 06
1 comment
A close look at the data - are we in a boom? or is it merely a bubble about to pop?


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