Rules For The (new) Startup Investment Bubble

This is a guest post by Diego Remus, Editor of Startupi, The Next Women partner in Brazil.

I don?t think every catastrophe generates controversy, nor every controversy catastrophe. But I still can?t find satisfaction in all this current talk about a new startup investment bubble.

I like the facts presented recently by Paul Carr and Sarah Lacy on TechCrunchTV. For them, the growth in value of some startups ? which has become the subject of much speculation in the media ? has not arrived anywhere near what happened at the turn of the century. Check out their video below the fold.�

Finally, a bubble refers to an indiscriminate kind of spending and playing with money. Now, the high value startups (Facebook, Zynga, Twitter, LinkedIn, GroupOn, etc.) have not even had IPOs. Besides this, they show growing profits.

In any case, I found a point of view to defend. Moreover, it?s defensible because it is a perspective shared by former entrepreneur (now university professor), author and mentor of ?lean startups?�Steve Blank.

For Blank, there?s a new phase in world of startups. He says: ?We?re now in the second Internet bubble. The signals are loud and clear: seed and late stage valuations are getting frothy and wacky, and hiring talent in Silicon Valley is the toughest it has been since the dot.com bubble.�The rules for making money are different in a bubble than in normal times. What are they, how do they differ and what can a startup do to take advantage of them??

In a recent post Blank explains the bubble signs and oulines scenarios (read his full analysis�on his website, steveblank.com).

Paths to Liquidity:�a quick history of the four waves of startup investing.

• The Golden Age�(1970 ? 1995):�Build a growing business with a consistently profitable track record (after at least 5 quarters,)�and go public when it?s time.
• Dot.com Bubble�(1995-2000):�?Anything goes? as public markets clamor for ideas, vague promises of future growth, and IPOs happen absent regard for history or profitability.
• Lean Startups/Back to Basics�(2000-2010): No IPO?s, limited VC cash, lack of confidence and funding fuels ?lean startup? era with limited M&A and even less IPO activity.
• The New Bubble:�(2011 ? 2014): Here we go again?.

And�Rules For the New Bubble: 2011 -2014

• Breathtaking Scales�
• The New Exit
• Tools in the new bubble
• Order of battle
• Wide Adoption
  
• Visibility

�

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