On a recent episode of This Week in Startups, Jason Calacanis had Molly Wood, Reporter at Marketplace and Benedict Evans of Andreesen Horowitz sit down to discuss a number of technological topics, starting off with the much talked about and speculated tech bubble caused by overvalued tech startups.
Jason posited that, in general, the public feels that when "things get really big, I get screwed." However, Benedict Evans, a mobile tech analyst, made a partisan but very logical argument against the public sentiment that more money than ever is being spent on shallow startups and that we're headed towards another dot com bubble.
The Pie is Bigger and It's Relatively Inexpensive to eat
The basic thesis put forth by Evans and his colleagues at Andreesent Horowitz generally goes as follows:
1. Startups are receiving more funding from investors because there is an actual consumer market for their services (which wasn't the case during the Dot Com bubble when much more of the world had little to no internet access).
2. The average size of investment is much smaller now than it was 15 years ago given the the falling costs of running a startup.
Such a perspective is obviously a convienient and rational one for a venture capitalist firm that focuses on tech based investments. However, I believe that as long as we have electricity and the internet, this focus on the market is a good one as the world's consumers are only going to spend more money online.
With much of the exposure in the market being faced by private investors, the stock market and individual public investors are being exposed to relatively little risk from any industry collapse. Moreover, much of the funding being given is at an early seed stage by angels, not by vc firms and not in the larger late stages of funding.
Skeptics forced to sit tight
Much of the suspicion that remains is with regards to the lack of public visibility into these very private deals. Moreover some of these deals involve hedgefund portfolios which include assets as sensitive as pension funds which could affect clueless civilians.
Others are concerned about an artificial economy with little oversight and a large number of small players. Andreesen Horowitz and other investor groups meanwhile see nothing wrong with failure and posit that a high rate of failure is actually pretty natural to business as a whole.
How I feel
I think the moral of the story is that any bubble is probably a ways off but in the end non-investors simply don't know enough to make any definite arguments against the current modus operandi. The public will just have to wait and see...and demand more information of course.
For the whole slideshow by Andreesen Horowitz, [click here]
Medvis Jackson is a web designer at Hindsite, curator at Kulchah and avid cricket fan. You can follow him @medvisjackson for his random thoughts