May 7, 2012

A summary: Do we have a new tech bubble or not?

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 Yes! We do have a tech bubble

  • The online game company Zynga used to be valued at $15-20 billion - as much as the combined value of the world's two biggest video-game makers Electronic Arts and Activision Blizzard - while having a weak business model.
  • 60 percent of the Internet companies that have gone public since 2010 are trading below offer price and buyers of the shares at their opening trade in the public market have lost an average of 32 percent. This could also be a sign that we don't have a tech bubble depending on your view of it.
  • Facebook has about 1 billion users and is valued at $100 billion - one user is worth $100. This doesn't have to mean that a smaller company with less users can value their company at $100 per user.
  • Smaller companies are getting investments from investors because they are desperately trying to find the next Facebook. The investors also have too much money so they don't know what else to do with it, except investing it in companies with business models they don't really like.
  • Investors have begun to prefer companies making no money - because it is easier to sell them to someone else at higher values - compared with companies making some money. It is easier to sell a vision if the company doesn't make any money at all.
  • Free is a dangerous business model. A company has to make cash. Many companies have plenty of users - but almost no earnings - and their goal is to sell some kind of user-behavior-information to other companies. For example, Pandora have 100 million users, but no earnings and the plan is to sell information about those users to other companies. But no-one knows how much money that type of information is worth - could it be zero?
  • Quotes like: "P/E ratio is a flawed metric to use when talking about what some of these new startups are worth." have started to appear. Isn't that exactly what everyone said during the last tech bubble? "This time is different - we don't need those silly accounting metrics anymore"
  • The Swedish newspaper SvD has created a special blog with the name "Silicon Valley" covering only tech companies

No! We don't have a tech bubble

  • Zynga and its games are actually becoming consumer brands, and there is a lot of recognition for growth potential.
  • Large tech companies are not over-valued: 
    • Apple (14 P/E) 
    • Google (18 P/E)
    • eBay (16 P/E)
    • Yahoo (17 P/E)
  • Facebook bought Instagram for $1 billion - but Instagram was also Facebook's largest competitor
  • While it is easy for smaller companies to find investments, it is harder for larger companies.
  • Media are reporting about the "tech bubble 2.0" because they didn't report about the latest tech bubble until after it had exploded.
  • The tech bubble 1.0 was more about spend your money fast, hire people as fast as possible, go public - and run! Today, many companies have a high valuation, but they hire more engineers to create a great product and are spending less money on stupid things such as champagne for breakfast.
  • People from outside of Wall Street are still remembering the last Tech Bubble and are afraid to do the same mistakes again.
  • In an online survey at the Wall Street Journal, 66 percent thought that we are in a new tech bubble. But, if there is a general consensus view that an asset is in a bubble, then it can't be a bubble. A bubble almost always happens quietly while everyone is a believer of that "this time is different".

Updated: 2012-05-15

May 3, 2012

Are you happy now Peter Thiel? Technological progress is here!

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In the earlier post, Peter Thiel has a solution to the global crisis, Peter Thiel was asking the world for more technological progress. He said:
"What's desperately needed in our society is companies that represent genuine progress, not just frantic change from one fashion to another."
Well, here are 3 companies with a mission to do just that:

RYNO motors

No-one has probably missed those Segways that were supposed to revolutionize the way we travel. You might see one or two of them in your city, but the concept as a whole never took off. The problem was that they were too expensive to purchase for the individual, and the way you travel on them is a little bit uncommon. We are not used to stand up when traveling - we prefer to sit down. The company RYNO motors has a better concept - a Segway looking like a motor bike - but with one wheel only.




The RYNO bike should work better compared with the Segway because it's less expensive ($4,500), it's more natural to sit down while going somewhere, and it's also a little bit cooler since it looks like a motor bike while the Segway looks like a hand truck.

Planetary Resources

The goal of the company Planetary Resources is to mine asteroids for commodities. It sounds like a joke from April fools day, but this is the real deal. Some of the members of the company are the movie maker James Cameron, and the Google founder Larry Page. From one asteroid, they could make as much as $20 trillion.




Inscentinel

The mission of Inscentinel is to train bees into fighting terrorism. The bees are going to detect explosives and drugs. I'm not really sure, but hopefully these bees can also be trained to detect landmines.




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