Tech vs. Real Estate P. I

Bubble 2.0


we are experiencing another dot-com bubble. From 1995-2001 we saw new online companies pop up (pun) every single week. They had $0 in sales yet they wanted millions and millions of dollars in seed capital.

Hey, luxury suite office space in Silicon Valley with decked out furniture and high incomes aint’ cheap!

Suddenly, sales didn’t matter. Business plans didn’t matter. The only important thing was “dominating the market”. If one could simply “be there first”, the money would follow suit. Maybe the company could be flipped. Maybe the site could generate ad revenue from high traffic.

Sound familiar?

By the way, a lot of investors lost a lot of money. Not to mention, a lot of web developers lost a lot of jobs. It was brutal.

Facebook’s monstrous IPO (initial public offering) was based on future projected revenue…not actual revenue. They also completely ignored the fact that General Motors (one of the largest advertisers in the world) pulled out of Facebook ads just before their IPO.

Instagram, which had not generated a single dollar in revenue, was acquired by Facebook for $1 billion. In the end, it was closer to to $750 million because they had a lot of contingencies based on Facebook’s IPO and—gasp—their IPO didn’t do well. I guess that’s what happens when you throw basic arithmetic in the mix.

Twitter’s investors are only getting a return on their investment by getting cashed out by new investors. Do that enough times and you’ve got a pyramid scheme.

I don’t want to invent the next Facebook (that’s an uphill battle and Facebook is a time killer at best). I don’t want to invent the next Zynga (apps are just a trend and half of all app revenue goes to the top 25 developers).

As an employee, I love tech. As an investor, it’s way too volatile.

I prefer real estate over Angry Birds any day of the week.

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Filed under Business, Entrepreneurship, FHA Loan, Investing, Nik Parks

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