23 August 2006
Building companies for a supposedly fast-growing market without significant numbers of people getting stupidly wealthy shows that capital is almost certainly misallocated here. To justify so much money going into early-stage companies doing web 2.0-ish stuff, we should be seeing more hand-wringing about the absurd amounts of money being made by a select few entrepreneurs. But we're not.
Remember my rule: The venture business is a bubble business. The industry owes its existence to its participants' ability to find and exploit liquidity bubbles in technology markets. In this case there is a bubble, but it's entirely at the company creation end of things, not the liquidity end (i.e., IPOs and M&A), which makes it the strangest and least economically rational technology bubble I've ever seen.
Why? Well, what's the financial point of a biztech bubble where oodles of money goes in, but next to no money comes out? At least in the dot-com days we'd had a few moonshot IPOs before people really began pouring money at MBAs who secretly craved to run online cat food stores.
On another note, I ask you: why has the B in the orange square logo of Blogger been replaced by a dog? I thought they were Google, not Lycos. I need to find more about it. And if there is no reason, here is the true question: why not a cat?
Now you know I'm a cat person, I have an MBA. Should I start an cat-owner online community to sell catfood. Plus, there are two things a marketer can't resist selling: catfood and shampoo.
I'll be back with more tonight (more posts that is, not catfood...ntntntnt).