Bubble or Trouble?

Are we experiencing a second Internet bubble?
The answer is clearly: yes.

When group buying, flash sales and straightforward B2C sites like Groupon, Ideeli and Lot18 raise money by the 100’s or 10’s of million dollars in ultra competitive markets, it means that too much money is chasing too few investment opportunities. Many start-ups are caught in a race to grow by acquisition (of traffic, of competitors…), to sell out before even attempting to break even, to IPO before everyone else does…

The question that needs to be answered is not whether there is a bubble 2.0, it is how much trouble will it cause when the bubble bursts. After the first well-advertised and overvalued IPO stocks rapidly depreciate, will there be a soft landing or will there be a dot.com bust?

My bet is on mild trouble or soft landing. Why? Because there is enough skepticism, if not cynicism, in the market to assume that many investors are going into the bubble with their eyes open.

Thus, when the most overvalued stocks will rapidly sink, investors won’t pull out of their many other Internet investments — the businesses which raised single digit millions, because that’s all they needed. In that respect, this bubble is very different from the 2001 dot.com bust.

At least, that’s what I believe.

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  1. therese says:

    Comments work. Feel free.

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