Considering the mad rush among VCs to invest in the next big or even moderately successful startup servicing a particular branch of social media, more than one investor (Fred Wilson included) has wondered if a bubble is on its way to bursting. This sense of impending peril seems to be the inevitable dip in the enthusiasm that has gripped the startup scene this 2010, especially in the aftermath of the glowing PriceWaterhouseCooper report from a month ago.
Such misgivings shouldn’t be reason to panic, however, because unlike the late 90s tech bust, no publicly traded companies are involved and the future looks bright for social media. In fact, the worrying trend these days is privately owned companies are getting billion dollar valuations in the span of a few years, like Twitter or Groupon, which just turned down Google’s $6 billion bid. As of this writing, despite the storm clouds mentioned by Fred Wilson, there’s no immediate danger of a bust, just the creeping worry that some catastrophe awaits investors in the coming months.
Why is this? As a result of the almost feverish scramble among VCs to inject money into startups whose core products are just—how to put this nicely—another exercise in rounding the social media wheel. This is the trouble that’s being circulated now among news outlets: whether the cash being spent on young companies will really pan out, with enormous rewards for early bird VCs, or fall flat on its face as social media (this will come across as blasphemy to the ears of the faithful) takes a sudden dip come next year.
But despite these concerns, by any possible measure, the startup world is healthy and vibrant at the moment, so there’s no need to lose sleep about the possibility of a bubble. At least not yet.
Via: The New York Times