More Indications of a New Tech Bubble

I have been reporting how valuations for consumer Internet startups have been rising, with some deals auctioned up to pretty incredible levels, reminiscent of the dot-com bubble. This is an early indicator of a new tech bubble brewing, rivaling the 1978-83 PC Bubble and the 1995-00 dot-com bubble. So far only a handful of companies have benefited, such as Twitter, Groupon and FourSquare, but now the markups in value are spreading. GigaOm reports that cloud-service startups are also seeing the same pop. The consumer Internet companies rely on cloud computing, so it is no surprise that their success has dragged related companies in their wake. GigaOm gives these examples:

  • StorSimple (hybrid storage systems) raised $13 million at a $50 million value, even though it has yet to bring in a dollar in sales
  • RightScale recently raised $25 million at a reported valuation of $100-$125 million
  • Eucalyptus is said to be valued in excess of $100 million
  • Aster Data snagged $30 million with a rumored valuation between $85 and $120 million. UPDATE: company emailed me to say this valuation range rumor is not accurate
  • Cloudera, the Hadoop-based big data company and one of the all-stars of big data movement, is looking to raise a fresh round of funding and is being valued in excess of $100 million

The next shoe to drop is a signature IPO, like Apple in 1980 or Netscape in 1995. The most attractive candidate is Facebook. There is no question that it could go out whenever it wishes, given its scale (500M users) and revenues (ramping over $1B). Recent remarks by Peter Thiel, a board member, suggest that the earliest it goes out is 2012. Before that a number of other highly-visible companies may go out, including Skype (which has filed for IPO but might be bought by Cisco before it gets out), LinkedIn and Zynga.

In the meantime, Facebook is already the subject of two movies, the most highly-awaited of which is The Social Network, coming to theaters this week. It is getting strong buzz, and has already attracted YouTube parodies. With that, who needs an IPO?

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About Duncan Davidson 228 Articles

Affiliation: NetService Ventures

Duncan is an advisor to NetService Ventures, where he focuses on digital media and the mobile Internet.

Previously he was at four start-ups: Xumii, a mobile social service based on a Social Addressbook; SkyPilot Networks, the performance leader of wireless mesh systems for last-mile access, where he was the founding CEO; Covad Communications (Amex: DVW, $9B market cap at the peak), the leading independent DSL access provider, where he was the founding Chairman; InterTrust Technologies ($9B market cap at the peak), the pioneer in digital rights management technologies, now owned by Sony and Philips, where he was SVP Business Development and the pitchman for the IPO.

Before these ventures, Duncan was a partner at Cambridge Venture Partners, an early-stage venture firm, and managing partner of Gemini McKenna, a joint venture between Regis McKenna's marketing firm and Gemini Consulting, the global management consulting arm of Cap Gemini.

He serves on the board or is an adviser to Aggregate Knowledge (content discovery), Livescribe (digital pen), AllVoices (citizen journalism), Xumii (mobile social addressbook), Verismo (Internet settop box), and Widevine (DRM for IPTV).

Visit: Duncan Davidson's Blogs

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