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Bubble, Bubble, Bubble — Security, Security, Security

The startup ranks are starting to thin. We’ve added three companies to the TechCrunch DeadPool in the last week (Raw Sugar, FilmLoop and Browster). Even Google got into the spirit of things when they shut down Google Answers at the end of the year. And over on the Forum users are asking “Who’s Next?

It’s clear that new venture fundings are still out pacing DeadPool admissions by a large multiple – it looks like $600 million or so was invested in Web 2.0 startups in 2006. And since most startups fail, I expect this commenter may be correct when he says “I predict 2007 will be the year of the deadpool.”

But this doesn’t mean we’re in a . In fact, I think the exact opposite. I think a few failures are direct evidence that we are not in a bubble and that the private venture markets are actually in the process of letting off a little steam to keep things rational.

The Implosion

Web 1.0 effectively ended on Friday, April 14, 2000, when the lost about 10% of its total value. Between March 10 and April 17, 2000, the Nasdaq lost over 37% of its all time high of 5,133 (and it fell far further later on). The Nasdaq was practically an index of Web 1.0 companies v. the “old economy” NYSE, and it got hammered.

One of the biggest issues driving the collapse was a failure by companies to drive earnings enough to keep up with stock prices. Many public companies had three-digit P/E ratios at the time of the crash. By contrast, the P/E ratios for Google, Yahoo and Microsoft today are 62, 35 and 24, respectively.

The Reality

Today, the IPO door is nearly shut for Internet companies. GoDaddy withdrew it’s registration statement in August 2005 before going public. NetSuite is next up – we’ll see if they can make it happen in the next couple of fiscal quarters.

There are probably two reasons for the IPO drought. First, there are very difficult reporting requirements now in place that weren’t around in 2000. It takes a lot of administrative overhead to be a public company today. Second, and more important, the public markets have factored in what they learned the last time around and they just won’t let companies go public on the vague promise of future revenues and profitability. Once bitten, twice shy.

That leaves the acquisition market as the only viable source of a liquidity event for most startups. And while there have been a handful of high profile Web 2.0 acquisitions (YouTube, MySpace, etc.), entrepreneurs and venture capitalists have significantly lowered expectations compared to their state of mind in 1998-2000.


OSA Editorial Comments:

I believe that 2007 will be the year of the Publisher, and a Blogging explosion like the world has never seen; a revolution of Blog entrepreneurs are the new working from home businesses. So, the new WWWeb 2.0 we now live in is going to grow so fast over the next few months we need to be totally aware of what is going on in the world of online security! We now have to realize the new “no privacy planet” we all share is prime for cyber criminals to have their way with us, you have to be so careful Who, What, When, Where, Why, and How you share your personal information, with everyday!

  1. Personal Computer Security is my number # 1 issue, Online! Everything starts there as far as cyber criminals are concerned. They get their foot through the door through of your invisible Internet connection, then they hack, crack, and jack anything they can. It’s a (portal to the wallet) to find out more go here: Personal Computer Security
  2. Identity Security, is our # 2 online security issue for 2007, please do everything in your power to keep your personal information protected, find out how to protect your personal information and what crooks are really doing to lure you in to giving it to them, and steal everyone’s Identity Security.
  3. Security against online Predators is number three but, for parents with children protecting them from this terrible scourge on the information superhighway should be their
    # 1 priority. Your worst nightmare begins where (online Predators are hiding, in the back alley gutters of the WWW)! Start here and learn what predators are using as their bait of choice, get your own Personal copy of the ebook “Don’t Take Candy From Strangers” NOW! 

Your Online Security Authority
Bill Wardell

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  1. 1 Comment(s)

  2. By 1 sweet girl on Jan 8, 2007 | Reply

    I believe that Web 2.0 and blogging are the new wave of internet publishing, and not just another fad. In 2007, many internet site owners who are unaware of Web 2.0 will wonder why they are not being visited and not earning the same amount of revenue they once earned. When they come to the realization that they have not kept up on the technologies at hand, they will find themselves struggling to make the necessary changes in order to not lose their business’ and still be able to retain their customer base and also boost their overall web presence. Not only is this new wave important for the large companies, but, this has a huge impact on the small upstart companies who may or may not have the desire to one day be publically held/traded.

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