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While we’re on the subject of bubbles

Once again, Silicon Valley is humming.  Tech IPOs are hot, hot, hot.  Household names like LinkedIn, Pandora and Zynga, just to name a few, have recently gone public or have plans to do so, with many others awaiting their debut (think Groupon and Facebook).  It reminds me (and others, I’m sure) of the late 1990s/early 2000s when technology/Internet companies were going public at an alarming rate, without the revenues or profits to back up lofty valuations.  Fortune says there will be more than 50 tech IPOs before the end of 2011 and that proceeds so far from this year’s IPOs — $12 billion — have far eclipsed last year’s total.  A recent guest blogger on CNBC states that, “there is a familiar sense of déjà vu.  In some ways, it’s the year 2000 once again in the IPO world.”
 
Should we be scared that optimism has again returned to the Valley?  The Fortune article asserts that “the consensus is that there remains sufficient fear in the marketplace — be it on Sand Hill Road or Wall Street — to prevent exuberance from becoming totally irrational.”  Maha Ibrahim, a general partner at a Silicon Valley-based VC firm, says, however, “that bubbles can be very positive, and this one is needed to kick start a long-sputtering economy.”  Are we really in the midst of another tech bubble, though?  According to Business Insider, the current environment “doesn’t seem very bubblicious.”
 
Hopefully we’ve learned from past mistakes, but in my opinion, if recent activity helps drive the economy, than call it whatever you’d like.  After all, a bubble by any other name (to borrow slightly from Shakespeare)…is still a bubble.

 

Laurie Berman, lberman@pondel.com