// what do you think?


The Big Difference Between Startups Now vs During the Last Bubble

There’s a lot of talk about the next tech bubble. And while I’m sure there will be market adjustments (as there always is) I think there are a lot of things that are more over inflated than the tech world. Like education, personal debt and I still think the housing crisis isn’t over. I said last year that I’m expecting 5 more (so now 4 more) years of recession.

I’ve heard a lot of good arguments why we are in a bubble. I’ve also heard equally good arguments of why we’re not. Several of the people who believe we are lost a lot of money as investors last time. A lot of people who don’t were entrepreneurs last time. Marc Andreessen, who lived through the highs and lows of the last bubble and is now a very active investor, doesn’t believe we’re in a bubble.

Marc says that the tell tale sign of any bubble is the rush of MBA’s:

There was a point in the late ’90s where all the graduating M.B.A.’s wanted to start companies in Silicon Valley, and for the most part they were not actually qualified to do it. They brought the whole sideshow of the hype and parties and all that crap. M.B.A. graduating classes are actually a reliable contrary indicator: if they all want to go into investment banking, there’s going to be a financial crisis. If they want to go into tech, that means a bubble is forming.

I don’t know for sure because I’m not an economist. I remember but wasn’t really involved in the last bubble. And apparently I’m not a good source anyway because I’m an MBA. But here’s something I do know, and that’s that startups this time are different than last time. Companies aren’t raising Millions because they have a .com web address. They aren’t employing hundreds of people needlessly. And while I’m sure some out there are, I don’t think most of them are.

I think the perfect example is Instagram.

Instagram is a product I love very much. It’s probably the one app that keeps me tied to the iPhone. Instagr.am is also my favorite search on Twitter.

If you’re in the tech community at all you’re very familiar with Instgram. Here’s some quick facts:

  • They have more than 6 Million users.
  • They’re app is only available on the iPhone. You don’t even get a web profile page. Although an Android app is much rumored.
  • They have raised $7.5 million in funding.
  • They have 4 employees. And are hiring their 5th.

6 million users and they only have 4 employees. Now granted they don’t have any revenue yet but when you have 6 million users and are just getting ready to hire your 5th employee it’s pretty easy to cover your expenses. And when if they launch their android app I predict they’ll easily double their user base next year and they probably won’t need to double their staff.

Whether we’re in a bubble or not, I think companies like Instagram are going to be just fine.

My advise (if you care what an MBA has to say), now’s a great time to build a real business. Build a great product, with happy users, that provides real value and I think you’ll be just fine. Not saying it’ll be easy, either way, but it will be fine.

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About Tac

Social media anthropologist. Communications strategist. Business model junkie. Chief blogger here at New Comm Biz.

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