Quite awhile back, there was a dot-com bubble which burst around the year 2000. There was an incredible hype around the Internet and on web start-ups, and those which listed on stock exchange had such exponential growth that everyone jumped in without properly assessing the fundamentals of the investment.
Then it crashed and the successful dot-coms became dot-bombs. And so many people got burned that they never wanted to believe in these risky web based start-ups anymore.
Flash forward to present day. It’s happening again. People have short memories.
Everything is online. Venture capital is flowing into tech start-ups at an incredible pace and at incredible amounts. Valuations are blowing through the roof in IPOs.
And much of this is going on without the companies even turning a profit. There’s no positive cash flow. Some don’t even have a viable business model yet and are still trying to figure out their identity.
The business game is changing and everyone wants to jump on the bandwagon. It seems that as long as you have a big base of users, a database of a captive audience and an online community established, you don’t even need to monetise the site yet but there’ll be people cueing to have a slice of the pie.
But there’s a danger and although I don’t see it slowing down yet, I believe that it’s a bubble and that the valuations are far greater than the real value of many of the tech companies out there.
A company could very easily burn through their capital and never reach the critical mass and turning point of properly monetising what they have, especially when you look at the amount of marketing and SEO it takes to maintain the popularity of an online website nowadays. Not everyone has a model which can readily draw a huge amount of loyal, repeat users consistently.
I think we have to be careful in how we approach the current environment even as everyone gets excited over the daily success stories of online start-ups. It’s so easy to get distracted and not be able to focused on what your own company does best. It’s so easy to envy the success and want to emulate it. But in the end, there are too many people trying to hit homeruns and strike jackpots, forgetting that you’re far more likely to win the game by sticking to your core strengths and competencies.
In this context, focus is far more important than keeping up-to-date with the latest fad.
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