End of the Bubble or Just a Correction? | Hacker News Reader

End of the Bubble or Just a Correction?

codebelay.com

30 pointsbarce18 comments

CrunchBase is a useful tool, but it is not a complete data set that could validate the sort of conclusions the author draws.

I agree with your assertion. How would you go about validating the author's conclusions in a more thorough manner?

Using the PWC or Venture One data which are comprehensive would be the way to go. That's my plan once I get access.

Data geek niggle - it's pretty deceptive to start the graph at $200 million instead of zero. It makes the drop in 2012 look larger than it really is. Granted, the effect isn't huge in this case, but its still very bad practice.

The fatal flaw in this article is that the author has NO IDEA how much of the 2012 investment has made it into Crunchbase. He's dividing the total investment by the number of days as if every investment made until today had been accounted for.

That guarantees that the projection will fall short, because many investments are announced much later than when they're made. For example, IndexTank's round was closed in 2010 but announced in 2011. The average lag is anybody's guess, but it could easily be two, four or six months.

This logic applies to every year, since a round could close in 2006 and have been announced in 2007. Regardless of the lag, the trend is clear. It is a downward one.

Funding could be reported late, but then slotted at the accurate time. For example, in January 2013, we might get news -- and then have retroactively represented in CrunchBase -- a funding that closed in October 2012.

So even if Crunchbase is eventually a full/accurate/consistent record (which is itself a big 'IF'), such a lag in reporting could mean any 2012 numbers aren't accurate (and comparable to 2011/2010/etc) until sometime 2-6 months into 2013. Ergo, any 'downward trend' at this point might still just be an artifact of the limited data.

Exactly. And it's even more complicated: the author assumes that funding is distributed evenly over the year, when it's not. Very few deals close during the summer, and the period September-December is particularly active.

To the OP: you are jumping to conclusions too quickly without asking the right questions. You also seem too attached to your hypothesis. I recommend that you read Nate Silver's new book "The Signal and the Noise."

Last year Facebook and Twitter raised a combined $1.9 billion which should not be overlooked. Facebook particularly accounts for a full half of last year according to CrunchBase.

- http://www.crunchbase.com/company/twitter

- http://www.crunchbase.com/company/facebook

Exactly. If you pull that investment from the graph it looks pretty boring and business as usual.

I don't think that selectively removing the single most significant data point and then claiming that its "business as usual" will lead anywhere useful.

I was trying to say that the conclusions being made seem to depend entire upon a single data point...

It is end of the bubble of common folks excitement with cheap internet and cheap gadgets.

Facebook has near exponential growth rates due to many factors, but mostly - a) cheap digital cameras (and then mobile handsets). b) cheap ADSL technology around the world (then mobile broadband). c) peer effect - adult population engaged in behavior of teenagers and college students.

Now all the excitement gone, and all those gadgets, sites and self-exposing or on-line shopping is nothing but a common boring activities.

The next big thing, by the way, is distance-everything. Distance learning is already here, along with remote work. Distance medical diagnostics is on the way.

As long as more people will realize that distance education is possible, they will naturally think that almost everything else also.

That means very interesting possibilities for an economy, including bursting of commercial real-estate, pay-walled education and even SUV-cars bubbles..

Just because something became common, and comfortable, doesn't mean it will stop being economically significant. Otherwise, after the first internet bubble burst, the web design business would crash and burn, along with the the online advertising business, and online shopping business. Social networks, online shopping and gadgets are here to stay, in one form or another, and they will be huge revenue streams for companies which produce the best products.

Good luck with your business on distance learning, it sure is promising, hope it works out as you expect.

1) Assuming this data is close to actual numbers, seems like saying "Investments are near the levels from 2010 (which by the way was 1.4 billion), BUBBLE!" is a bit premature.

2) Maybe it's just me but the grammar seems off. The, "end of the technology bubble" to me can also mean that the bubble that we're supposedly in has ended and it's A-OK.

The always fashionable predictions of a bubble.

The fatal flaws in this article are many (including those highlighted by others):

- The idea that one metric can predict a correction

- On top of that, the metric of funding/day is simplistic and utterly useless. A couple of mega green tech, life science or semiconductor fundings (or absence of) will skew this metric in a totally different direction. We track this stuff and 2012 hasn't been a great year for those areas of VC which often see big rounds

- Deal activity (the # of financings) in a period has to be considered in any discussion of a correction

- SF as the single market used is problematic. Is it representative of VC? The Valley or stats for the valley, Massachusetts and NY would be better to use

Shameless plug - Check out CB Insights (www.cbinsights.com). Our trends tab has some free cuts of the financing and M&A markets which may be interesting.

Is there a lag in funding reporting or are fundings pretty much always reported on the day they occur? Are there any seasonal effects? This is a yearly graph, but 2012 is being reported at the end of September when there are still three months left until the end of the year.

Anyone care to do this for tech startups at large, for comparison purposes? If we're starting to see geographical diversification, that would be a (very) positive thing. Far too much talent and far too many networks are concentrated in the Bay Area.

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