Thursday, October 18, 2007

Tide of Dollars Floods Over Silicon Valley Startups

It seems like Web 2.0 is forming Bubble 2.0. Companies with minuscule sales are being given valuations that rival industry giants.

Is Google really worth more then IBM, a company with eight times their revenue? Is Facebook worth $15B? This trend continues with smaller companies in Silicon Valley that are flush with venture capital cash.

Recently eBay concurred that they greatly overpaid for Skype. At some point, valuation of companies needs to be tied to how much revenue they generate instead of the size of their web audience. It is likely that the Web 2.0 bubble focused on tying valuation to advertising potential before generating a single dime of revenue is a bubble that is ripe to deflate.

However at this point the exuberance, and Web 2.0 buzz, is continuing. Venture Capitalists are pouring money into the start-ups and larger companies are continuing to purchase them at lofty valuations.

Silicon Valley Start-Ups Awash in Dollars, Again