It’s easy to get a feeling of deja vu these days.Every week brings big news of another tech IPO. We read about super-sized valuations for companies that haven’t turned a profit. Sounds familiar doesn’t it? It has a certain late 1990s flavor. Are we experiencing another tech bubble? A reprise of dot-com mania? If you’re foggy on the meaning of tech bubble, here’s Investopedia’s definition: “Tech Bubble – a pronounced and unsustainable market rise related to increased conjecture in technology stocks. A tech bubble is highlighted by rapid share price growth and high valuations based on standard metrics like price/earnings ratio or price/sales.” So should we be anxious? Is history doing it’s thing again — repeating itself? You may think so when you scan headlines. Let’s go through the list of recent and impending IPOs that have made news lately: LinkedIn.com, Pandora.com, Groupon.com, Zynga.com, Twitter.com, and Facebook.com. Are investors irrationally exuberant about these businesses? Perhaps. Consider that Pandora and Groupon aren’t profitable. LinkedIn posted its first profit ($12 million) last year. Twitter has managed to generate a little net profit, nevertheless the social network is still trying to find a long-term moneymaking method. On the plus side, Zynga and Facebook, which are expected to go public soon, are pocketing big profits. (But is the maker of Farmville really worth several billion dollars?) What about the companies that aren’t making much or any money? Are investors insane to pour money into them? Maybe, maybe not. Remember, profitability today is not the same as profitability down the road. Amazon.com didn’t post profits until 2004 — practically 10 years after launch. But now the organization takes in money by the truckload. Last year the Amazon’s net income exceeded $1 billion. So who knows, maybe Twitter will discover a way to parlay its big user base into a moneymaking machine, a la Google and Facebook. If you’re concerned, you might find comfort in Jolie O’Dell’s recent Mashable column, which points to some important differences between the today’s tech climate and the dot-com era. To begin with, the number of tech IPOs in 2011 (25 so far) pales in comparison to 1999 (308), the height of the dot-com bubble. Another difference is quality. In 1999, you could take a vague idea, write a half-baked business plan (or not), and somehow convince investors to throw money at you. This year’s crop of IPOs are quite buttoned up by comparison. But there’s still reason to fear a bubble, even if things have changed since 1999. If Limp Bizkit stages a comeback, I would recommend hitting the panic button.
About KBM Enterprises, Inc.
KBM Enterprises, Inc. was created by Kevin B. Merwin, founder and C.E.O., upon realizing that there was a need for equal IT solutions for small and medium sized businesses. While working as the Vice President of IT Systems Management for Vacationville International, he was in charge of managing networks in Idaho, Washington, Colorado and Canada. From this vantage point, it was clear to Merwin that larger companies had the advantage over small and mid-sized businesses, because they were the only ones who could afford to have their own IT staff. What would it take to provide “the little people” with this high level of service? Merwin started looking for ways in which KBM could provide resources that would help other businesses to compete on the same level as their largest competitors.
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