Anil Dash draws up some great conclusions about the new “built to flip” economy and I couldn’t agree more. He thinks that these new “web 2.0” startups aren’t thinking IPO but are looking to get acquired, which probably makes sense considering all the acquiring that’s been going on (Weblogs, Inc., Upcoming.org, Weblogs.com, etc.).
Anil explaining what happened back in the 90s:
Interestingly, most bubble companies, especially those with unsustainable models, ended up flipping to one of the big players (AOL, Microsoft, Yahoo, eBay, later Google) or one of the then-big players (Lycos, Excite, et. al). This would happen after the initial run-up in stock value, and would end with a crash or a slow slide, after which the VCs made money, founders made a little bit of money, and everybody else pretty much ended up underwater.
So basically bubble companies would go IPO, get a huge run-up in value, then their stock would deflate, and a floundering has-been Dot Com would be sold to a major tech figure for a few stacks of bennies. Now, small teams are creating mashup faux-companies, generating lots of buzz, and are acquired prior to making any real money. The end result of both scenarios is nearly the same dollar figure.
Is this the new economy? Do revenues no longer matter? Is buzz and site traffic the real measure of success? Are pre-money valuations pulled from thin air, or out of asses, or both?