The next great tech bubble emerges

March 24, 2011

photo.PNGAn application that wasn’t even in the app store a week ago just raised $41 million.

We’ve reached the point where simply the idea of an app is now enough to raise multi-million dollar capital. Were any of these folks around back in 2000? Certainly some lessons have been learned the first time around. Most investors and companies are avoiding the same mistakes but that hasn’t prevented plenty of head scratching deals to emerge in the last few months.

The app, called Color, is a photo sharing application that allows you to post and view images by people in the same proximity as each other.

“Not since Google have we seen this,” is what one Sequoia Capital partner told Color Labs co-founder Bill Nguyen when he met with them recently.

Those seven words inspire such an abundance of eye rolling that one has to wonder what the guys over at Sequoia are smoking. Better yet, how quickly can I put together a pitch deck boasting some superfluous social, hyper-local, organic, mobile game changer of my own?

Reid Hoffman, founder of LinkedIn, has a rosier view of the current frothiness of the tech market. He’s poised to take LinkedIn public soon, so his motives for such optimism may be a bit self-interested. “If you look at the crop of companies in the growth phase now, they all have very solid economic models behind them. Some at the center of the pack have business models that could live for a long, long time.”

VC money seems to be funnelling mostly to Internet based startups over the past two years. While there are some ridiculous deals being made, there are real companies making real money on the Internet. was snapped up today by Walgreens for $409 million dollars, raising the stock up 114% in trading this morning. The Internet based drug retailer had over $456 million in sales in 2010, making it the 8th largest online retailer in the U.S.

The good news is that the victims of the eventual fallout of this current hyper-investment in the tech market will hopefully be limited to these private big shot investors and venture capitalists who have only themselves to blame. The underlying victims may be startups with real business plans and an actual solution to a real problem, who after the crash will find it tough to move their venture to market. All the while the Techcrunches and newly launched Beta Beats of the world will be there to assess the carnage.

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