back to article Bubble 2.0? Moneybags VC Andreessen warns profit-free startups: 'You will be VAPORIZED'

When it comes to the internet age, Marc Andreessen was in there right from the start. Now, when he talks, people listen. So when the geek-turned-venture-capitalist today warned there'll soon be a bloodbath unless startups start making bank, we imagine there were a few spilled soy lattes in the Valley. Andreessen took to …

  1. Anonymous Coward
    Anonymous Coward

    I probably missed something

    I would like to see where the f*** is all this cash he is talking about.

    Oops... I should not be California dreaming on a winter day. He is referring to Silly Valley. OK, he is underestimating it then. It is not as bad 1999, it is worse. It has never managed to become better either.

    As far as the bloodbath, as long as the big players in the valley continue to utterly fail in innovating (some of them are learning) and continue to startup-shop their way out of this the Silly Valley culture will continue to exist. 99% of startups shopped by billion turnover companies are shopped not to get new product and tech onboard. They are shopped to demonstrate coolness, relevance, hip. Their half-baked products are quietly discarded at the next financial results at which point their new owner will go and buy some new ones. There is of course the 1% or so of the ones that try to build real stuff, but they are not really a part of the Valley culture. There it is important to be hip, not to build real stuff. Not that Shoreditch and the Silly Roundabout are any different.

    1. Tom 7

      Re: I probably missed something

      "They are shopped not to demonstrate coolness, relevance, hip. but to prevent disruption to their cash flow from more efficient ways (for the customer) of doing things"

    2. TheOtherHobbes

      Re: I probably missed something

      All the cash he's talking about is over at Y Combinator, Greylock, and - oh look - Andreesen Horowitz.

      The startup scene has always been a novel form of welfare for geeks trying to be frat boys.

      All those very serious wannabe-a-founder interviews, all that hiring and firing drama, all the cash burned, and so little actual turnover.

      VCs are Very, Very Important People who know All About Capitalism - which is why they've been funding the world's most expensive form of performance art.

  2. Dr Stephen Jones

    "Now, when he talks, people listen."

    You mean, people have stopped laughing at this?

    1. Kristian Walsh Silver badge

      No laughing matter.

      Look at a typical home user's top "apps": Facebook, YouTube, Twitter, NetFlix, gMail. All run in-browser.

      Google is a multi-billion-dollar software company with market-leading products that doesn't write native Windows applications.

      Even Microsoft now offer Office as a product you can use through a browser. That's Microsoft. And Office. The quintessential "desktop" application suite.

      I think you'll find that Andreessen was right about the situation, but only wrong about the endpoint being Netscape.

      1. Arbiter

        You're 100% right and completely wrong

        This is actually a rather tidy microcosm of why Linux continues to fail to take over the world: customers are a small subset of users.

        Customers pay for product and services. Most Linux users won't pay for software and are therefore not part of any market.

        When you're a FOSS developer, you develop software to please yourself. Perhaps you enjoy creating. Perhaps you want to raise the bar rather than admit that compared to its Windows counterpart a given piece of Linux software is unbearably awful.

        When you're bored, broke or too busy with your day job/garden/exciting new idea you can simply stop.

        FOSS quality control is optional. You may do it to indulge your sense of craftsmanship, or maybe some obsessive compulsive nerd will volunteer and do an incredible job until he achieves a specialised fame and finally acquires a girlfriend.

        So it's pot luck as to whether the Linux version of something will be wonderful or rubbish. There are many examples of marvellous but unfinished and abandoned. Inter-platform support is equally variable.

        Paid software has to at least be finished, and companies in it for the long haul maintain software well past the point at which it's no longer interesting. They don't stop until it's no longer profitable.

        I'm not exactly ragging on Linux, more on people who cannot grasp that pot luck quality isn't good enough for some applications, and a freewheeling disregard for consumer needs earns their enmity, and poor discoverability through wildly inconsistent and frequently dreadful UI design makes it unsuitable for low-competence users.

        Having lots of users will never get you market dominance because markets are composed of buyers and sellers. Deployment share is not the same as market share, and only market share matters.

  3. Destroy All Monsters Silver badge
    Paris Hilton

    Why is there a question mark after "Bubble 2.0?"

    Maybe because this is actually "Bubble 3.0", the third one in about 15 years? Probably a record in the history of humanity.

    M. "Snowden is a Traitor" Andreessen, is late to the party. I don't see why him saying something is making it more visible...

    As I mentioned earlier:

    How Financial Bubbles Fester And Burst—Even As The Fed Says Not To Worry

    In today’s post Wolf Richter offers some solid insights on the dynamics of financial bubbles which merit further comment. The starting point is to recognize that once they gain a head of steam, financial bubbles tend to envelope virtually every nook and cranny of the economy, creating terrible distortions and destructive excesses as they rumble forward. In this instance, Wolf Richter explains how Silicon Valley has once again (like 1999-2000) been transformed into a rollicking capital “burn rate” machine that has spawned a whole economy based on striving for bigger losses, not better profits.

    This latter development—- currently exemplified by 44 VC start-up companies in the IPO pipeline with a valuation of more than $1 billion each, despite no earnings and scarce revenues—-is indicative of late stage bubble dynamics. Say January 2000!

    Needless to say, our monetary central planners remain hopelessly bubble blind—- still professing to see no significant speculative excesses because they are looking in the wrong place. Janet Yellen, for instance, keeps insisting that stock valuation multiples are still well within “historic ranges”. So DO NOT BE TROUBLED....

  4. akeane

    Most asset classes...

    ...are a bit bubbly at the moment, who would have thunk artificially lowering interest rates and removing the moral hazard would lead to misallocation of capital...

    At least with Internet Bubble v2.0 we don't have "How to make yur own Interwebsite Biz selling cat food from your cellar" style programs on BBC2 anymore like we did in the good old late 1990s

    Good times!!!

    1. Destroy All Monsters Silver badge

      Re: Most asset classes...

      Hell yeah.

      I remember Dot-com_commercials_during_Super_Bowl_XXXIV. Probably on Youtube somewhere.

    2. Anonymous Coward
      Anonymous Coward

      Re: Most asset classes...

      Plus all of that QE money has to go somewhere...

  5. IHateWearingATie

    Paging Steve Bong...

    ... this man is a threat to your catapult

    He must be eliminated. Paging มาลัย (which means "Garland of Flowers" in Thai)

  6. K

    VC's should take their own advise...

    And stop lending money to poor investments..

  7. Alistair

    VC's are part of the disease. Wallstreet is the pandemic

    I'll just re-iterate my previous comment from here:

  8. Lucky2BHere

    Just desserts? Too late for that.

    The Silicon Valley Way was effective only at the very beginning. It did create a few very strong companies that have since defined our tech and international business landscapes.

    But the perpetuation of it has created one of the biggest myths in modern economic history. It has not improved innovation and job-creation nearly as much as it could have. And, it's destroyed so many great ideas, individuals, organizations and even whole economies. Boom-bust cycles are not particularly healthy ways to grow economies.

    The tone here suggests the VCs will get their just desserts. If one hasn't noticed, they are rather flush with cash. Their unholy marriage with Wall Street has created truly sickening wealth for not the 1%, but the .01% (an admittedly frustrated estimate). When a company goes public like FB or Twitter, the money is made the instant shares are released, but *only* by the chums who set the deal up: the VCs, the investment banks and a few more-than-well-informed brokers. The Big-Bang moment immediately after the bell is rung is a ride into financial hell for the rest of us.

    Institutionalized pillage. These self-made billionaires are today's real mafia.

    We can't afford to go through another major cycle. I've been in the tech business since 1980, and in the Bay Area since 1986. I've experienced three of them, and they are truly devastating...but not to the VC community. Never to the VC community. They make their real money up-front.

    All you armchair tech experts can throw stones at Andreessen. After all, he was one of the most famous wunderkind poster boys; essentially hand-picked by the VCs to represent Netscape's rise: good on camera, fairly articulate, even-keeled. But, he's one of the very few who has not only learned what kind of reality The Way has spawned, but put serious effort into restructuring his own approach. Andreessen Horowitz is one of a handful of major funding sources that looks hard at all the fundamentals. They actually spend time understanding the projects and the people in them. They are not perfect, but they *are* different.

    New business failure rates have not changed over the past - at least - 15 years. How is that possible with all the resources and attention available to start-ups today? If 90%-plus of all new ventures shutter within five years (that number includes ventures in garages, dorms, basements and apartments *never* registered), it can't possibly be natural selection, as is espoused by the VC community. With that kind of inherent ineptness, we, as a species, would have perished a long time ago (though, we seem to be hell-bent on doing it at some point in the near future...).

    We need to stop feeding the animal. Stop letting the popular media make stars out of the one-hit wonders. Most importantly, we need to focus on getting *prepared* to actually go into business with these great ideas we all have.

    Great ideas are not hard to come by, but are worthless without a business behind them. The great idea *is not* the business. *We* are not the business. Money will *not* solve all the problems. We have to actually create the structure - the business - that will provide the sustainable mechanism that will help create the value of the idea and allow it to get to the people who need it the most.

    Probably five people will read this, but after doing this for 30-plus years, the simple message of "plan first" still needs to be heard everywhere. It's not happening in schools, it's not happening in the industry, the VCs don't seem to want it (they think it'll screw up their current cash-generating system...but they're wrong) and the complicit popular media is ignorant.

    Success can be defined in any way you wish; a very individual thing. It is ridiculous to think if you don't make a billion dollars you've failed. The foundation of any economy is the millions of SMEs that provide steady jobs and income, and contribute every day to local and national economies. If someone finds happiness in a ten-person company and that's all they need, then it's a success. Tired of tech and want to open a coffee shop? Do it. If it makes you and your customers happy, do it.

    Going into business is not easy. It can take over your life. But if it's done right, it can be incredibly rewarding and endlessly interesting (what more can you ask of modern life?). Plan, structure and build your business a day at a time. Don't even think about starting something without a real business model that can sustain your efforts with an absolute minimum of outside assistance. That's the only way to stop these increasingly damaging cycles.

    1. Arbiter

      Frighteningly true but incomplete... gets worse. Western economies are essentially pyramids schemes inasmuch as they depend on expansion. Having run out of frontiers they have been expanding on paper, but eventually some fool fails to realise that you can't call in those debts and triggers a Great Depression or a GFC. The ructions are going to get closer and closer together and I don't know what next but it scares me anyway.

  9. Anonymous Coward
    Anonymous Coward

    Twitter rants, Nuclear Tweets

    Slightly off-topic, but what is the deal with articulating complex concepts with Tweets? Or worse, a series of tweets?

    Can the guy that practically invented the web browser not compose a blog? Blogging software makes it very easy to construct multi-word documents that are viewable on the web - they can hold substantially more than 140 characters and are persistent, to boot.

    What's really scary is seeing Iranian, Russian, and American diplomats use Twitter to communicate state information that can start wars.. will a misconstrued Tweet be the beginning of the end for humanity? If so, then we deserve extinction.

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