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The Social Bubble

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Many social networking ideas & companies want to re-invent the way we use the Internet.
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    While President Obama is battling hard to drag the rest of the country out of a brutal job market, parts of silicon valley are going through a mini economic-boom reminding people of the late nineties. Internet’s growth spurt fueled the tech bubble back in the day and it’s mid-life crisis brought the stock market crashing down in the early 2000’s. Internet is now a well-known commodity - one that’s an integral part of most people’s life. But there is a new hype in the tech sector and it's built around social networking and mobile applications. Many social networking ideas and companies led by Facebook and some of its poorer step-children are promising to re-invent the way we use the Internet and centralize our lives on their sites. The hype surrounding these companies is so real right now that many valley venture capitalists are making sure some of these Facebook clones and “social” companies don’t stay poor after all. Dollars are available on the cheap for a lot of these companies.

    Just like the late nineties, company after company is being valued at billions of dollars – that’s billions with a B. Not that wall street has ever behaved rationally, but there are clear signs of “irrational exuberance” on display right now. The latest IPO season was kicked off in style by LinkedIn and they are currently out-performing most people’s wildest expectations on the street. Groupon and Zynga have decided to follow suit and their IPOs are just around the corner. Experts have Twitter in the pipeline and of course we are all supposedly waiting for the “big one”. Bay Area has been waiting for the “big one” – the next major earthquake, for a while now, but these days, the Facebook IPO is referred to as the “big one” in some circles. The expectation is that the Facebook stock will define the 2010’s much like how Google’s stock defined the tech sector in the 2000’s. 

    It’s not just the IPOs that are making the waves. Several smaller startups with cool ideas are raising hundreds of millions in funding and the investment is soaring in the areas of social and mobile since smart phones and tablets are changing the way we do things these days. A hot startup called “Square” with a really cool device for small businesses to charge credit cards through their iPad or iPhone just raised 100 million dollars. The hype is also spreading to some traditional, old school internet businesses like petflow.com, a New York based online retailer that just raised 10 million dollars in it’s second round of funding. Real estate listings site Zillow.com has decided to go public as well and their valuation is expected to be around 400 million dollars. They are also counting on their mobile traffic to help with their valuation and growth. Good times are back again for some.

    The relevant question here for the average man is, what does this hype mean to you as an individual? Of course, if you have a killer tech idea, this is the time to spend time on it and try to crystallize a business plan around it. It’s hard work for sure, but the time is ripe to try and attract investment dollars into your idea. You have an opportunity to package your million-dollar idea and establish it as a company worth 10’s or 100’s of millions of dollars.  If you are not an entrepreneurial type, but an IT professional or if you have any kind of skill-set or talent to contribute in the tech industry, you should probably consider joining one of these “bubble” companies. The question you want to ask yourself is, can you put yourself in a position to ride this bubble and make some money while also helping your career by learning some cool, new skills? If you can assume some of the associated risks, you should definitely consider exploiting this hype. 

    If you are in a personal situation where stability at your job is not a concern and if you are willing to work hard, the smart thing to do would be to get into one of these “big-money” startups and enjoy the ride while the cash lasts. May be you will get rich in 2 years via an IPO or may be Google will buy your startup. It might be worth your while to the tune of 100’s of thousands of dollars, if not more. In the worst case, you may be laid-off, but you might have learnt some cool job skills. If you are looking for a stable job to manage your life with 2 little kids or if you are an immigrant working against strict visa or green card deadlines, tread carefully. You may not be able to afford a roller-coaster ride at this stage of your life. Everything that goes up has to come down and this bubble will be burst at some point. That’s just the way silicon valley and wall street works. So be prepared for a spectacular crash and play the game intelligently.

    With high risks come high rewards and the “rules of engagement” with the tech bubble is no different. Many souls in the silicon valley regret the fact that they stood by and watched the Internet bubble grow like a dinosaur and then crash spectacularly right in front of their eyes. While you don’t want to be the one holding the bag when the bubble bursts, you do wish you had taken advantage of the unique opportunity that comes around only once every decade or two. The reality is, you are not completely insulated from the bubble anyways. If you are part of the work force in the tech industry or even if you are just a causal investor through your retirement account, you will indirectly benefit from the bubble and get hit by it's eventual crash anyways. So you might as well take part in the bubble directly. That would be my 2 cents and I will leave it to our intelligent readers to figure out the “why”, “how”, “where”, and “when” part of this strategy of exploiting this new social bubble.

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