Introducing the TechCrunch Bubble Index

Today, I thought it could be interesting to introduce the TCB Index that has been making the ‘headlines’ lately. First of all, what does the Index tell us? The TCB index counts the number of headlines on TechCrunch (blog: see techcrunch.com) over the past 90 days relating to startups raising money (‘startup fundraise’ means that the amount raised was at least $100K and less than $150mio). Therefore, the higher the index, the better the fundraising environment.

For instance, if we have a look at the chart below (source: Todd Schneider’s website), we can see that the startups business has been going through a difficult time for the past few months. On November 16, 2014, the TCB Index was at 209, which means there were 209 TechCrunch headlines about startup fundraise in the 90 days preceding that (roughly 2.3 per day), down from a high of 346 in April this year.

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 (Source: Todd Schneider)

Quick thoughts on Twitter’s IPO and the dotcom bubble 2.0

It makes me think the way I felt when I saw the headline ‘Twitter files for IPO’ last year. As a reminder, the company sold 70mio shares on the IPO (November 6, 2013) at $26, raising $1.82bn in its Initial Public Offer. In addition, I was asking myself how a company, that wasn’t profitable at the time it went public, could be valued over 10 billion dollars?

In its first public financial statement, Twitter reported $79.4mio in losses for the year 2012 (after a negative net incomes of $67.32mio in 2010 and 128.3mio in 2011), and was predicting even steeper losses for 2013 (guess what: losses reached 645.32mio that year).

I concluded that we were in a second dotcom bubble. Below I added a chart from the Wall Street Journal (which sums up briefly what I just said).

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(Source: Wall Street Journal)

 Is it just the beginning?

Today, as the TCB Index shows us, there is less money in the startups business and we are starting to see some weaknesses. For instance, we heard lately that Fab (a design-focused commerce company), a once-to-be Silicon Valley’s darling valued $1bn back in June 2013, is about to sell for $15mio according to some sources (the acquire: PCH International) as it had struggle to sustain its growth. With the Fed considering starting raising rates for the first time since 2009, are we going to experience more of those cases?

 ‘A thing is worth only as much as it can be sold for.’

Publilius Syrus