Are we in a bubble?

Scott Kirsner wrote an article this past weekend for his Innovation Economy column in the Boston Globe. In the article, he looks at the question of whether or not we are in a economic bubble. As is typical with Scott’s longer form pieces, he sought out opinions from both sides and he does a great job of interviewing people with many different opinions.

Along with the article, Scott produced a video with short interviews of people with opinions on the subject. I was lucky enough to be interviewed by Scott at the TechCrunch Boston event.

I’d like to take a moment to add to the few points I made in the video:

  1. I believe that startups whose sole business model is advertising will have a hard time as we go deeper into 2008 and 2009. Although the market for online advertising is growing rapidly, there simply is not enough demand to fill the supply of startups who believe they can build a business solely on advertising revenue.
  2. I believe that we are in a “startup bubble.” It seems everyday there is a new social network that launches and yet another website that aims at a specific vertical. They can’t all co-exist. At some point, the startup activity will slow down.
  3. Companies (like Punchbowl Software) that have a hybrid business model will be able to adapt more quickly to any economic downturn. At this point, we have more business development opportunities for e-commerce partnerships than we can handle. While we believe that a large percentage of our future revenue will indeed come from advertising, we’re building a diverse business that we believe will help us weather the storm of any economic downturn.
  4. I expect that merger and acquisition activity will pick up significantly during 2008 and 2009. As small companies feel less sure of their ability to survive in an uncertain market and large companies look to invest in new technology and services, I think we’ll see a lot of consolidation in the market. In the past, this would have fueled even more startup activity — over the next 1-2 years I think you’ll see this will have the short-term effect to dry up the startup community.
  5. As always, the market is goes in cycles. A few years from now, everyone will be asking if we are in a recession. I believe that the cycles will be much shorter over the next decade– so we will see more highs and lows. In this kind of a market, timing is everything. Let’s hope Punchbowl Software is in the right place at the right time.

Whether or not we are in an economic bubble this time is debatable and maybe even laughable, but I think one thing we all agree on is that it is a great time to be an entrepreneur.

Thanks to Scott for including Punchbowl in his interview. Scott is great for Boston– he’s asking the hard questions and raising the consciousness of the entire community. As a journalist, I can’t imagine that there is anything more rewarding.

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