Business Logs

Roll It Up And Flip It

Thursday, October 20th, 2005 by Mike Rundle

Anil Dash draws up some great conclusions about the new “built to flip” economy and I couldn’t agree more. He thinks that these new “web 2.0″ startups aren’t thinking IPO but are looking to get acquired, which probably makes sense considering all the acquiring that’s been going on (Weblogs, Inc., Upcoming.org, Weblogs.com, etc.).

Anil explaining what happened back in the 90s:

Interestingly, most bubble companies, especially those with unsustainable models, ended up flipping to one of the big players (AOL, Microsoft, Yahoo, eBay, later Google) or one of the then-big players (Lycos, Excite, et. al). This would happen after the initial run-up in stock value, and would end with a crash or a slow slide, after which the VCs made money, founders made a little bit of money, and everybody else pretty much ended up underwater.

So basically bubble companies would go IPO, get a huge run-up in value, then their stock would deflate, and a floundering has-been Dot Com would be sold to a major tech figure for a few stacks of bennies. Now, small teams are creating mashup faux-companies, generating lots of buzz, and are acquired prior to making any real money. The end result of both scenarios is nearly the same dollar figure.

Is this the new economy? Do revenues no longer matter? Is buzz and site traffic the real measure of success? Are pre-money valuations pulled from thin air, or out of asses, or both?

Reader Comments

3 Responses to “Roll It Up And Flip It”

Jeff Smith Says:

I hope this isn’t the new economy. I fear that if this is the way things are headed, we won’t be seeing as many quality products, but more half-assed, hurried products. People will just being trying to get something together as fast as possible with the prospect of selling it (or rather being ‘aquired’) rather than taking pride in their product (and/or brand) and producing something of quality, for the long-term.

October 20th, 2005 at 4:04 pm

Paul Says:

Like Jeff, I hope this isn’t the way things are going, although I suspect my outlook would probably be different if I was running one of these companies that are likely to be snapped up by a larger player.

October 21st, 2005 at 5:43 am