Facebook, Zynga and Twitter have inspired a host of copycats, and it’s those companies that are overvalued and are creating a growing tech bubble, said Floodgate partner Mike Maples.
Some major companies in the Web 2.0 era have become incredibly popular and have ballooning valuations. Facebook, for example, is valued at around $50 billion. Social gaming company might be worth around $7 billion. Those colossal valuations have made some investors and entrepreneurs concerned that the companies are overvalued and are contributing to a tech bubble similar to the one that led to a recession in the early 2000s.
But if there is a tech bubble, it isn’t because of the whole host of copycat companies that are trying to be “an x, but for y.” It’s coming from the companies that are mimicking them and trying to operate in the same space, Maples said. To that extent, there probably is a growing tech bubble — even though it isn’t as bad as the one in the early 2000s that involved “mass hysteria,” he said.
“Is there a tech bubble? Rounded off to the nearest yes, yes,” Maples said. “In a given year there are maybe 10 or 15 companies that are truly valuable, and then everyone crowds around the soccer ball — those companies end up having their valuations get away from them.”
He said Silicon Valley hasn’t quite reached bubble status — but it’s well on its way. That’s in contrast to Y Combinator founder Paul Graham. Earlier in February, Graham, the leader of a well-regarded startup incubator said the Valley wasn’t in a tech bubble because the companies were much better quality than they were in the late 2000s. He made those comments on news aggregator Hacker News, a part of Y Combinator.
Maples is known for taking “early, crazy” risks like investing in news aggregator Digg and Twitter, he said. He tries to focus on potential investments that are almost controversial, because those typically end up being the most successful. He also has the unfortunate notoriety of attending a controversial gathering of early-stage startup investors now known as “angelgate.”
And he hasn’t escaped that infamy yet.
“Now I can’t have dinner with more than two angels without it being a silly collusion meeting,” he said