Last Friday, I noticed a tweet from my friend Aziz Gilani (@texasvc) at DFJ Mercury:
“When asked questions by the audience, john doerr just filed groupon under ‘bubble’. The crowd roared! @rbpc2011″
Normally, the half-life of tweets are about 5 minutes for me (if that), but this one stuck in my head all weekend because it is wrong on a few levels.
First, I don’t think Groupon is a bubble, or indicative of a bubble. While I don’t have a ton of inside knowledge, from what I do know they are creating substantial profits at the company. I guess you could file Groupon next to Facebook, Twitter or Zynga if you are that cynical, but in each of these cases, there are real businesses here. What are reasonable valuations for these entities? No clue, I’m an early-stage investor, but profit is profit. And I don’t think any of these markets are fads.
Whether or not any of these companies are long-term successes, I don’t know (my guess is they will be), but these don’t look like bubble companies that I’ve seen in the past.
I think the term bubble referred to the Dot Com blowup a decade ago. Many of these bubble companies had no viable business models and were acquired or taken public due to hype. Many of these companies had negative margins for every good they sold. I’m sorry, but volume doesn’t help you here. (Note to self: shipping kitty litter is expensive).
And why be a hater Mr. Doerr or audience? In the case of Mr. Doerr, he is one of the most prolific investors of our time, so I’m not sure why he has to be negative. As momma used to say….
As for the audience, I’m not sure if this reaction was spurred by jealousy, or some desire to see the VC ecosystem do poorly, but all of us in the startup community should be rooting for our industry, whether or not we invested in these companies or not.
I wasn’t at the event, so perhaps I’m taking too much issue from a third-hand report in 140 characters or less, but this just hit me the wrong way.