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by prklmn
3296 days ago
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Here's why the bubble is all too real. Let's compare Houzz to another company in the housing space with a $4 billion valuation that's not swept up in the tech bubble, US Gypsum. Last year USG, a company that has survived for 116 years, made about $400 million in profit. That's not make believe non-GAAP BS, that's actually profit. I'm not privy to the intimate details about Houzz's financials, however I'd be surprised if they made a tenth of that. The question I ask myself is if Houzz will ever be this profitable, and when. I'd guess no, but I could of course be very wrong. When the market turns, which it will, profitability is what counts in determining who survives and who doesn't. When we start measuring performance using metrics other than profit, which is quite common now i.e. revenue, non-GAAP profit, users, and so on, we are ignoring what really matters and this allows for situations like the dot com bubble and the current bubble to arise. These companies are raising cash with ease now, and burning it just as easily. There will be a day, I think sooner than later, when it's not so easy to raise such enormous sums of money. When I see something like Uber losing $3 billion last year, and funds still lining up to invest, I can't help but think that we're in the middle of a bubble. These tech firms are selling hope more than anything else to investors. |
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