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by nugget 1352 days ago
I'm just old enough to remember the dot com bubble. Very few companies back then had much revenue, let alone any profit. Public tech companies in 2022 have enormous revenue and profit streams. Alphabet/Google is trading around 20 times earnings and Meta/Facebook is around 10 times earnings. The S&P 500 overall is in the high teens. I'm not sure I'd call that disconnected from reality.

Within the startup ecosystem there are embryonic products that if nurtured can develop into existential threats to most of the current Fortune 500 companies. Incumbents eventually have to pay up to survive, eg. Adobe acquiring Figma. This dynamic supports startup valuations broadly. Startups represent the future and the future is usually priced at a premium.
3 comments
Zanfa 1352 days ago
> Public tech companies in 2022 have enormous revenue and profit streams. Alphabet/Google is trading around 20 times earnings and Meta/Facebook is around 10 times earnings.

While this is true for the largest of ad companies like Google and FB, the same isn't true for the vast majority of recent tech IPOs like Robinhood, Duolingo, Couchbase, Monday not to mention literally all of the ridesharing and food delivery companies to name just a few.

In a way, excessive acquisition valuations are likely also a side-effect of too much money floating around that might change radically with increasing interest rates.

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benj111 1352 days ago
Ad spending is one of the first things to get chopped come a recession. So expect these numbers to go down.

So then the question becomes what's the profit margins? Can they absorb, say, a halving of revenue short term?

If they can't then they're going to start layoffs, and the first to go will be the ones that don't generate revenue, so the experience gets worse for users, and the pipeline of new products dwindles, and you've released a bunch of potential competitors that know your business into the labour pool.

This also removes the price support for those existing startups.

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caeril 1351 days ago
One problem is that in 2022, most of these companies have very fragile revenue in a contracting or even a steady-state broader economy.

In a time of genuine hardship, particularly of the energy/food constraint kind, there are a million consumer priorities before a new iphone (Apple), consumer electronics (Amazon), fast fashion, vacation travel, and the enormous adtech ecosystem (Google, Facebook) that is supported by such business, as well as the toolmakers (Adobe) for them.

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