The New Internet Bubble and the Rise of the Countless Entrepreneurs

The recent announcement that Facebook is acquiring Instagram for US$1 Bn have made shockwaves all across the globe. This comes hot after the heels of the well publicized IPO of Groupon and the pending Facebook IPO.

Now, to me, Instagram is no where worth the $1bn that Facebook is willing to pay for it. For one, its only a small team of less than 10 men. Secondly, Instagram has no business revenue.

All of this puzzles me quite a bit, why would Facebook be willing to pay such a big price for something that doesn’t quite make sense? Sure we may argue that we’ve said the same thing back in 2006 when Google bought young upstart and also (non-profitable) Youtube but at the very least, Youtube had some form of value. They had a clear niche and popularity. Easy video uploading and sharing.

Instagram on the other hand has way too many clones in the market right now and everything that it does can be done by other more packaged applications (ie. Path).

So where is the value? What does Mark Zuckerberg sees that most of the world doesn’t? Or is this just part of a quick capital play to flip and get some money in a post-acqusition valuation.

All the signs pointing out are worrying me that we may actually be living in a new Internet Bubble.

Yes, we’re certainly not yet at the level of the 2000 dotcom bubble, but just take a look around your Facebook feeds. I’m willing to bet every week there’s at least one person talking about how amazing the “startup scene” is and how awesome their idea is going to be. Sharing links and articles of apparent startup successes like “Draw Something”, “Angry Birds” etc.

Together with the media bombardment of all these stories of success, movies and books about entrepreneurs who made it big with nothing but a ramen diet and a crazy laptop, it only helps to perpetuate the myth that running a startup is easy.

Truth is, running a startup is hard. There’s so much more that goes beneath running a startup and for every ‘successful’ startup, there are 100 or more who fail.

Its difficult and it can get pretty downright depressing and I’m not sure if all this false news and excitement is going to do the industry any good. How many people are going to try thinking that its the fastest way to make a quick buck and then fail because it wasn’t really something they were prepared to sink deep into.