The Ghosts of Venture Manias Past
- Joshua M Brown
- March 21st, 2011
The Venture Bubble is getting a lot of attention lately, perhaps because of the ludicrous $25 billion valuation that online coupon startup Groupon may attain in its IPO this spring. It is an absolute free-for-all out there, the only thing missing is a reality show on Bravo called America's Next Top Startup. I'm sure it's in the works.
For fun and perspective, let's take a brief glimpse back at the last time everyone caught Venture Fever...here's something from the San Fransisco Chronicle circa November 1999, four months before The End...
Ex-49er greats Harris Barton and Ronnie Lott yesterday said they have raised $40 million from 99 professional athletes and that their Champion Ventures I fund will invest it with 10 top technology-focused venture capital funds...
To call this money the "Dumb Money" is a bit too insulting, let's just refer to it as the "aspirational money" and leave it at that.
As general partners in Champion Ventures, they don't plan to review business plans or invest directly in hot startups. Instead, they leveraged their connections in Silicon Valley to gain entry to an elite group of funds that close their doors to most mortals...
Yes, why even pretend to do due diligence with millions of your own dollars when we're all openly playing Greater Fool anyway?
A lot of professional athletes "have gotten involved with a lot of dumb restaurant, car wash and other deals, and had a problem with capital preservation," according to Barton. With venture capital firms regularly "ripping the skin off the ball," he said he expected Champion Ventures to beat the S&P 500.
Let me give you a hint, kids...anytime you hear the term "ripping the skin off the ball" in any context other than a refernece to Bernard Malamud's novel The Natural, run the other way, wallet in hand.
Anyway, the similarities between that late 1999 moment and now are beyond eerie, there is a tangible sense of deja vu that cannot (should not?) be ignored. A handful of these startup miracle businesses will go on to greater things, but for most, we're in the moment where it's as good as it gets.
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The Reformed Broker is a blog about financial markets and the economy. Joshua Brown is a New York City-based investment advisor for high net worth individuals, charitable foundations, retirement plans and corporations... More.