Bubble or not, let’s build something.

By Mike Gozzo

I’ve been thinking a lot about the state of the tech startup scene in North America as I work on raising our seed round and pound the pavement in boardrooms, cafes, and over pricey lunches. It seems that $FB has spooked almost every investor and fellow entrepreneur into thinking that the end of the good times are coming and another door to innovation will be shut. Worst of all, this fear keeps  brilliant people working shitty, dead-end jobs in faceless corporations. It’s a fear that crushes dreams.

In MBA school, you learn about stuff like discounted cash flows and how they are ultimately what is used to value a company. (Comparables and multipliers are really just proxies for the notion of what the present value of a company’s cash flow is)

Then you get out and start raising a round, you throw valuations around in the air and to most outsiders it seems illogical. I think this comes about because many founders simply aren’t financially literate enough to do more than say “If AirBnB is worth X, then we must be worth at least Y”

Some people get excited by these uninformed valuations, others write blog posts and call it a bubble. In my opinion, the truth is somewhere in the middle. This crop of entrepreneurs learned some big lessons from their older brothers. They’ve learned the importance of revenue and having an unfair advantage. With a few exceptions, my experience leads me to say that most entrepreneurs are trying to build real businesses and are not gaming the funding community. This is very different from the IPO fever of the dot-com bubble. (Not to mention the fact that the size of many seed rounds today would barely cover a month of runway in 1999)

Capital is out there but the funding environment is not loose and there is less cash in the system than there was the last time around. TechCrunch and YC make it look easy, but fundraising is still fucking hard. Anybody who’s pitched endlessly or sat through months of due diligence only to miss closing date after closing date will confirm this.

Instead of arguing on what our companies are worth, we should all be focussed on building a strong, diverse and healthy North American tech industry. It’s time to get back to work and stop giving a flying fuck about what some investor thinks you’re worth. Debating whether or not we are in a bubble are simply unproductive.

I don’t know about you guys, but I’m going to get back to building something that matters.

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