Instagram Acquisition Brings Bad .com Flashbacks


You probably thought my Instagram post would be about the evils of Facebook, but instead I wrote a post with Jennifer Leggio on Forbes about how to survive a tech bubble. No matter what impact the Instagram deal has on my personal social media (and even on the fledgling network), what is becoming clear is a return to dangerous financial valuations for venture-backed tech start-ups.

Paying $1 billion dollars for a 12-person company with zero in-bound revenue makes absolutely no sense. Even worse, the acquirer Facebook is a company that expects a $100 billion IPO on $1 billion a year of net revenue. It’s clear we are in the midst of another tech bubble. That’s why Jenn and I wrote our somewhat cheeky survival guide.

During the .com era, I was in the middle of the boom as a mid-level manager. I remember getting laid off with the rest of the marketing staff at IPNet Solutions in 1999 (I served as media relations manager), just three weeks before our shares vested. The catch? It was done on my cell phone in two minutes flat while I was on vacation. Nice. Four years later, IPNet was acquired for an undisclosed amount (e.g. a mercy kill).

Then as a PR exec at TMP Worldwide (now Monster Worldwide) back here in the DC area, I helped an optical telecom company build a $1 billion IPO. They were also acquired in 2003 for stock after bleeding red ink, going through waves of layoffs, and realizing the culmination of its two contracts.

Finally, when the dot com bubble crashed, I watched waves of my peers get laid off, as the agency’s telecom and tech start-up business dissipated. It was heart breaking watching them go month after month, not knowing if this time would be my turn, too. I survived that rough patch.

So, you can see I have experienced these wild tech start-up valuations personally. What goes up without reason will surely come down. Many of us are still in tech start-ups. Some of them are very good companies. But it never hurts to be ready for worst case scenarios like a social media bubble bursting.

What did you think of the Instagram acquisition?

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