Reply #12: Silicon Valley Start-Ups Awash in Dollars, Again / NYTimes [View All]

http://www.nytimes.com/2007/10/17/business/media/17bubble.html?_r=1&hp&oref=slogin



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October 17, 2007
Silicon Valley Start-Ups Awash in Dollars, Again
By BRAD STONE and MATT RICHTEL
SAN FRANCISCO, Oct. 16 — Silicon Valley’s math is getting fuzzy again.

Internet companies with funny names, little revenue and few customers are commanding high prices. And investors, having seemingly forgotten the pain of the first dot-com bust, are displaying symptoms of the disorder known as irrational exuberance.

Consider Facebook, the popular but financially unproven social network, which is reportedly being valued by investors at up to $15 billion. That is nearly half the value of Yahoo, a company with 38 times the number of employees and, based on estimates of Facebook’s income, 32 times the revenue.

Google, which recently surged past $600 a share, is now worth more than I.B.M., a company with eight times the revenue.

More broadly, Internet start-ups are drawing investment based on their ability to build an audience, not bring in revenue — the very alchemy that many say led to the inflation and bursting of the dot-com bubble.