Is Facebook the New AOL? No. Nothing Is the New AOL

Lest chatter about Bubble 2.0 recede too much, The Verge has published a very amusing primer on the state of the tech industry that imaginatively connects some dots among old titans and new upstarts.

Nilay Patel, under the headline “Facebook is the new AOL,” takes on some of tech's current sacred cows — Facebook, Google, Apple — in a broad warning about making some of the same mistakes with misplaced value assumptions that are still all-too-familiar memories of the dot-com bust.

You can argue with articles like this (which I’m about to!), but they’re valuable because they force us to ask the right questions and keep our eye on the ball. The point is to recall history at regular intervals so we aren't doomed to repeat it.

Last year was the year the tech press obsessed about a return of "The Bubble." One of the main characters in the discussion was venture capitalist Marc Andreessen, who vigorously argued that there was no bubble, that valuations were, in the main, sane.

In one of his most full-throated expositions, Andreessen told the Wall Street Journal exactly why now isn't like then. "The ones that make it work are going to be enormously valuable. This is a time of very big franchise creation," Andreessen said. "The people who say it's all like the '90s and it's all going to come crashing down just don't know what they're talking about."

Andreessen may seem conflicted by the fact that he's in the tech startup investment game, so talking up that industry and its prospects would be expected. The bigger irony is that he was a co-founder of Netscape, the poster-child of the 90's IPO bubble, a company with no revenue which AOL — now worth $3.7 billion — purchased in 1998 for $4.8 billion and whose value plummeted, after the bust, to zero.

But it's just as easy to argue that Andreesen knows what he's talking about precisely because he is a player and puts his money where his mouth is and has even left money on the table by being, in retrospect, somewhat conservative in his backing of Instagram.

The tech and investment world has changed considerably since the frothy 90's. Not entirely, of course. Instagram had no revenue when Facebook bought it for $1 billion (and then botched its first attempt to make some money). That purchase price seemed audacious, even idiotic. And then came Facebook's purchase of WhatsApp for $19 billion.

über has an implied value of $40 billion. Dropbox, AirBnB, Snapchat and Flipkart are at $10 billion, according to a tally by the Wall Street Journal. Meanwhile Twitter, the last huge tech darling to go public, is trading below its IPO price and its management team is the subject of seemingly endless media speculation.

Is this a Tale of Two Cities? I think, rather, that it's the two side of the same coin. There is big money available for tech startups, and there are valuations which depend heavily on a particular future, and those factors are the same as they were back in the bad old days.

But we aren't doomed to relive the dot-com bust for a very simple reason: Entrepreneurs and investors have a very different game plan now. Going public is only one, not necessarily primary, goal. Is Facebook the new AOL? No, no one is. The game plan now is to get in, get out, and get on with it. On both the investment and founder side there is an increased desire to grind out significant, if not game-changing, victories rather than winning the lottery just once.

There is also a class of new funding sources with a different perspective than early investors. It's chastening to wring one’s hands over the titans that were: AOL, MySpace, CMGI, Netscape. But from those ashes emerged some real titans with real spending money — The Googles, the Apples, the Facebooks. Include in that elite club Microsoft, Yahoo (now a little more flush with Alibaba gains) and even my own company, LinkedIn. You are much more apt to read about these whales buying guppies rather than bigger whales — like AOL buying Time Warner, that other cautionary pre-bust tale.

In the 90's, entrepreneurs dreamed of going public and changing the world. Now more than likely they dream of building something that a bigger fish needs to acquire (even if only defensively), cashing in and moving on. Serial entrepreneurship and the ecosystem that supports it is an enormous safeguard against big bad bets from early investors who might have to push the envelope to go public, and God-complex founders who surround themselves with acolytes assuring them they are geniuses.

"First Day Pop" used to be the mantra of heady entrepreneurs. Now it's "Exit Strategy."

So, are we likely to go through yet another 401(k) crushing experience that punishes all investors for the stupidity of a handful of puppetmasters? I doubt it. And it's not because of any new regulation, investment timidity by angels, seeders, family and friends or the scaling back of risk taking by plain folk with ideas and drive. It isn't even because we've seen this movie before or that IPOs are passé.

It is because entrepreneurs have widened their horizons and have become more pragmatic — not less — about valuation. There are some priced-for-perfection valuations out there, as the Journal journals. But for every Mark Zuckerberg, who turned down a billion dollars from Yahoo because he thought he could rule the world, there are dozens of others who just want a check from Mark Zuckerberg so they can tilt at another windmill.

Are you an entrepreneur who's been lucky enough to face a decision to sell or go public? Are you an aspiring entrepreneur who wants to build to sell rather than ever go public? Do you work for a startup in the midst of this heady atmosphere — what's it like? Please comment below and/or write your own post. If you do, comment with that URL here and I'll link to it.