Are we in a Bubble? Who cares?
Really. Who is investing in startups right now? Rich people who think they can make more money investing in startups than they can investing in other investment vehicles.
What happens if these rich people lose their money? Nothing. No bail outs. No massive loss of income for "normal" citizens. Rich people get a little less rich. Some rich people who put all their money into angel investing lose all their money.
Who is getting funded? Teams of two and three engineers who have built a product and have gotten some form of traction. Last published figures I've read said that Angel List has gotten 300 startups funded this past year. How much money are these startups getting? Anywhere from $50k to $1M.
300 startups * $1M = $300M in funding in angel capital this past year. The National Venture Capital Association's numbers [1] states that Total VC in 2010 was $23B, which is still 1/5th of the VC that was spent in 1999, and is in line with VC investment over the past 10 years.
$300M in angel funding is roughly 1.3% of the average VC funding per year over the past 10 years.
What _is_ different this time around, is that there are hundreds of smaller bets being placed, rather than dozens of huge bets.
Are all of these hundreds of startups going to have decent exits? No. Are a number of them going to turn into successful businesses, perhaps.
But, what is going to happen is that hundreds of founders are getting an amazing education on raising capital, starting a company, shipping product, and trying to make money. What really excited me is what Silicon Valley and the tech landscape is going to look like in 10 years. What this surge in angel investment is doing is educating massive numbers of engineers in how to build and ship product.
As far as I'm concerned that's a huge win for everyone, regardless of how many exits there are this time around.
Is this a Bubble, really, who cares? Writers that need to sell magazines.
ref:
[1] http://www.nvca.org/index.php?option=com_content&view=ar...