When I did my "Startup Therapy" presentation last month, I took the opportunity to actually look up the NASDAQ graph of the time period that we ran DoBox.  I've said informally for years that "we skiied the avalanche" of the collapse of the public financial markets, but until that time, I'd never looked it up. Here's a link to the slide I called Skiing the Avalanche that shows what the NASDAQ looked like, overlaid with the life of "funded DoBox" (Jan 1999 to March 2002). 

As I said to the new entrepreneurs in the room, if you could have picked the WORST time to start an investor-backed company, well that might well have been it!  We started just a few months before the NASDAQ peaked, and sold about 6 months before the low point. 

But what struck me was looking at the time leading UP to the March 2000 peak.  Look at 1999.  Remember the 80's Prince song "So tonight I'm gonna party like it's 1999"?  It looks to me like the Bubble 2.0 crowd is really partying like it's 1999!

I look at YouTube at $1.65billion (and they're having a really  hard time getting rights to all the stuff that's up on their side - no DUH! as anyone who knows anything about the arts, theater or creative game could have told them...). 

I look at the Web 2.0, at the eyeballs, and it's a really weird case of deja vu all over again.  I know, I know, "it's different this time".  I know that NOW there really IS an advertising model and it's (mostly) working.  But if I was a web 2.0 entrepreneur, I'd look pretty closely at the real 1999, and then I'd ask myself the hard question - is this the 1999 of Bubble 2.0?

And if IT IS, and you're a Web 2.0'er, WHAT SHOULD YOU DO!?  My suggestion,  SELL WHILE YOU CAN!  Follow the lead of the YouTubers and the crowd that's racing down the same road.  As they used to say in 1999, "monetize those eyeballs". 

Here's another picture for thought.  In a great article, 

"Can the Economy Survive the Housing Bust? (Fortune on CNNMoney.com) By Jon Birger" , Birger talks about Liz Ann Sonders, chief investment strategist at Charles Schwab & Co., who carries around a chart so scary that she doesn't like to show it to investors.  But she shows it to us.  It's a chart that plots the National Association of Home Builders' Housing Market index against the Standard & Poor's 500 stock market index (with a one-year lag).

Does that make you nervous?  It sure made got my attention. Are we just partying like it's 1999?  Are we at the end of the "1999 of Bubble 2.0"?  If so, trust me, skiing that avalanche is not fun.  At the same time, if you have a real business, and you really are committed to grow it, even if you're skiing your heart out, you can prevail, it just takes a lot more work than on the upswing. But why will the housing downturn result in a stock market downturn, and why would if affect tech?  Well, consumers went from one bubble (stock/dotcom) to another bubble (housing).  Now, last time, we had some "real hits" like the telecom collapse, the Enron disaster, as well as the end of the Y2K spending that clearly fueled huge tech sales to the enterprise market for much of a decade.

We won't have those this time.  But we will have another "real hit", this time the hit of consumers in over their head with their house and their home equity loans, or multiple (speculative) houses they can't sell or rent, or adjustable rate mortgages that keep adjusting up and up and up while the Fed fixes their liquidity mistakes of 2003-04 (see WSJ, 11/6/06 "confession of the Fed").

Investors turn quickly from Greed to Fear.  All over the country they're in fear mode in the housing market.  The data seems to point to the fact that it's only a matter of time (< 1year) that Fear hits the stock  market.  And when it does, just like "last time", the business models that don't hold up under scrutiny are going to go down hardest and fastest.

Don't say I didn't warn ya!