Just ask Yahoo, which paid $5.7 billion for broadcast.com and $3.6 billion for GeoCities in the last Internet bubble more than a decade ago. It drove off a crazy round of overvalued acquisitions culminating in America Online’s $165 billion deal with Time Warner in which funny money bought an old-line media business. It was fun for a while, but when these businesses didn’t produce, it all fell apart. Mojo can’t sustain itself.

Let’s hope this is not what we are seeing again, but it’s hard not to be worried. Silicon Valley has no incentive to stop the valuation madness.

Search for the ‘Next Big Thing’ Yields Soaring Valuations via The New York Times

I know that these stories all begin to sound like some hysterical “the valuations are too damn high” meme.  But I was there for the first dot com boom and fizzle.  Something has to sustain the market as it grows, and once the valuations get to a certain level, it requires the scale of the public markets to exit these investments.  Unfortunately, the exuberance of the equity markets can only be sustained for so long.

(via marksbirch)

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