I am quite scared, to be honest. I am not old enough to remember the internet bubble. But I know you got out of that bubble just at the right time. Which was very impressive. Could you please share some of your experiences back then. In 1999, what made you think differently than today.
I think that if you talk to a number people who actually were investing at the time of the Internet Bubble, you won’t find even one who feels it was similar to the current situation. Not one! Because it wasn’t.
Back then, companies were IPO’ing with just an idea, with no revenue yet, and being valued at huge amounts.
I remember a famous analyst of the time, at the level of Mary Meeker (I don’t remember if it was actually her), saying something like: “Sure this company is at 200 times revenue, but it’s undervalued because “comparables” are selling at 400 times revenue!”
I remember Jeff Bezos, in an interview, saying something like “I’m flattered in investors’ faith in Amazon, but at 200 times revenue our stock is overvalued. We are just a bookstore, after all.” (Which at the time he said that, was what it was).
During the bubble everyone’s Aunt Tilly, the check-out person at the supermarket, and the cabdriver who picked you up, were talking about investing in Yahoo, and AOL, and the latest company of the week (you get the idea)! Right now, your Aunt Tilly, the check out person, and your Uber driver have most likely never even heard of Cloudflare, or Crowdstrike, or Datadog, or Zscaler, or Twilio, or Okta, and aren’t investing in them.
And these are real companies that are leaders in their fields, maybe even dominant in some cases, with multiple hundreds of millions of dollars of revenue at least, and growing very fast, in fact at rates of growth that I, personally, have never seen before in such mature companies in my long investing career. And their revenue is recurring, locked in in a way. In addition, most have high gross margins, and most are even profitable, and almost all have positive free cash flow, which means the business is actually putting money in the bank, literally, and NOT running up huge deficits and living on the next stock offering for cash to continue running the business, which was what was happening during the bubble. It was a crazy time.
No, this doesn’t feel ANYTHING like the year 2000 Internet Bubble!