Housing.com And The Big Consumer Startup Valuation Bubble

Today with a pedigree technology team, a hyper growth business plan one can easily raise money to fund their consumer internet startup. Startups that are catering to every human need using internet today seems to be an funding opportunity for investors. These consumer internet companies are getting millions & billions as valuations completely defies common wisdom about business fundamentals.

We see daily news about some or other startup with no revenue, or negligible revenue, to be valued in the billions. Technology companies main attraction is their fast user growth with traction. Bubble is created when intangible asset values are inflated out of thin air like no of active users metric. I am clearly of the opinion that technology companies are getting hefty investments even when they haven’t figured out how to generate revenue consistently, let alone make a profit, It’s a bubble. Bubble are created by entrepreneurs & funded by investors. What will prick this bubble? Housing.com is the one.

Housing.com the real estate discovery site got lofty valuations with ample funding. They will be looking to monetize on subscription, transaction brokerage. The way they are spending crores on media & advertising to attract both on demand & supply side. It’s not sustainable. It’s race to bottom. India’s property market sentiments continues its downward trend. Customers are no longer bullish on real estate as investment asset class in real world. Housing.com will have to deliver its performance to justify the investments & valuations will be difficult. On non-performance access to cheap capital will dry off. It will bring the required correction in the startup market. Current times reminds me of the dot com bubble in 1999-2000. In those times startups with no revenue also got access to cheap capital. Indya.com which had raised 50million USD in dot com time had a similar story of investing money in building brand first & company later. Great team but lost the plot. I can see similar trend with Housing.com startup.

Seeing the Housing.com in news, one of the fellow angel investor was convinced that businesses having a generic domain name should be invested. My take was that merely having the domain name Housing.com will not make them successful. If this was true then Search.com & not Google.com will be leader when it comes to search engines. Similarly it’s Amazon.com the biggest online retailer but not Shopping.com. Lastly in commuting it’s not Transport.com but Uber.com that is popular. These companies are popular because they are looking at disrupting with new business models out of their technology platform. It is one more point for me that housing.com generic name will not be successful. The responsibility lies more with investors than entrepreneurs not looking at the reality & agreeing to fund at high valuations. VCs have fear of missing out on high profile deals. It make them vulnerable. 

Being an angel investor I am bullish on investing in Indian startups that are building value & creating disruptions with technology. There are great companies in India being built to last & becoming huge wins for investors.

But it’s time for investors to Look Down to reality & not Look Up with Housing.com

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