The problem with a bubble, is not that 'money is thrown around' by investors - but that the source of the money ends up being in public hands.
The founders get their investment from the investors.
The investors get their money back when the company is acquired (or makes money).
In the early stages of a bubble, this process generally consists of 'money being thrown around' as you say.
However, due to the hype of the returns from these 'investments' (e.g. Facebook growth) - it attracts the public investors into wanting to get in on the 'action'.
Typically this is done through an IPO, which allows the public to come on board and potentially pay all previous investors / founders down the chain their money back (plus more).
However, even without the IPO's of the last bubble (and they may still come!) - the public money is finding a way in (e.g. Banks setting up Social Media Investment Funds). Not to mention any other general investment companies having some of their portfolio riding on 'internet based stocks'.
Then when the bubble eventually bursts (The trend reverses and everyone tries to get out while they can) - it is often the public investors which are left out of pocket / losing their homes / etc.
The point made at the end of the article is, if you are in a start up right now (or even a VC) - it is better to get out early, than to get greedy and end up getting burnt when it bursts (e.g. GroupOn).
The founders get their investment from the investors. The investors get their money back when the company is acquired (or makes money).
In the early stages of a bubble, this process generally consists of 'money being thrown around' as you say.
However, due to the hype of the returns from these 'investments' (e.g. Facebook growth) - it attracts the public investors into wanting to get in on the 'action'.
Typically this is done through an IPO, which allows the public to come on board and potentially pay all previous investors / founders down the chain their money back (plus more).
However, even without the IPO's of the last bubble (and they may still come!) - the public money is finding a way in (e.g. Banks setting up Social Media Investment Funds). Not to mention any other general investment companies having some of their portfolio riding on 'internet based stocks'.
Then when the bubble eventually bursts (The trend reverses and everyone tries to get out while they can) - it is often the public investors which are left out of pocket / losing their homes / etc.
The point made at the end of the article is, if you are in a start up right now (or even a VC) - it is better to get out early, than to get greedy and end up getting burnt when it bursts (e.g. GroupOn).