> This valuation (along with the recent surge in Facebook stock) will send a rising tide of valuations rippling down through the ecosystem until “my friend and I have a pitch deck and an idea for a web app” is worth $10 million.<p>The opposite has been shown to be true (and correlated with my own experience) for early stage companies. The biggest startup valuation bubbles happen when there are no public tech companies for money to be invested in (eg. the '07 startup bubble and more recently in '11).<p>With Facebook, LinkedIn, Pandora, and now Twitter etc. public early stage startup valuations have shrunk again.<p>Where it does get competitive is in the later stage rounds, but that was happening anyway as the mega-funds like DST competed with traditional VC and mezzanine funding (the business model here changed, as companies wanted to go public later).<p>> Snapchat and Pinterest are worth around $4 billion dollars each. Evernote and Airbnb are each worth over $2 billion. Path is worth $500 million.<p>Snapchat never raised on $4b, that was a rumor (and it continues to get cited as signs of a bubble even though the round never happen). The only other valuation here that would be out now is Path, and that is only because that startup has struggled. Were it a real bubble, Path would not have any problems raising a new round at $1b, fact is they are laying people off and searching for bridge loans from friends).<p>> “People who think the company is overvalued,” they scoff, “just don’t get the power of Twitter.”<p>There is nothing magic to understand, the business model is centuries old - sell services to individuals whose attention you have. Twitter currently has 250M subscribers, larger than most traditional media companies (that required printing presses, expensive TV spectrum to be purchased, entire studios like 30rock, dealing with the politics of media ownership, expensive distribution etc.) and growing quicker.<p>I am a twitter user, I don't watch television anymore and I don't pick up newspapers or magazines. For advertisers to reach me and people like me, they need to find me on Twitter (or others on Facebook - this is the competition).<p>The Twitter IPO is <i>great</i> for startups, for a few reasons: first, it returns money to investors who will inturn invest in the next generation of startups, it reinforces the hit parade and that the industry depends on, and it will bloom and entire new generation of angel investors who will be supporting the ecosystem (in the same way former Google employees did 10 years ago and FB employees did 2 years ago).<p>edit: and I think the Buffett quote argues <i>for</i> Twitter, i've seen that quote used before to argue against Bitcoin, but not against an actual company that is producing hundreds of millions of dollars in revenue and growing at almost 100% a year.