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Is Seattle headed towards dot-com irrational exuberance – again?

When I see the ‘New Seattle Startup Index‘ by Seattle 2.0 I can’t but help feel that we’re headed back to the days of dot-com irrational exuberance. The days where success was measured by page views and unique visitors, not revenues and profit margins.

In 1997 through 2000, those of us involved in building the dot-coms did so on the greater fool theory. Kind of like owning a professional sports team. Doesn’t matter if you’re losing money. A greater fool with a bigger ego will come along and out bid the other guys to pay double what you bought your team for seven years ago.

With dot-coms the greater fool was the next venture capital group who would put in more money at double or triple the valuation of the VC group at the last funding round. The shareholders, whether founders, employees, or investors were all getting richer on paper. All getting richer based on page views and unique visitors. Greater fools also included buyers of dot-coms which paid exuberant prices.

I like what Seattle 2.0 is doing pulling local Seattle entrepreneurs together for networking and education. Someone like me can only love their self billing on its Seattle 2.0 About Page.

Seattle 2.0 was created in 2007 with one goal in mind: To help tech entrepreneurs build great companies.

What makes this different from other sites and blogs is the fact it’s written by doers. We are not journalists, reporters or analysts. We are entrepreneurs, investors, advisors, consultants and members of a healthy and ever-growing startup community around Seattle.

Our primary audience is the entrepreneurs and startup employees in the tech space. Everything that adds value to them, it’s fair game at this site. Additionally, we want to support the eco-system as a whole, including providing information and valuable content for Venture Capitalists, Angel Investors and Service Providers.

When I saw the ‘New Seattle Startup Index’ I asked on Twitter why not base the index on more tangible things entrepreneurs should be striving towards. Profitable or not? Customer retention? Rate of growth in revenues?

That way entrepreneurs can find the appropriate mentors and role models. Some founders may be seeking revenues and profits and be looking for appropriate leaders to meet.

Jennifer Cabala, editor of Seattle 2.0, responded that as private companies they don’t have to share revenue and profits. I understand the list has limitations in that regard. Cabala is doing a great job, but maybe ask for companies to share whether they are profitable, how many customers they have, what their customer retention rate is, and maybe even share profit margins, if they are comfortable with the later. You could use percentages on rates of growth.

Otherwise the index may mean little. Unless you are looking for buzz created by companies who see their name on the list and are looking for some measure of success. Even if that success is fictitious.

If you’re looking to help entrepreneurs build great companies, you need to highlight successful entrepreneurs who are building great companies. That way entrepreneurs on the way up can meet them and perhaps be mentored. Maybe screen or invite speakers for your events based on such factors.

It’s easy today with low cost development (development required millions in VC investment in ’98) to build things that create lots of traffic and buzz. But the chances of being the founder of the next Twitter, Facebook, or even I Can Has Cheezburger are about the same as you batting cleanup for the Mariners or being the starting tight end for the Seahawks next year.

Seattle entrepreneurs need to be focused on a successful business model. From the day you launch something will someone take money out of their pocket to pay for your service or product? Only then will you know if you created something or not. Only then will you have customers who care enough about your success that they will help guide you on how to build a better product by sharing their legitimate feedback.

Do rising Seattle entrepreneurs know what it’s like having your heart ripped out through your stomach when you need to sell your company before you’re ready because you chased irrational exuberance? A company that you and your teammates poured your hearts, souls, and every once of flesh into. I do. My fear of that ever happening again is worth as much as a Harvard or Stanford MBA.

The only thing worse would be to have to close the doors on your company. Something hundreds of other Seattle entrepreneurs lived through in the dot-com era. Imagine your teammates unemployed and looking for jobs on a day’s notice.

Let’s bring Seattle entrepreneurs into communities such as Seattle 2.0. But lets do it in a way entrepreneurs can find the right role models and mentors. Let’s do it in a way that attracts seasoned Seattle entrepreneurs who are not scared away by events filled with kids chasing irrational exuberance.

Seattle is a great city. It’s a wonderful place to found and grow a company. I moved to Seattle 11 years ago to chase a dream. My dream remains alive. And I have not one regret moving to Seattle.

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