This morning Fred Wilson, posted about the megatrends going on in the VC world right now, and then argued that the current exuberance is ok because a lot of value will be created. I disagree that the two are linked here is why:

I agree with the two main points of this post, that this is a frothy time and that there are major “megatrends” going on - what I disagree on is that the two are related.

The demand for startups to invest in and the supply of startups have nothing to do with the logical megatrends this time around and here is why:

There is a flood of new investors into the startup scene for three reasons all completely unrelated to any of the megatrends. 
- Successful founders becoming investors - unrelated to megatrends. 
- Cost of startups down so now your local doctor is an investor - unrelated to megatrend
- Startup investing becoming trendy and cool - unrelated to megatrend
This is not smart, logical, thematic investing, this is “me and my golf friends all think this is cool, and I sold one chain of carwashes for $1M so now Im an angel and I want in”

The supply of startups matching up with this investor demand has nothing to do with the megatrends you mentioned either. The supply of startups is coming from a few unrelated sources as well:
- Every media outlet chanting “startups are the jobs” - unrelated to megatrend
- Every university chanting “we want the startups” - unrelated to megatrend
- Every Chamber or City EconDev Group chanting “startups YAH!” - unrelated to megatrend

So what we have here is a whole lot of people who got into it for the wrong reasons and should probably not be investors, matching up with founders who got into it for the wrong reasons and who should probably not be founders.

To say: “nothing great has ever been built without irrational exuberance.” is very bad pattern matching - and assumes that because irrational exuberance happened before and whole lot of value came out of it that every time irrational exuberance happens anywhere near a startup land that a whole lot of value automatically comes out of it.

This is simply not the case. 

The drivers here are different this time, this is not 1999 all over again. The frothyness is almost in a completely different channel separate then the megatrends (which are valid) that you mentioned, talk about, and invest in.

So where is the frothyness separate from the megatrends that are actually viable VC/angel sectors? They are in the 10,000th daily deal one off, they are in music, they are in -shrinking- markets like online dating, they are in platform derivative companies, on and on… those companies, their founders their investors are not contributing to some great creation of value under a bubble, no they are just some sideshow that will get wiped out hard.