Why The Social Media Revolution Is About To Get A Little Less Awesome

In the wake of Facebook’s disappointing IPO, Paul Graham, the cofounder of the country’s most famous and successful tech incubator, Y Combinator, sent an email to his portfolio companies predicting a shift in the way venture capitalists evaluated start-up potential. Before the public offering, companies that build a large audience were not under much pressure to build a revenue model to match. But “the bad performance of the Facebook IPO will hurt the funding market for earlier stage startups,” he wrote, “possibly a lot, if it becomes a vicious circle.”

Facebook’s bad IPO wasn’t an aberrational day. The company’s stock kept dropping. And dropping. From $38, the offering price, into the $20’s and below.

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