I remember the first tech bubble well. True story: In 1998, one prominent online vendor – long since dead, by the way – was selling my company’s product for $66 when the distributor price was $76. Also true: In 2000, a would-be acquirer flirted with buying Palo Alto Software for its web traffic, but wanted to leave out our $5 million revenue stream because “that would lower valuation.”

And yet, despite that memory, last week I found myself suggesting to a local web software startup that they might be better off scrapping their so-called business model and just aiming for disruption, not revenue.

Of course, theirs is a special case. I saw a demo last week. The software, though not yet released, looked potentially cool enough to go viral. By viral I mean remarkable in the [popularized-by-Seth-Godin] sense of something so good that users tell other users quickly. Every user generates additional users fast. And it could also be disruptive. By disruptive I mean it has the potential to change the way a lot of people do things. I’d like to tell you about the company, but for various reasons that would be inappropriate until middle May.

However, this is the second time in three months I’ve suggested to a software startup (different startups) that they might have to choose between being disruptive and charging money to cover costs. Quite honestly, this strikes me as dangerous advice. Hit it really big or go broke. It certainly heightens the risk.

To make it interesting, I found Nick Bilton’s With No Revenue, an Illusion of Value on the New York Times bits blog last weekend. He argues the exact opposite point:

When this next bubble pops — and it will pop — the idea to make no money can finally pop, too. Then investors can start working with companies to build businesses that have long-term financial goals, instead of just building a short-term mystery.

However, uncertainty is a sign of intelligence. I think. Maybe. So I’m not sure.

Still, look at the big winners of the last few years: Facebook, Twitter, and Instagram, for example. Valued in the billions of dollars. Entirely free to users. And, although Facebook now makes billions in revenue, revenue was not the point in the beginning. Revenue in fact would have killed their growth. Do you agree?

So there’s the dilemma: disruption vs. revenue.

That is, at least, until some big crash of publicly-traded stock occurs and visible valuations of top-grade startups fall because fashions change and analysts start liking revenue. If that ever happens. My favorite tech bubble analysis this week is by Chris Dixon, whose thoughtful piece here includes a nod to disruption vs. revenue:

The argument that sometimes startups get better valuations without revenue is somewhat true. As Josh Kopelman said “There’s nothing like numbers to screw up a good story.” This is driven by the psychology of venture investors who are sometimes able to justify a higher price to “buy the dream” than the same price to “buy the numbers.” This doesn’t mean the investors think they will invest and then get some greater fool to invest in the company again. For instance, at the seed stage, intelligent investors are quite aware that they are buying the dream but will need to have numbers to raise a Series A.

What do you think? Is a valuation crash coming? Does even asking the question make it more likely?

(Note: I apologize for defining viral and disruptive when you already knew what I meant. I like to explain those jargon buzzwords when they come up.)