The New, New Bubble
The cover story in the current issue of FORTUNE deserves consideration. Normally I would include a link but the magazine appears to still be into selling ink on squashed tree. Steal a copy from your dentist’s office.
Mark Zuckerberg is on the cover bursting a bubblegum wad in one of those slomo pics they used to take at MIT (maybe they still do). At any rate the article is about the presumed tech bubble, the number of IPOs out in the Valley, the price of real estate in Palo Alto and exotic cars. Seems the Tesla dealer in PA is selling the all-electric coups like lemonade on a street corner in NYC last week. Tell me no one is aware of Peak Oil now!
What’s interesting to me is the relatively low VC input over the last several years compared to the $100 billion infused at the turn of the millennium. Last year, according to the article, about $23 billion entered the coffers of emerging companies, a far cry from 2000 but much better than the low point of 2008-09 when the numbers got into the teens and bottomed out at 1997 levels.
If you study this stuff you can’t do better than the data put out by the NVCA or National Venture Capital Association in its quarterly and annual reports. What’s interesting to me is that, minus the years of the recession that nearly unhinged the global financial system, VC investments had been trending in the $20 billion to $30 billion range.
Now that’s a nice range to be sure but the last few years have been in the low average range, so how is it having such a pronounced effect?
Glad you asked.
I’d say that a bunch of the effect comes from cloud computing. Not the cloud computing that exports your computer room to some country with permafrost that can cool its operation by opening a window. I mean the cloud computing that puts a truck load of technology in the hands of entrepreneurs for a song AND the cloud computing that enables them to sell or, excuse me, “monetize” their creations for pennies across the cloud. That cloud computing.
This is where I take a shameless plug and say that back in 2004 I suggested, in a white paper, The New Garage, that this would actually happen. The cost of starting up would go way down largely because companies wouldn’t need to buy all of the means of production. I figured they’d still spend heavily on sales and marketing but that was before those activities became so socialized. The result is a marketplace in which it costs very little comparatively to make new products and to get them to market.
All that’s well and good but it also brings into focus another not so wonderful idea, bubbles. Zuckerberg is on the cover with his wad of Bazooka as a sort of morality tale in the making. Are we headed for another tech bubble? I think so, if only because the wize guys in the article tell us, nah, not again.
Good luck with that.