Facebook’s stock seems to have recovered from an overpriced initial public offering. Twitter stock opened spectacularly on the New York Stock Exchange in its recent IPO. Two-year-old Snapchat turned down a multi-billion-dollar offer from Facebook and there are hints, it even shunned a Google bid. Hey, it seems that high-flying, mega-billionaire kids are partying like there is no tomorrow; they’ve made incredible fortunes in relatively short forays into the business world. Money seems to be falling from the sky in the Valley like water in an Amazon rain forest. Wow, life is good up there and getting better, right?
Hmmmm? Haven’t we seen this phenomenon before? When valuations were skyrocketing even as the path to hard revenues and profits were muddier than the Amazon River? 1999. Remember the dot.com bubble that popped thereafter, well over a decade ago? See any parallel? Think the Valley is smug and secure?
“‘Man, it feels more and more like 1999 every day,’ tweeted Bill Gurley, one of the valley’s leading venture capitalists. ‘Risk is being discounted tremendously.’… That was in May, shortly after his firm, Benchmark [Capital, led a $13.5 million investment in Snapchat, the disappearing-photo site that has millions of adolescent users but no revenue.” New York Times, November 26th. Isaac Newton anyone? What goes up must come down?
Benchmark should know. “Benchmark has invested in more than 250 startups since its inception in 1995, including Art.com/Allposters.com, CTERA Networks, Infinera, Lithium Technologies, Marin Software,Minted, MySQL, OpenTable, Second Life, Snapchat, Tellme Networks, Yelp, Inc., Zillow, and Zuora, as well as franchise companies like eBay, Juniper Networks, Tictail, Tropos Networks, and Red Hat. The firm manages nearly $3 billion in committed capital and has been widely recognized for its commitment to open source. Other notable investments include AOL, 1-800-Flowers, Ebags.com, Friendster, JAMDAT, MetaCafe, Palm Computing, Seeking Alpha, ServiceSource, and Zipcar. Benchmark made its first China deal, Baixing, in 2009.” Wikipedia.
Benchmark is making a fortune. The market is loving the valley again. But… “That is generating a huge amount of attention and an undercurrent of concern. In Silicon Valley, it may not be 1999 yet, but that fateful year — a moment when no one thought there was any risk to the wildest idea — can be seen on the horizon, drifting closer…. No one here would really mind another 1999, of course. As a legendary Silicon Valley bumper sticker has it, ‘Please God, just one more bubble.’ But booms are inevitably followed by busts.
“‘All business activity is driven by either fear or greed, and in Silicon Valley we’re in a cycle where greed may be on the rise,’ said Josh Green, a venture capitalist who is chairman of the National Venture Capital Association…. or Benchmark, that means walking a narrow line between hyping the future — second nature to everyone in Silicon Valley — and overhyping it… Opinions differ here about exactly what stage of exuberance the valley is in. ‘Everyone feels like the valley has been in a boom cycle for quite some time,’ said Jeremy Stoppelman, the chief executive of Yelp. ‘That makes people nervous.’” NY Times.
But for most in the valley, the end is not really in sight. Funding in the third quarter exploded by 17%, and the mood still seems bullish. “John Backus, a founding partner with New Atlantic Ventures, says he believes it is more like 1996: Things are just ramping up.
“The numbers back him up. In 2000, just as the dot-com party was ending, a record number of venture capitalists invested a record amount of money in a record number of deals. Entrepreneurs received over $100 billion, a tenfold rise in dollars deployed in just four years.
“Much of the money disappeared. So, eventually, did many of the entrepreneurs and most of the venture capitalists… Recovery was fitful. Even with the stock market soaring since the recession, venture money invested fell in 2012 from 2011, and then fell again in the first half of this year. Predictions of the death of venture capital have been plentiful.
“For one thing, it takes a lot less money to start a company now than it did in 1999. When apps like Instagram and Snapchat catch on, they do so in a matter of months. V.C.’s are no longer quite as essential, and they know it. Just last week, Tim Draper, a third-generation venture capitalist with Draper Fisher Jurvetson, said he was skipping the next fund to devote his time to his academy for young entrepreneurs.” NY Times. Yup!
Who wants to go to law school (applications are down 18%) or drudge through medical school or even work those hundred plus hours a week pay your dues on Wall Street… when you could be worth hundreds of millions of dollars while still in your 20s? Take the Sand Hill Road off-ramp (above) or just keep driving? What’s your opinion?
I’m Peter Dekom, and I seem to remember a little migration to Sutter Creek a long, long time ago….
Posts
No comments:
Post a Comment