This headline caught my eye this morning: US VCs Raised $7.7 Billion In Q1, Highest Influx In A Decade. Of course, if you‘ve been following the news in our industry, you know there’s a raging debate on over whether we are in “another bubble.” This news will of course be interpreted as evidence that, in fact, we are back to bubbly levels…after all, one decade ago was when we had our last big hurrah, right? When VCs gave mostly incompetent founders way too much money, and the whole thing came crashing down around us.
Well, yes….and ten years ago, there was no way our industry, social culture, or technological infrastructure was ready for the big ideas VCs wanted to fund.
This time, I believe, is different.
There, I said it. Now go invest those billions, VCs, and go spend them, entrepreneurs. It’s about time we believed again.
Though, I must admit, the constant specter of the dot com bubble is a healthy thing – it keeps most of us focused on creating value, rather than simply scheming on how to make a quick buck.
I swear I remember like it was yesterday in 1999 I think the investment firm was something like Robertson Stevens or something, they ran an ad on CNBC saying, “This time it Really is Different!” or something like that.
It is true thought that what killed Web 1.0 was that the business plans were based on having ubiquitous broadband which wasn’t there, the connectivity buildout destroyed by the Telecom act of 96.
Now we have a monopoly on connectivity with data caps which still could threaten some business plans especially in this new paradigm of streaming video.
All the billions are going into unregulated industries, thus all the productivity and creativity. If you had billions would you spend it laying fiber directly to homes that the Government could force you to resell to other upstart companies at no profit? Nope. And thus lay our connectivity issues.
Exactly. While the ideas were correct 15-10 years ago the execution ability and customer acceptibilty weren’t nearly as ready as they are now.
However, I don’t think we’re still ready in terms of workforce. I don’t think there’s enough qualified employees to people the companies adequately such that they can deploy what they correctly imagine customers want. Tech companies are doing great now because thanks to the recession they were able to fill up most every role with A-players. But 2012 will be different. The A-players will get spread thin across the multitude of new companies, and I think far too many good ideas will wither on the vine because of an inability to get product to market.
The only thing that changed from 10 years ago until now, is the date. All of these ideas that will command millions and millions of dollars, in venture capital, are just that, ideas. If GM wanted to raise a whole bunch of money in the late 80’s by building a car, that would utilize the cell phone and call all the driver’s friends when it got to a location, would have been laughed at, hence foursquare. If FedEx was looking for millions of venture capital to create a system in the 80’s that would make copies of your photo album and letters and distribute them to all your friends everytime you had a new picture developed, they would have been laughed at, hence facebook. I could go on. The common denominator behind all profitable online ventures is the advertising dollar and the size of the communities they are exposed to. Google took adwords and made it into a billion dollar industry. Facebook could take that to a similar level. Twitter is still trying to figure out what would be best for their model. Groupon may be the most over-valued company out there, it remains to be seen. The point is, all of these models that are being developed, need 2 things, a huge loyal customer base, and an advertising platform to keep the revenue coming in. Without them, they are just good ideas. Now if you would excuse me, I have a joint venture business plan I have to formulate. I just thought of something. 🙂
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