Posted on Wednesday, Jun 17th 2015
The technology industry is the most exciting phenomenon in America today, other than, perhaps, the prospect of energy independence. The latter, however, doesn’t get the same kind of glamorous coverage from the media that our personalities get. In particular, technology entrepreneurs have led us into an age of nerd-celebrities that dominate the psyche of the young and ambitious. A recent profile of Marc Andreessen in the New Yorker exemplifies this dynamic. The tech industry has officially captured the imagination of the public, and Hollywood is rolling out movies to feed this frenzy.
Against this backdrop, there are a number of trends to watch:
- The Second Silicon-Valley Gold Rush: It had happened once before during the dotcom bubble days: the young and the ambitious from all over the world flooded into Silicon Valley and started digging for gold. Today, the same phenomenon is happening at an industry level, not just in Silicon Valley. Becoming a technology entrepreneurs is once again THE thing to do, bankers be damned. I like this trend. Among other things, large numbers of young people are learning to program, studying engineering and computer science, and of course, dabbling in entrepreneurship. These are valuable skills to develop, even if the digging doesn’t yield gold right away.
- The Unicorn Bubble: Billion dollar valuations seem to be growing on trees these days. Especially, late stage ventures raising humongous amounts of money at outrageous valuations is the fashion du jour. Not all private unicorns will become public unicorns. Not all unicorn entrepreneurs will make money.Not all unicorn investors will make money. The bubble will rationalize, as entrepreneurs, especially, get burnt, and then get savvy.
- The Angel Investment Bubble: Young technology professionals who have been showered with the bounties of the successes of Google, Facebook, Twitter, LinkedIn and their likes, are now armed with money and experience. They want to fund the next crop of such successes. Dreams of riches glitter in their eyes. In 2013, 70,000 companies raised angel investment. This isn’t all good news. The number of companies raising venture capital remains constant at about 1000 a year.
- The Rise in Bootstrapping: This is the greatest good news of all. It has become dramatically cheaper to get companies off the ground. It has also become much easier to access the once esoteric knowledge of how to build successful businesses. This is where the real, sustainable entrepreneurship is happening. And the savvy ones understand the mantra Bootstrap First, Raise Money Later. Unicorns built in this mode are drawing unbelievable levels of success.
- The Rise in Fundamentally Solid Companies: While the market has a lot of froth, it also boasts incredibly interesting, solid companies. Huge revenues. Great products. Solid fundamentals. Many are aiming for not a billion dollar in valuation, but billion dollars in revenues. Much cooler, IMO. While valuation can be a house of cards, revenues and profits tend to have staying power.
- The Commoditization of Venture Capital: There is too much money in the system chasing too few venture scale opportunities. The negotiating power is 100% with the entrepreneur who has a proven, fundable venture. So, back again to the mantra, Bootstrap First, Raise Money Later. You can go to VCs as kings, not beggars. Better still, let them come to you!
- The Globalization and Democratization of Entrepreneurship: Silicon Valley is a geographical sphere, but it is also a mindset. The latter is being exported widely. At least another 25-50 mini-Silicon Valleys have emerged, from Israel to Bangalore to Santiago. Most are still nascent eco-systems, and it will take another couple of decades to mature into full-blown Valley-style hubs. But the process is well on its way. And that’s thrilling to watch.
- The Promise and Peril of Artificial Intelligence: Technology, especially machine learning, robotics, and large-scale automation looms large. Entrepreneurs are pushing the envelope on these technologies and trying to build unicorn companies. VCs want to invest in them. But what if a Frankenstein emerges inadvertently? And what about the massive unemployment that is an inevitable by-product of automation?
- The Rising Inequality in Society: Twenty-first century is the age of superstars. Without education, especially technical education, large segments of society are falling behind. How do we close this gap?Democratization of entrepreneurship is a potential (partial) solution.However, the problem is large and acute.
- The Dehumanization of Society: Technology has created tremendous opportunities for the world to shrink through communication, collaboration, and cloud-based productivity tools. But it has created immense opportunities for wasting time. On Facebook. On Twitter. On stupid games. Human beings are losing their ability to communicate in person. To smile at each other. To converse. To enjoy a meal together without looking at their smartphones. To look into each other’s eyes. To touch. To honor food that someone else has cooked with love and care. To be present in the moment without interruption. This is a tremendous loss that cannot be quantified.
These are my current thoughts. There are many others, of course. Happy to discuss, so please weigh in.