Silicon Valley Could Use A Downturn Right About Now
Michael Arrington
249 comments »
Silicon Valley is paradise for geeks, and people flock here from all over the world to be part of something very special. When I speak at events here one thing I often do is ask people in the audience to raise their hand if they live in Silicon Valley. Usually 80+% of the people raise their hand. I then ask them to leave their hand up if they were actually born here. Only a few hands ever remain up - the vast majority of people who live here and work in technology moved here at some point in their career. It’s a neat parlor trick, but it shows just how special this place is. Our entire culture in Silicon Valley is based around technology and entrepreneurship, and all the talent is imported from around the world. It doesn’t matter what color you are, what God you worship or who you choose to sleep with. All that matters is the products that are built and the technology behind them.
And Silicon Valley can be a lot of fun at certain times. When I first started writing TechCrunch in 2005 it was like that. There had been a couple of small acquisitions (Flickr, etc.), but for the most part there wasn’t a lot of venture capital moving into new web startups, the IPO window was firmly shut, and the public companies weren’t doing much M&A. There were a few dozen new startups, though, and the people who were involved with them were largely here because they loved what they did. No one had marketing departments or PR firms. Lavish launch parties were a dim memory from the late nineties.
Events started popping up as well. Our first party was in September 2005. Twenty or so entrepreneurs came by my house for beer and burgers. Chad Hurley, the co-founder of YouTube, was one of the attendees. I remember asking him if he thought the whole YouTube thing would work out.
We quickly had three more just like it (but with more people). When I look back at the pictures from those early events, I remember good times, and no one was talking about twenty million dollar venture rounds or selling out for a cool $1.65 billion. Companies like Meebo and Sphere literally launched in my living room in front of a couple of hundred genuinely interested people.
Somewhere in there the money started rolling in. Our first dime of revenue was December 2005. A few months later a lot of companies were raising $3 million A rounds, then $7 million A rounds after the YouTube acquisition. Companies started to hire marketing managers and PR firms, and spending tens of thousands of dollars on launch parties. Now, a year after the madness started, it’s even worse. Companies have to actively dodge venture capitalists to avoid raising a big round of financing.
Times are good, money is flowing, and Silicon Valley sucks.
I don’t know what it is, but the same thing happened in the late nineties before the bubble burst. Lots of startups got funded that made no sense but people got excited anyway. A unique, beautiful and well executed idea was not a story worth talking about until that first round of big, eye-popping capital. People become more anxious, and more likely to snap at someone in anger or jealousy. Rumor mongering spikes, and a crucial balance is lost. It’s no longer about beautiful products and genius developers. It’s about the money and the status, and hot PR chicks and marketing departments.
The press side of things is equally nuts. I wasn’t writing a blog in the first bubble so I can’t compare now to then. But entrepreneurs are no longer talking to us just to get our opinion and hope for a blog post and a little discussion. These guys need press to stand out from the scores of startups just like them. Saying no to them isn’t really an option. They show up at our front door with a bottle of wine or flowers. They instruct their PR firms to do anything necessary to get a story. More than once I’ve had a CEO break down and cry on the phone when we said we weren’t covering them. And more than once, I folded and wrote about them after those conversations.
I left Silicon Valley at the peak of the insanity last time around, and I was pleasantly surprised when I returned in 2005 to see so much goodwill and community surrounding innovation. Now, it’s just like the old days again, and Silicon Valley is no longer any fun. In fact, it’s turned downright nasty. It may be time for some of us to leave for a while and watch the craziness from the outside again. In a few years, things will be beautiful again. The big money will be slumbering away, and the marketing departments will be a distant memory. We can focus, once again, on the technology. And the burgers and beer.
Right on. I hope those good times and those good companies and team are *still* around and I believe those teams will create the killer products and services that will last through this euphoria.
Mike, take a look outside of the valley for a few moments. If you look at places like, well, Gainesville Florida you will see a hub of innovation that is completely disconnected from the mass of capital flow that can destroy the culture of creativity.
Out here, not every silly idea is courted by Sequoia. Even at UF, where you would think technology would flow like wine from the sheer number of students available, only a few startups (and almost none in the web technology sector) ever become more than garage ventures (Grooveshark pops out in my mind).
Last month I started a tiny (by most standards) technology conference out here and realized something important. Outside of the valley there really is innovation, you just have to be willing to do the legwork to find it. Not only that, but because all of us entrepreneurs out here have to work so much harder to be noticed, our businesses usually have some really savvy models and a lot of pretty tough leg work behind them.
The rest of the nation outside of the valley is the proving ground, and because of that I really think it might be some of the most fertile land for technological development.
At least we didn’t make Treumors (no offense to Guy)…
REMINDER: THE BAY AREA IS A BORING COLLECTION OF LA-LIKE SUBURBS. IT’S ONLY REMARKABLE BECAUSE OF THE CITY OF SAN FRANCISCO.
Steve S - I disagree with some of what you say. I’ve worked at technology companies outside of the valley - London, Ottawa, Los Angeles - and know the tech scenes pretty well in NY, Seattle an Copenhagen as well from living there or visiting quite often. There are great startups there, sure, but the wonderful support networks just aren’t there that you have here in the valley. It’s like making movies outside of Hollywood - lots of people do, but the culture is different and it’s harder. Silicon Valley is literally perfect when things are calm here and everyone isn’t chasing the dollars. I’ve never seen anything like it anywhere else in the world. That’s why so many entrepreneurs move here, with our without a visa, to make their dreams come true.
Mike,
I have never lived in Silicon Valley but travel up there on business sometimes. The interesting thing about being in the tech field is that there is still a lot happening outside of silicon valley. I actually feel blessed to be in southern California. There are a lot of cool technology startups happening in San Diego and a lot of cooperation & goodwill between us startup guys.
The feeding frenzy just never seems to happen here and i guess that tempers things a bit more and that is a good thing. We seem to be attracting a greater technology talent pool as well. It always is fun here and while we don’t get all the hot pr babes like you guys in the valley, we just go to the beach (when we get 1 minute of free time) to get the eye candy. The great thing is that this costs us not one penny of investor money.
You have lived in Southern cal and you understand that the vibe is very different. Interesting take, thanks for the insights and looking in the rear view mirror.
Rodney Rumford
Big money ruins everything quickly. Lack of big money ruins everything much more slowly.
I’d have to agree witht the “out of the valley” sentiment. Violent swings like that are fun when you’re young, but at a certain point, it’s nice to be somewhere where there is good tech stuff happening, but without all the crazyness. And thanks to the internet, it’s all getting easier and easier.
That’s a very good point. The valley is a hotbed and it really is one of the finest tech incubators that this country has seen in quite sometime, but as such it has a tendency to have these “me too” phases. What I was really trying to point out is that there is a great big country out there, and that the valley is really not necessarily the center of the tech universe.
A lot of time, when you focus only on the big whiz bang deals (which is what I think you were getting at in your article) some of the equally ground breaking, but less publicized products fall through the cracks.
When you are forced by necessity to run lean, and need more than just a “good” idea and a few Palo Alto connections to secure funding, you tend to see a lot of really interesting, really savvy business’ emerge.
I am not taking a shot at Silicon Valley in the least, all I am really saying is that easy money and plug and chug business generation does tend to produce bad bed fellows, on occasion. Then again, it also tends to produce quite a few marvels.
Thanks for the response.
bai bai! u be’s back in 80 daiz?
Haha, Zaki, I think I agree. Can’t live with it; can’t live without it.
Mike, what a sad, sobering post. Are you telling us you are going to be moving on from TC?
Also, even with all the copycats, I still think I’ve read about some pretty neat start-ups on here in the last few weeks. Yapta, and that phone tree one come to mind immediately (just because they are so recent, I imagine).
A thought just occurring to me: I’m sure many others have suggested this in the past, but could you have a TC Top 10 or something, where readers vote on the start-ups they find most interesting, disruptive, and USEFUL (read: not Twitter)? You could refresh the list every week, and display it somewhere on the right sidebar. Reader involvement, more page views, more accurate start-up reviews/ratings — what could be better! Haha.
From the perspective of a bootstrapping entrepreneur, your short essay couldn’t be more spot-on.
I don’t want a cash-infusion for my start-up. I’m not interested in the glam of venture capital. And I’m scared as heck about what would happen — to me and to my startup — if I didn’t have the cash crunch imposed on me that keep me disciplined.
It’s so easy to get caught up in the money. In fact, only hours ago I was talking with a buddy about a local startup that has a burn rate of $170K+ monthly without a drop of revenue. Founders’ salaries are $160K! They drive Mercedes. Live in big houses. Eat at expensive restaurants.
And they’re only a single anecdote.
I want to know what happened to the start-up mentality. What happened to committing yourself fully to your product (service), in the spirit of entrepreneurship, because you believe in that product? And so much that you’re willing to forfeit a salary in the short-run for an equity position?
I know it’s not lost entirely — that there are folks out there who WANT to eat cold pizza and work long hours with little pay, all in the interest of creating real value. But they’re hard to find. In Silicon Valley and elsewhere.
So glad you brought this issue to the fore, Mike.
From some reason I was waiting to see a post like this from someone like yourself. Someone had to say what even us outside of the valley (so cal) can see is going on. Each day, a new rumor or a new startup with a dropped vowels in the name. With each post a little less enthusiasm or interest generated. Instead the gossip stories get the most attention, and lets face it are the most fun to read.
Hopefully at some point it will hit a critical mass and only the strong services will be able continue to grow and operate. We certainly wont have a shortage to choice from.
Myself? I’d rather leave the city and corporate machine behind and run a smaller web business from my home. It doesn’t yield a billion dollar buy out but it pays the bills and keeps life mostly stress free. Sounds nice huh?
There needs to be a downturn so you can write a book, Mike. I want to hear more about the crying CEOs.
I think this really hits the nail on the head. The entire spirit behind starting a venture is supposed to be the idea of truly committing yourself to an idea. The very best management and the smartest products are created by those who first have experience and second have the fiscal discipline necessary to weather storms and burn cash at reasonable rates.
Funding should be hard to acquire, maybe not quite as hard as some institutional investors would make it, but it should be the result of a well thought out business model that can generate value for the investor.
I guess this is going slightly away from the subject, but is more inline with what Brian wrote. The Bootstrapping mentality is somewhat missing from the valley at the moment (or so it appears).
Take what you said about the press for instance. How much signal is being drowned in the valleys noise at the moment? No one without a huge credit line and the willingness to hire a well connected PR firm can get the coverage you really need to be a breakout hit in the internet startup bubble.
Everyone tries to even the playing field, but when we are being really honest with ourselves it seems (at least) that we are always attracted to the sexiest sounding products and usually those are the products who could make enough noise to get someone big to pick them up.
I am really just building on a critique here. It’s not so much a problem as a symptom of having a place with such a high concentration of really valuable, really intelligent people. I suppose having the opposite problem would be much worse.
Who cried on you Mike?
The Silicon Valley doesn’t suck, but every once in a while it becomes home for a lot of people who does.
And well Mike, what would you do? Stop writing about Krksztr.com receiving a $X million Series A round despite having little prospects of ever become profitable and focus instead on writing about Mel and Jim’s cool web project? I don’t know… Are you still doing what you enjoy doing? It doesn’t sound like you are. Can you go back to basics? Should you? You just got yourself a CEO, Mike! (with all due respects, no ofense meant and I’m sure she’s a wonderful and extremely capable woman)… A CEO…for a blog! A profitable blog I presume.
You’ve got trapped in that same thing that’s pissing you off I think. I say go get married and have a couple of kids or something…
Since I have been reading TechCrunch for the last year or so, I would like to share a few thoughts…
Shouldn’t we be blaming the “people or community,” with a lot of money, that are funding those “me too” startups? In my opinion, these type of fundings create a chain effect of “hit-and-run” companies, where founders do a really good job of the sell-pitch, grab some short term high salaries, then exit.
Mike, are you suggesting there will be a 2nd burst soon?
Thanks.
Bravo. First thing I thought of: “This town needs an enema!”…If I may, I say consider an opposite action; gather the other like minded folks and make a stand in the valley. Try to shed light on the truly interesting ideas and the people behind them. Be merciless on the BS and idea cloners and do the best at keeping the original spirit of what you started.
Easy to say and hard to do. Worse still, I’m a marketing person (who’s fiercely proud of the work his company does) offering advice.
Good luck.
This might be an idea. Standing up is not necessarily standing out, it may just amount to editorial decisions to avoid promoting those companies that really do not deserve the spotlight. To me frank Mike, you are a meme-maker and a heart breaker in the valley. Your opinions hold a huge amount a weight and you are in a position to make some small change in culture.
Everyone wants to be featured on Tech Crunch, and you have scads of requests coming in (the Forums prove that much). One way to shift public opinion is to give us something new to look at — which I must admit you do a lot of the times.
This town needs an enema, indeed.
You gave an impetous to my intution. The time is not that ripe now. It may happen in 2009. But I will not be surprised if it happens earlier. Why I have this intution? I read a lot of computer industry news.
I was thinking that Web 2.0 hype maybe it. But I am not sure of it now.
When? I have already talked about it.
In what? Web 2.0? Online ad M&A driving up froth? Too many new startups getting funding? I do not know.
Why? Some kind of mob psychology?
How? I do not know.
I may have some insights in later posts.
Mike trying to get on WSJ again?
Hi Mike,
You should move to Ireland. Plenty of beer and burgers and not much investment
Freudian slip or typo in the last paragraph?
“It may be time for some of use to leave…”
“launched in my living room in front of a couple of hundred genuinely interested people”
That’s a pretty big living room
CEO’s crying on the phone to you? Wow, they must rely on you a lot.
But I’ve also noticed that not all startups you cover actually “make it”. Sure they get a nice big spike in their Alexa graph but that’s about it. The rest is up to them to make sure their product stands for itself. I think more times it doesn’t and usually it is just another spin off from a popular product with 2 extra social features.
I’ve also noticed you’ve put the MyBlogLog widget back, what gives?
Hi Mike,
Great post - as a reader of TC since the start I loved hearing about the great ideas and websites people were building and getting a real feeling of the innovation going on in garages and dorm rooms. It was inspirational and made me want to get involved, do some beta testing, build a website, anything.
Somewhere along the line the dollars flowed and it sure wasn’t as fun hearing about first round funding or the launch of the next social network/personalised home page.
There are still some gems being launched but its a lot more cynical now - to second #Noah - I would love a mini-blog focused on startups without funding. Focus on the little guys again, and if they become big, then they don’t get covered. I know the hardest part will be sifting through the mass of startups to find the interesting ones, but maybe that should be done by the users. Get them to bubble new sites to the top of a list, then you critique them.
HAhahah. Mike is still looking for new ROCKY web 2.0.
Youtube, Meeboo, Joost, Myspace, Facebook and all startups took VC steriods. They got money, muscles, and copy power. lol.
Mike,
I think it may also depend on where you go. I was at the wordpress.com 1 millionth user/2.2 release party tonight. Low key affair, some free drinks for attendees but if wanted a burger or meat-on-a-stick you paid (and heck lots of people also paid for their own drinks). Lots of tech talk, lots of company founders, but very relaxed, friendly conversations.
On the other hand, there is clearly a lot chasing the dollars happening right now - plenty people seeking vc funding, too many companies launching for even interested users to find/use/try them all. And definitely the line between a major blog (such as TechCrunch) and “big media” (tv, the NY Times, the WSJ etc) seems to have shrunk to nearly nothing - i.e. stories will break on any of these mediums and quickly migrate.
Our little neck of the world (and yup, I’m new here in the past few years myself) seems to be driving more and more of the media coverage (and not as unusually lots of funding dollars).
However I think it is still fun for many - and still relaxed (relatively speaking) but you do have to pick and choose. And the speed at which ideas, new companies, events go from zero-to oversubscribed is growing.
I’m bootstrapping my current startup, we’re in very limited beta at the moment, I half dread/half anticipate what happens when we open up, when we’re ready for wider blog coverage. Technically I think (but won’t know until it happens) we’ll be ready for it - but I know it will mean a new pace to our lives (and I want to make sure we’re ready to build on momentum when it happens - including being ready to generate income potentially).
This upcoming weekend I’m off to the Midwest for a long, mostly non-tech weekend. I anticipate that not only will it be a welcome mental refresher, but that very likely I’ll get a lot of work done - in no small part by giving myself permission to disconnect for a while, to cut down my rss reading, to not attend an industry event for a week+. I’d suggest to you that you give yourself a day or two (at least) each week to do something aside to technology - dinner with friends etc.
Anyway good luck and keep up the great work! I think in the past few weeks Techcrunch has been getting even better - though the pace does seem to be accelerating.
Shannon
You might be getting your wish.
There are rumors of a few big .coms which were funded a few years back about to crash (and hard)…..
Me? I’m just going to keep building my company on real revenues and real customers. It’s crazy but it just might work!
Kevin
A CEO who would cry just because they don’t get TechCrunch coverage is a CEO *guaranteed* for failure, and in my opinion, terribly unsuitable for leading a company of any sort, any size. You should’ve just hung up on the spot, and hopefully throw in some true words to get them started on journeys better suited for their types.
Maybe you find it a whole lot less fun because the crowded space is suffocating. But as the leader of a blog with tremendous leverage, I don’t understand how you can find all this so depressing on a personal level.
Mike, you should come out here to La Rochelle, France. Zero funding here, or burgers, or start-ups except mine..so maybe not then!
We have built a small blog community without funding. We have an actual business plan that should make enough revenue for us to pay bills and eat and maybe take a holiday, we didn’t start to exit. We only started our site because of frustration and thought maybe we’ll make a couple of quid along the way.
We have a re-launch in two weeks and our technology will get us coverage, unlike now!
Our users are driving our site forward, and dictating its path, not a VC firm.
Could articles like this be a sign that the negitivity is already setting in and a crash is just around the corner!!
Well i think the boom can be felt outside Silicon Valley. I am from London, UK and primetime news did a story on the “new tech boom”. I saw champagne, i saw hot chicks, i saw something desperately wrong.
I think the nirvana you seek is visible in Copenhagen next week - get on a plane and hang out at Reboot (reboot.dk) for a couple of days - you’ll see people and ideas that exist purely for the idea and the fun of invention.
Mike,
Come stay with us in DC for a while! I’ll get a couple bushels of crabs
Cheers,
Shervin
The idiom “You reap what you sow” comes to mind after reading this post.
I think this is a great story about geography, economics and the internet. TC has to be rooted in the Valley and yet its influence reaches far beyond.
This is a first thought but perhaps you could consider fragmenting news items into categories so users could search by business stage, category or location.
You could then focus on the start ups that interest you and migrate the more irritating ones to a different category like ‘Valley Mutants’ or something which could have different writers.
Dang, Lenny beat me to it.
Seriously Mike, I know you’ve worked in Europe before. It’s an exciting time over here right now and because funding is still very tough to get, the craziness of the last boom hasn’t happened here yet.
There are a bunch of us trying to build great tech companies in Ireland and, just as importantly, trying to build the start-up culture here. Whilst the Lee Valley or the Bandon Valley may never become the next Silicon Valley, from adversity comes greatness.
Hopefully catch you at TheNextWeb in Amsterdam.
Hey Mike,
if you wanna see a community that it not full of bozos and not totally influenced by the big money then come over to ApolloHunter.com where you can see some cool Apollo apps.
We are all early adopters of Apollo and most developers are doing the stuff in their freetime.
Cheers,
Alex
very good point, I’ve seen that happen a lot lately
Mike,
Your post is very interesting and I completely get your point :
too much money = bad Atmosphere
But for a lot of web entrepreneurs around the world, the Valley is THE place where people understand what they’re doing and where they’re going. The whole mentality is about what is next great idea and where is the next dream team…
In France and some other European countries, if you talk about innovation, it has to be a technology, a pattern, an amazing invention, but it can’t be a new kind of service. That means it’s incredebly hard to get funded when you have a new service idea. The next Google or Ebay could never come from France, because the idea is too simple for investors.
Once again, I understand what you say, but to me it’s like Paris Hilton saying Petrossian Caviar is aweful because there is too much of it in the restaurants she goes to.
You leave in a very exciting community, in an amazing part of the world, where maybe parasites are hanging around… but you might be a bit spoiled?
Long life to TechCrunch and to the Valley!
M/
Interesting article for someone who also lives in a valley, but more like anti-silicon one… you know.. the tractors farms and stuff.
I agree with your point…
Lack of access to capital is one of the biggest brakes on development – it’s a shame to see VC saturating the tech industry but maybe the surplus will eventually trickle elsewhere.
It strikes me that the industry is a victim of its own success though, the same thing happened in the UK in the last boom. There was a group of passionate innovators that met in a church hall of all places, to discuss the latest developments in mobile technology (it was called WAPWednesday), run by a university student. However, within months the venue changed, big money got involved, big cheeses from all the mobile companies started attending and it became a hysterical money chase. It was depressing, but it’s surely just what happens when potential revenues expand beyond a certain point – the capital flows increase commensurately.
It’s also a shame because VC is not the only form of funding after all – I started a web design company around the same time with a design firm that put £15,000 cash in for a 20% stake based on nothing more than their faith in us. We grew organically to a firm of 30 employees and an office in Australia.
Anyway, I left because I didn’t like the money-chase and wanted to work with passionate, creative people so I became an IT teacher in a country school, which I love.
And I’d just like to say that Techcrunch is a brilliant resource for us - my students are constantly referencing it and love finding out about the latest developments weeks before they’re reported in the mainstream media.
Dude, if we took a poll on who’s to blame for Bubble 2.0, wouldn’t we all yell TECHCRUNCH? I remember seeing you at a conference not even six months ago declaring, “no, we are not in a bubble, this time it’s different.” Then asked the same question many times from different angles, you were persistent on this matter. I can remember thinking very clearly: “That dude’s gonna eat this words.”
Can’t the fault of this issue be partially attributed to you and those like you? When you write story after story of new “Web 2.0 Startup + 1 feature”, and run on about financing numbers and valuations, don’t you think you at least perpetuate, a bit, the notion that success is gauged only by those metrics, or that to be successful means only striving for those metrics?
I think there is a bubble when the pundits are harkening back to the days of yore and reminiscing about a time when the issues and subjects that they write about didn’t exist. It seems though, that they’re forgetting why, and what, they are writing and why their readership abounds.
Get real. Where’s Drama 2.0?
Mike - there is ONLY one thing you can do.
Come to the land downunder - where the beer does flow freely, where the world is more laid back, where startups struggle and cant get funding.
Where an idea is discussed between mates, where things still do get made up over a few beers, and were the burgers are fresh.
I say FK silicon valley - Australia is closer to Asia anyway - and they have 1/5 of the worlds population compared to the US. Silicon Valley will move in the next 5 years - the money will go to China as the rates of PHDs and Masters go up.
Australia is right in the action of it all, but still with only 20 million people - we love our beer, we love our tough struggles and we definately are not silicon valley.
Gday mates
Very cool article Mike.
I live outside of the valley and it’s awesome to have some insight of what’s happening there. I have a popular blog that I started two years ago. No funding, no business plan: it started in my bedroom and I’m still running it from there. Now I have a full time editor and some part time bloggers who work for me. It’s very cool but’ve I always been fascinated by Silicon Valley and I’m even thinking of moving there to take my business to the next level.
I will always be more interested in having a beer and a burger with other geeks and discuss new ideas rather than having to talk with greedy venture capitalists, but money is part of the game and it’s a reward of all the hard work and time you put in building the future of the internet.
Anyway, I love Techcrunch! Thanks for giving us our daily dose of geeky news!
It’s great reading about all the Valley shenanigans on TC. Maybe you should come down to Christchurch, NZ for a change. We’re so chilled out no one even knows we exist
I hope the party keeps going for a bit longer. Nothing worse than turning up just as the drink runs out and the speaker system blows up.
sounds like you need a beer and a break, pop down to brisbane for a few days - plenty of beer here
Best post I’ve seen here in quite a while, Mike. Spot on.
Dude sack up, and make a difference,
you and a few others hold enough sway/publishing power to make things change, so why not give it a go.
If its something you believe in that strongly I would have thought you would already be doing this.
Definitely the best article you’ve written in a while. You should write a few more opinion pieces a month that focus on the technology/entrepreneurship culture, rather than just on the businesses themselves.
Cheers from London.
Mike,
This is a post I didn’t really expect to see coming from you but it’s refreshing to see someone stick up their hand to say something most people are trying to ignore or hopes goes away. Of course, sticking up your hand when most people still believe the good times will continue to roll can be a difficult place to be but good on you!
Mark
Mike: All due respect, but what you are saying here is essentially that it’s not fun for the “locals” anymore because it’s summertime and it’s hot and all the people are there crowding the beach and ruining the scenery. So it’s not that the valley needs a downturn, but it’s that you would personally prefer for the worst of the tourists to go away.
You also have to think proportions. In the glory days you mention, it’s not that there are fewer entrepreneurs; it’s just that only the most emphatic and authentically convicted ones take action. This doesn’t mean more or necessarily better innovation — it simply means that it is more relaxed like the Fall or Spring, and therefore much more fun for the gatekeepers, such as yourself.
I agree with many of the above posters in that in the end, much of the tech innovation will crop up elsewhere. Silicon Valley has the connections and the quick feedback pools, but it is also not largely connected with mainstream culture and has an over-emphasis on early adopters. I thus believe that most of the lasting innovations that emerge on the web will seed outside of the valley and grow steady followings over time.
It’ll be interesting to see how it pans out. We’ve yet to see the return of the tech IPO market, so I think the peak is still far away.
Mike, I’ll buy you a burger at the next web.
As someone whose success has come thanks to all this money flowing in to the valley, it’s interesting to read you grumbling about it. Two old cliches come to mind:
Don’t bite the hand that feeds you.
Be careful what you wish for.
Mike,
Move to Canada. (I don’t mean that in a bad way, I’m in Canada.) Lots of talent, creativity, less of the environment you describe…although we’d like to capture some of the Valley’s essence, Canadian markets will never have that same feel you describe.
And you’d still be close enough to visit the Valley whenever you felt like a lower quality beer or wanted something other than moose or bison burgers. *smile*
Mike you maybe right that the Valley is boiling - I don’t live there- but Europe is only just warming up , as you will find out on your visit to Holland. This market has plenty of growth.
Sometimes a change is as good as a break and maybe when in Europe next you’ll see things from a fresh perspective but you are right to call a sanity check every now and then especially when Microsoft splash the cash to the tune of $6bn for an average company.
Did someone shout knee jerk reaction or was I just thinking it?
I’m currently starting developing something on a shoestring budget, but do not have the support network here in the UK (as it’s quite negative). I’m looking to move out there to get the help. How much are 3 bed properties out there?
Hey all you great European web companies…..stop coming here.
Instead please hire and move some of us out there.
Trust me, you don’t want to sit in 101 traffic.
Kiss the USA goodbye and move to Berlin/Kreuzberg. Here the rent is cheap and the people aren’t fat.
@Sean we would if the VC’s over here in Europe would take the same risks as the more far-sighted and generous VC’s over there. The question I would ask is this. If Flickr, Youtube or Writely had been started in Europe would they have been [as well] funded or got bought for the amount?
I suspect the answer is no which is why we will still get a brain drain but things are changing both from the perspective of the VC’s and entrepreneurs.
Mike, this post isn’t really about the valley, it’s about the web. The web has been incredibly fun for most of the past 3 or 4 or 5 years. I’ll never forget how amazing the last few months of 2005 were. There were beta invites for compelling new web apps hitting my inbox every day. But now the money has well and truly arrived and the web has entered a new phase. There won’t be a downturn; the money that’s pouring in now is being invested by smart rich people who are good at making more money. The web is becoming our new distributed news and entertainment platform.
It’s a bit sad, there’s no doubt, when thing change; but the nice thing about technology is that there are always fuzzy edges to push, even when the center turns to stone.
Silicon Valley Downturn… sounds like a disruption opportunity to me!
OH GOD, PLEASE MAKE IT STOP!
I’d wait a bit before getting out of Dodge, there’s still a lot of deals to be done before panic sets in and the for LEASE and for RENT signs start appearing all over 101 and beyond.
Are most of the startups just waiting to be bought out by a big company?
I remember that article bubble bubble bubble. Yet you came out and said no no no.
We’re not more than 4 months away from that and you are now coming to realize that something is not right! But I’m glad to see your starting to see reality and throwing some cold water about. You could start by being critical about sites that are over funded and kack!
Mike,
Refreshing post, from a number of standpoints. And i wonder if your post is more a litmus test than a true blogging of thoughts.
As a silicon valley outsider based in Australia, i share a non-US perspective of Web 2.0. I’m guessing a growing number of TechCrunch subscribers also liveoutside of the US.
If we stop and consider Thomas Friedman’s book ‘The World is Flat’, then the future of the web isn’t based in SF, or even the US. The ubiquity of the web, and the commerce behind the long tail will enable truely globally defining solutions to come to market from anywhere. However, if it ain’t backed by Sequoia, can it really be any good??
SF VC funds need to think globally.
History does repeat itself! I think we could use more social networking websites. When are we going to move onto innovation and solutions that can solve real problems.
Nice post Mike. I have to agree with you and kind of saw it coming when I said lots of startups will end up in the deadpool. The bubble might be coming, it will be interesting to see what will happen.
I also believe that most of the web 2.0 startups are money driven, well.. I mean, most of them are looking for VC’s, that’s what they all want.
When I started my first big game website several years ago, I did it because I loved flash games, didn’t think about making money with the site, only wanted to make it popular and have lots of users who loved the site. It worked well, got amazingly popular.
This is all part of the cycle.Basically we just need to get out of this rust quickly so the next innovation cycle begins.
As several have suggested, there will be plenty of people boot-strapping interesting startups even when coverage of Silicon Valley focuses on cash and the tech celebrity pecking order.
The problem is that stupid money and bad press coverage help mis-allocate engineering and other talent, starving the boot-strappers and others who don’t want to sell 40% of their companies before they even have products out. This, and unreasonable expectations, led to the ‘01 crash.
But with the out-sourcing opportunities we have now, should we be as worried? Probably not. Let the young CEO’s entertain us with hubris and ridiculous spending while the quieter majority of Silicon Valley continues to have fun and build cool stuff.
Boston isn’t boiling over…I guess we have more conservative angels and VCs here. That’s new england puritanism and practicality for you.
Wait Michael, aren’t you part of the reason it’s so bubbly? Can you please go back and read what you wrote on Geni about how it may be worth $100 MM already?
Mike,
I have a completely different view than you on this. I own a user experience design firm in San Francisco near most of action. I’ve been to ONE web 2.0 meetup and zero conferences. Why? Because I hate exactly what you are talking about. I get enough hype by reading blogs(like yours), checking out betas and talking to our customers and prospects about their ideas. Sure there are some people/companies which have moved here to be close to the action and for the most part they are really nice and gracious. Maybe I get the other side of things because we design products that get them funding, but I just can’t see it the same way as you.
Perhaps you need to layoff the blogging and let your people do the work for you for awhile. You sound burnt to a crisp.
I must agree with you on one point though. Everyone is bootstrapping and doing private funding. I do not know of one of our companies who have taken VC or angel funding until they couldn’t live with their current infrastructures.
Also. While about 50% of the startups we work with are local, 25% are in NYC, and the other 25% in places like Tokyo, LA, London, Santa Barbara, Seoul, Dallas, San Diego, Philly, and Atlanta. So there is plenty of innovation coming from outside our locality.
Everyone wants a piece of the pie, but in the end pop will eat itself.
Ever stop to think that Techcrunch and you are a sign of another SV bubble? While you’re disgusted at CEOs that beg to be covered, perhaps there are those that are sick of wannabe-professional blogs that are covering every bubble event in the vain hope for that extra Click Through Rate on your ads.
Jay
to be fair TechCrunch is a journal of note, one which covers the news of the day, Michael believes that Omni is worth $100m (which it probably is in the current market), be that right or wrong in terms of real value is irrelevant, it’s a market valuation at today’s prices.
Since you’re quitting your weblog and have decided to go away somewhere else for awhile, do let us know when you start up again elsewhere.
That is pretty accurate. You have to go with what is “true” at the time. Whether it turns out to be a load of bull hockey later on doesn’t change the fact that it is the most accurate assessment currently available. That’s one of the problems with breaking news.
Mike:
Well timed. Comments fantastic on this post. The reality is you need to be the substantive Valleywag and start to question the products that come out.
For example, how should Yahoo value Bebo? Where is Tagged really going? What can Metacafe hope to accomplish economically?
Even the well trafficked sites are enormously derivative like those mentioned above. I feel that Bolt (my own company) and things like Heavy are as well. Now that YT owns the home movie UGC category and is owned by google, do sites like grouper, veoh, sharkle, meta etc… make any sense?
I thought the Geni valuation was insane. i think your post about the opportunity for them to break through had a little merit, but does the world need another photsharing site where families can exchange ideas. Isn’t the social networking revolution fueled by sex and dating? Does this make sense for families?
There are so few original ideas. And the venture guys really struggle to identify them.
Maybe wikiyou will be one or maybe not. I don’t know why more entrepreneurs can’t admit that and why there can’t be more honest dialogue about the fact that consumer Internet is no different than Hollywood.
Nobody truly knows what will work. All you can do is differentiate and iterate. And time will tell.
Yes the boom and bust cycle lives on and we go on about the “good old days” when all was pure and unsullied by corporate greed. But such is the biz we live in. I myself took what I have learned from some of the boom and bust and planted the seed in the mid-west. Not a bad idea. Cost of living is half that of the Bay Area and the entire state has less then population of just the Bay Area itself… no crowds! So I tell you all to take the seed and what you learned from the Alpha-Geek center of the universe and pollinate the rest of the country.
Is Louisville, KY far enough out of the valley?
Not a hotbed by any stretch, but Bourbon beats wine.
- Mike - your biting the hand that feeds you; heh
- keep these negative sentiments to yourself; keep hire’ing others to blog for you … sell your fedmed ads;
- and whipe your tears; (How about putting that law degree to use) …
- You got lucky; hit (1) good thing (this blog) …(Edgeio sucks) ….
- now your taking your luck in vain; chump, Rb
Wow man…this one is heavy. There are a lot of us that don’t want to have anything to do with hype or the Valley: it’s a distraction, and unproductive. The margins is where we want to be, with people that we can trust. I believe that innovation will continue to abandon the Valley, as people having fun creating something useful come to the same conclusion as you just have. It’s a great area btw, and I am not dissing the cities or lands/oceans that make up your area. I’m a big fan. Just keep the hype and the people that thrive on it.
nice post. but i think you might be overreacting.
there’s not close to as much money changing hands as the first bubble.
companies are cheaper to start, that’s why you see so many of them.
it’s not like these vc’s have forgotten how badly they got burnt during the first bust.
I think it’s all in who you surround yourself with. L.A. is the mothership for stupid, vapid people and there’s always a steady stream coming in. They ruin what’s great about the city, but somehow, staying away from where they go seems to work for most of us. It happens at clubs here all the time. One opens and all the cool, industry and career people will go there for drinks. A celebrity might come along because he/she has some friends who go, and before long, there’s a line out the door of pointless, trashy girls (maybe our version of hot PR chicks?) and idiots who wreck the vibe and drive everybody out. I think it’s in where you’re going and who you’re hanging out with. I could go to Area and be surrounded by cheesy people and bad shoes, but I don’t go. I’d rather have no life than end up around those people. You control the valve.
If this is what your world has become, it’s good to understand you were the architect. Moving isn’t the answer. It completely floors me to read this post.
I may be the only person who agrees with Steve S on the lowering need to be in the Valley in the first place. The conversations that used to only exist in the valley are now written on blogs where anyone can chime in. The flood of VC money is really more of a distraction for an early venture, and with telecommuting, talent can exist anywhere. Then again, we’re in Orlando which is practically down the street from where he is..
Our little startup has never been on TC, never taken a dime of funding and operates on a really strict bootstrap budget, but guess what? Emurse’s bank account grows every month.
This whole little craze pretty much started with the mentality of a “return to basics.” A plan for revenue, low costs, reduced barriers to entry, simplicity in design, etc. etc. And now, here we are. 1998. The parties sure are fun though.
You can’t write this. I just bought 90 shares of QQQQ.
OMG - Stop Whining!
The chance to make the money that you say ruins the Valley is why people come here in the first place.
You also make it sound as if nothing existed in the Valley before 2005.
People getting funded, getting rich, and getting excited again. Yeah, this really sucks.
Excellent post and insights, thanks.
This is so true that it hurts. I, like many of fellow Silicon Valley entrepreneurs, was almost devastated during the last recession.
Times were tough.
Then we all stepped from outside our caves and started to celebrate technology again.
People, this time around, seemed more humble, genuine, and encouraging of each other. And for the longest time, it remained untouched. There are still many great people that I choose to keep in the network - some are in the Valley and others are situated around the world. But there are plenty more that have been affected by the prospect of money, fame, and the fruits of their vested social capital.
The sporadic parties and launch events were simple in their reemergence, but are now every night and quickly resembling the soirées of 1999. What was once fun is now a chore.
Michael, this