Silicon Valley: “Bubble” or “No-bubble” – that is …

The barometer of Google Trend clearly shows the fast inflated scale of the Silicon Valley’s euphoria …

SilVal_GoogleTrend

Some of the Silicon Valley prophets began to clarify it in some more details:

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Sequoia’s Moritz joins warning chorus over Silicon Valley valuations. Early investor in Apple and Google doesn’t like what he’s seeing. One of the most successful investors in Silicon Valley has added his voice to a swelling chorus concerned about a bubble in tech stocks, prophesying death for “a considerable number” of those ‘unicorn’ private companies that are currently grabbing headlines with sky-high valuations. Read more: http://fortune.com/2015/03/24/sequoias-moritz-joins-chorus-of-concern-about-silicon-valley-valuations/

There will undoubtedly be some sort of setback in Silicon Valley, one of the technology industry’s shrewdest investors has warned. A considerable number of “unicorns” — young, private technology companies worth $1 billion or more — are doomed to fail in the coming months, Sir Michael Moritz, the chairman of Sequoia Capital, told The Times. Read more: http://www.thetimes.co.uk/tto/business/industries/technology/article4391077.ece

Bill_Gurley
Bill Gurley is one of the best and most prominent venture capitalists in the U.S. right now… So when he blogs about the “b word” (bubble) and follows it up with a media tour, no wonder serious people pay attention… Mr. Gurley claimed that large fund managers are recklessly plowing billions of dollars into next-generation growth companies like Uber and Airbnb in the wild-west private market, rather than the regulated public market. He describes a mania of investors “desperately afraid of missing out” as they ante-up in the “high-stakes, late-stage game.” Read more: http://www.forbes.com/sites/valleyvoices/2015/03/09/sizing-up-bill-gurleys-bubble-and-the-end-of-the-ipo/

Mark_Andreessen
Marc Andreessen, the cofounder of Andreessen Horowitz, is one of the most powerful Silicon Valley venture capitalists… And despite warnings from investors like Benchmark partner Bill Gurley … about the tech bubble and excessive Silicon Valley optimism, Marc Andreessen says he isn’t concerned about another tech bubble mirroring that of the late 1990s… Andreessen says the burst tech bubble of 2000 was an isolated incident… “The argument in favor of concern is cyclical. The counterargument is that stuff works now,” he says. “In 2000, you had fifty million people on the Internet, and the number of smartphones was zero. Today, you have three billion Internet users and two billion smartphones.
Read more: http://www.businessinsider.com/marc-andreessen-talks-about-the-tech-bubble-2015-5#ixzz3dwBNkLOC

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Can big companies success or failure be considered as an indicator of anything in tech trends?

success_failurer_road_sign

Jobs_Second_Coming

And what about all other?

success_failurer_sky_sign

eCommerce_2000_crisis


us-technology-funding-whats-going-on-11-638

As it can be seen from the above chart, the eCommerce growths – as an integrated measurement of the main impact of Internet startups (so called “dotcoms”) on the US economy – stayed positive since the 1999 without any signs of any bubbles at all.

The fact that a significant part of “dotcoms” were the first victims of one of the next US cyclical economy recessions – that was called the 2000 “tech crisis”- doesn’t mean that the recession of 2000 was caused by “dotcoms”.

In other words, there weren’t any reasons to think that crisis of 2000 was cause by Internet startups. After all it means that any attempts to forecast probability of one of the US next cyclical recessions by comparison the “dotcoms” status of 2000 and 2015 is totally baseless.

Meanwhile the basic concept of “dotcom bubble” as original source of “tech crisis” of 2000 is still predominantly basic foundation for almost all analytical approaches of 2015. See for instance the section “Tech Bubble (2000)” of Forbes article The Coming Financial Bubble: Why It May Be The Worst Of All:

    The tech bubble, a.k.a. the dot-com bubble, was a period of time when the price of technology stocks soared, despite the fact that many companies were operating in the red. Driven largely by money from venture capitalists, many new technology companies emerged, offering their services for free. The expectation was that these start-up companies would be able to charge a fee in the future, which ironically, was fine with investors.

Mike Patton, author of the above quote article, is right: “many companies were operating in the red“, e.g. the Google, that continued to stay “in red” even a couple of years after the 2000. Its investors – unlike a lot of others – was not scared by the cyclical recession of 2000 and continued to support the startup of their choice. Unfortunately a great part of other “googles” weren’t so lucky in their relationships with VSs and were perished at the first stage of so called “tech crisis” of 2000.

Can the recent wave of “dotcoms” appear among the first victims of the nearest recession? They can and … that’s it. Nothing else – except of this trivial conclusion – can be “predicted” at this time. As Mark Andresseen twitted about it, “When the market turns, and it will turn, …many high burn rate co’s will VAPORIZE“.

What can be a real reason of the expected “market turn” can be discussed. For instance, “Icahn warns markets ‘extremely overheated,’ especially in junk bonds“…, though the recent scale of dotcom funding definitely can’t be one of them:

1990-2015_tech_invest_growth
Chart via: @skupor , @timmullaney: “Good news! There’s no tech bubble. Now for the bad news…

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