When is the next tech boom?
The New York Times reports on increasing valuations for start-ups, with venture capitalists having to pay more to get into deals such as the recent rounds for the school social networking company Facebook and podcasting platform Odeo. That these companies are so hot is a great illustration of the themes explored by this blog.
On another level, this is one possible early-warning sign of another tech boom. For around four years now the technology sector has been subdued, hardly surprising after the extravagances of the dot-com boom. What’s interesting is that in this decade we have in fact seen many of the wild predictions of the late 90s quietly come to pass. Moving on from the selling-pet-food-over-the-Internet phase of technology commercialization, there is now a swelter of new technologies and – more importantly – applications that are compelling (or at least appear to be). Social networking technologies, pattern recognition, bioinformatics, new generation content production and distribution, location-based services and far more represent some of the new wave of opportunities. I believe it is inevitable that at some point within the next five years we will go through another technology boom, perhaps not dissimilar to that of the turn of the century. Those fateful words: “This time it’s different,” will be heard. So for those that missed out on the first boom, position yourself well!
I hope you’re wrong about this one, Ross. I’m more positively disposed to the view of Carlota Perez, an economist in the Kondratiev and Schumpeter vein, who talks about five major cycles of technological revolution and wealth creation over the last 250 years. She sees a pattern to these major cycles (such as Industrial Revolution, Age of Steam and Railways, etc.) where there is an emerging period for a revolutionary technological complex, characterized by irrational exuberance and disconnection between finance and technology, followed by a crash, and then by a long sustained period of more deliberate wealth creation that she calls “deployment”. If she is right and this is pattern is predictive, then we are just coming out of the crash of the boom phase of the age of information and telecommunications, and headed for 20-30 years of powerful, sustained worldwide growth. Sounds good to me!
Ross – things are definitely swinging up, early stage venture funds are being raised again and there is an upbeat atmosphere settling in — like Doug though, I am more inclined to see this as a sustained upward trend rather than a spike/trough effect a la dot boom/crash.
I also hope you’re right Doug and Randal. However I’ve seen enough of financial markets and human greed not to believe that the next upturn won’t overshoot. That may be – and I certainly believe will be – overlaid on an underlying trend of technology-based growth. If the overenthusiasm is more tempered than in the dot-com days, we can escape with less damage than last time. Though it won’t be too long before that too was another blip in a long-term trend.