How does the recent boom compare to the previous ones in Silicon Valley?
March 17, 2021 7:34 PM Subscribe
I read this stat today: Over the past six months, at least 35 companies that were founded in the San Francisco Bay Area...have gone public for a combined market value of $446 billion, according to a tally by The New York Times. That, plus record sales an Amazon took in, how does this most recent tech boom compared to previous ones? IS this the strongest ever or was the 90's even more?
The amount of money being thrown around in the late 90’s to early 2000’s might have been smaller in raw numbers than now, but the percentage of it being spent on absolute horeshit was definitely higher. You could practically just walk down Market St and mumble “something something, but on the internet!!!” and get a term sheet from VCs who overheard you.
My place of business added a trillion or so dollars to our market cap in the last year, but we also sold way over a 100 million phones, and billions of dollars worth of apps, and just shit loads of wireless headphones.
Investors are still setting their money on fire (wait till you see the bullshit valuation Clubhouse gets), but their is a lot more “reality” involved in this time around.
posted by sideshow at 8:45 PM on March 17, 2021
My place of business added a trillion or so dollars to our market cap in the last year, but we also sold way over a 100 million phones, and billions of dollars worth of apps, and just shit loads of wireless headphones.
Investors are still setting their money on fire (wait till you see the bullshit valuation Clubhouse gets), but their is a lot more “reality” involved in this time around.
posted by sideshow at 8:45 PM on March 17, 2021
Do you mean strongest "boom" or strongest "bubble?"
In terms of the stock market this is stronger in absolute terms. The answers above are I think arguing it's not as big a bubble, which would mean the answer is yes, a bigger boom. In stock market terms. (I'm not 100% convinced but am kind of "wait and see" on this.)
I've lived here since '91 though and in employment terms I think it's not as big. Especially with Covid, but it's also like everyone's adjust to chasing the big payoff and bouncing around startups. It's like we've adjusted. In the nineties the boom was so crazy I saw my colleagues and friends who had zero coding experience leaving for technical positions in startups.
Amazon is sort of a question about the real world sales--but they aren't Silicon Valley and around 90% of their income is "traditional," low margin retail (as opposed to web services.)
posted by mark k at 10:25 PM on March 17, 2021
In terms of the stock market this is stronger in absolute terms. The answers above are I think arguing it's not as big a bubble, which would mean the answer is yes, a bigger boom. In stock market terms. (I'm not 100% convinced but am kind of "wait and see" on this.)
I've lived here since '91 though and in employment terms I think it's not as big. Especially with Covid, but it's also like everyone's adjust to chasing the big payoff and bouncing around startups. It's like we've adjusted. In the nineties the boom was so crazy I saw my colleagues and friends who had zero coding experience leaving for technical positions in startups.
Amazon is sort of a question about the real world sales--but they aren't Silicon Valley and around 90% of their income is "traditional," low margin retail (as opposed to web services.)
posted by mark k at 10:25 PM on March 17, 2021
Companies are going IPO way later
Horseshit companies find it harder to get funding
Due to companies going IPO way later, some companies are getting astronomically large rounds
A big difference is that the general economy is not tied to the up/down story of bay area tech like it was in the dot com boom. There is a shitload of money moving around, but it has less potential to pull down the economy
I can't think of a recent deal that is as absurd as the AOL/Time Warner merger.
posted by wooh at 12:04 AM on March 18, 2021
Horseshit companies find it harder to get funding
Due to companies going IPO way later, some companies are getting astronomically large rounds
A big difference is that the general economy is not tied to the up/down story of bay area tech like it was in the dot com boom. There is a shitload of money moving around, but it has less potential to pull down the economy
I can't think of a recent deal that is as absurd as the AOL/Time Warner merger.
posted by wooh at 12:04 AM on March 18, 2021
That stat is just companies going IPOed, and most have delayed their IPO hoping economy would recover, and it appears that many states are posting signs of recovery, not that vaccines are on their way. All of those businesses have been operating for years, and many have refined their business models to survive the pandemic, and is ready to take advantage of the recovering economy. I wouldn't call it a boom, more like "ready to take advantage of good timing".
posted by kschang at 3:47 AM on March 18, 2021
posted by kschang at 3:47 AM on March 18, 2021
You could practically just walk down Market St and mumble “something something, but on the internet!!!” and get a term sheet from VCs who overheard you.
You can mumble "something something, but on the blockchain!!!" today and get similar results.
A few years ago, it was "Uber, but for something something!".
A lot of it is absolute horseshit at any given time. But I'm not sure how much sense it even makes to question whether the companies involved are overpriced or not. If someone will pay that much for them, then by definition, that's what they're worth, as far as the market is concerned.
You will understand the Silicon Valley ecosystem best when you realise that for a lot of the people involved, their incentives are not actually aligned with creating and owning businesses that are profitable and sustainable in the long term.
The game in practice is more about owning a chunk of a business that people think is the next big thing. You can then sell a chunk of that business to other investors, increasing its overall valuation. That next round of investors is then incentivised to hype things up further to do the same thing again. And eventually some of these companies get to the point of an IPO, which means the owners get to sell their positions to the public.
The private rounds are getting longer, and the pre-IPO valuations are getting higher. Some of them seem crazy. But there's a lot of hoarded cash out there, looking for things to invest in, and a whole industry devoted to sucking that cash into the valley through any means possible. And each of the owners of that money are hoping to double theirs and get out before the music stops.
Will there be a crash soon? Maybe, maybe not. But I don't think you can tell from looking at the size of the boom or the bubble.
None of it has anything to do with tech, of course. Tech is just the excuse for the claim that the beans are magic.
posted by automatronic at 8:27 AM on March 18, 2021 [5 favorites]
You can mumble "something something, but on the blockchain!!!" today and get similar results.
A few years ago, it was "Uber, but for something something!".
A lot of it is absolute horseshit at any given time. But I'm not sure how much sense it even makes to question whether the companies involved are overpriced or not. If someone will pay that much for them, then by definition, that's what they're worth, as far as the market is concerned.
You will understand the Silicon Valley ecosystem best when you realise that for a lot of the people involved, their incentives are not actually aligned with creating and owning businesses that are profitable and sustainable in the long term.
The game in practice is more about owning a chunk of a business that people think is the next big thing. You can then sell a chunk of that business to other investors, increasing its overall valuation. That next round of investors is then incentivised to hype things up further to do the same thing again. And eventually some of these companies get to the point of an IPO, which means the owners get to sell their positions to the public.
The private rounds are getting longer, and the pre-IPO valuations are getting higher. Some of them seem crazy. But there's a lot of hoarded cash out there, looking for things to invest in, and a whole industry devoted to sucking that cash into the valley through any means possible. And each of the owners of that money are hoping to double theirs and get out before the music stops.
Will there be a crash soon? Maybe, maybe not. But I don't think you can tell from looking at the size of the boom or the bubble.
None of it has anything to do with tech, of course. Tech is just the excuse for the claim that the beans are magic.
posted by automatronic at 8:27 AM on March 18, 2021 [5 favorites]
My take is that a lot of the speculative horseshit is happening under private funding, and subsidized by people with high net-worth. By the time companies go private these days a large amount of the horseshit has been filtered out. The stock market is a social construct, so take any conversation about 'fundamentals' with a grain of salt.
posted by Dmenet at 9:36 AM on March 18, 2021
posted by Dmenet at 9:36 AM on March 18, 2021
SPACs are different now. They existed previously but they do seem to be having a moment. But otherwise I'd say the general mechanics of VCs and investment funds are still pretty much the same, with P/E ratios that don't make any sense and everybody chasing big rewards at the expense of long term viability. The trends changed from "X, but on a computer" to "X, but on the Internet" to "X, but an app" to "like Uber for X" or "X as a service," and now the trend is "X, but on the blockchain." Very little of it is sustainable, same as always.
Be sure to invest in my Delivering Pet Food On Blockchain Scooters™ startup.
posted by fedward at 12:42 PM on March 18, 2021 [1 favorite]
Be sure to invest in my Delivering Pet Food On Blockchain Scooters™ startup.
posted by fedward at 12:42 PM on March 18, 2021 [1 favorite]
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posted by geoff. at 8:17 PM on March 17, 2021