

Welcome to the Lost Decade (for Entrepreneurs, IPOs, and VCs) - grellas
http://steveblank.com/2010/07/15/welcome-to-the-lost-decade-for-entrepreneurs-ipos-and-vcs/

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wheaties
That's scary because Web 2.0 companies aren't the be-all end-all of the world.
We're in a decidedly fantastic spot, don't get me wrong. However, people are
going to need batteries that last longer, they'll want windows in their houses
that change shade, or soil that repairs and replenishes itself (South America
looking at you.) This type of thing takes the hard money web companies don't
need. It's the real source of growth.

~~~
rlyboslavsky
Tom Seibel once said during an interview at Stanford that Big Innovation in
software is over. 90s won't come back and another startup of Microsoft/Google
is unlikely.

When asked what are the areas of future growth/innovation he said: energy,
water management and green technologies.

My take on this is that software has changed so much, that it became kind of
enabling/supporting service that nobody can do anything without, i.e. even in
green tech field (assuming it indeed is going to be huge) there's plenty of
code to be written (and sold)

~~~
http-kid
What's water management?

~~~
kaib
In general it seems to refer to the fact that drinking and irrigation water is
becoming more scarce in parts of the world and we need both technological and
social systems for managing this resource. Aside from pure diminishing of
water stock a practical example could be one country building a dam upriver
from some other country.

~~~
zandorg
We need the gadget from Waterworld that turns urine into clean water, but
somehow doesn't turn sea water into the same...

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jswinghammer
Given that the whole capital structure is in a state of flux right now with
the reality of deflation (the exit of money from the system) while massive
inflation is going on at the same time (the creation of new money not the
increase in prices) why should we expect much of anything good to come out of
the next ten years?

I think that a lot of people will take their ideas and implement them on a
smaller scale and grow organically instead of getting big fast. This site is
filled with people doing or planning on doing just that right now. I'm not
optimistic about the next ten years but I think that we'll end up leaving this
decade with some rather nice companies that will really contribute something
substantial to the ten years that follow this decade. I'm assuming the next
ten years will be like 70s with stagflation defining our experience and
mainstream economists having nothing useful to say about why it is happening.

~~~
borism
I think you're a bit confused about inflation vs. deflation. There's either
one or the other, not both at the same time.

~~~
jswinghammer
The overall trend is deflation. There is a massive amount of inflation
occurring though. It's just happening at a slower rate than the rate of
deflation.

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smysore
what about companies that never IPO but grow and become successful private
entities (and hence, are never acquired)? that seems like a good place to end
up

~~~
arnorhs
That's a great argument. But I think his point was that from the VCs point of
view that doesn't look like the kind of fast ROI they're always after.

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all
I am not trying to be smart, but the irony did strike me.

From Blank's "Lessons Learned", no.1: "Advice that’s more than 5 years old is
obsolete."

The blurb under his "Posts from an Entrepreneurial Career: "Steve Blank's 30
years of Silicon Valley startup advice."

So, does that mean that 83% of his book is obsolete?

~~~
sblank
at least half is. that's why the blog updates it with new thinking.

~~~
all
Thanks for clarifying. Thanks also for your blog, from which I have learned
much.

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edw519
Hmmm, the seismic shift from MoreLikelyToIPO to MoreLikelyToGetAcquired
happened around the same time as Enron and its ensuing government yoke,
Sarbanes-Oxley. Coincidence? I doubt it.

When compliance raises expenses 1%, no big deal. But if that number approaches
50% for small, nimble, well-leveraged tech start-ups, then public markets
become closed to them.

SOX is an awfully big variable to not be considered.

~~~
j_baker
I think a simpler explanation is that IPOs simply weren't a good idea for most
technology firms, which is part of what led to the dot-com crash.

~~~
aspiringsensei
Exactly - if you need proof that equity of tech companies is a different
investment than equity of staid, ordinary companies, look at the capital
structure of successful tech companies.

Google, Microsoft, Nvidia, Apple...No Debt.

The existence of large cash cushions on these balance sheets is insurance
against a rainy day, and changes the risk profile. If these companies had been
levered during the 03-07 expansion, they would have exploded in value.

They didn't, because it makes no sense to lever a tech company to the hilt,
even if you believe it makes sense to lever a manufacturing company to high
heaven. Cashflows are too variable and too prone to disruption.

It takes a special kind of tech co to go public, and many (i'm lookin' at you
pets.com) weren't that kind.

------
brc
It's not just IPOs that have had a lost decade. All major US stock indices
have not increased in value (inflation adjusted) since 2000. As an equities
investor in the last decade, chance are you haven't made any money at all.

In 2000 some warned about a Japan-style slump, people said it coudn't happen.
They still say that today, not realising, that, for 10 years, it's already
true. Sure, there was a runup from about 03-07, but unless you got out at the
top, you're back to where you started. And it's not just stock indices, it's
also real estate and the number of jobs.

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travem
It would be interesting to see how may of the M&A's were planning an IPO prior
to being acquired.

A recent study shows that a better price can be extracted from the acquiring
company if the sellers adopt this dual-track strategy. See
<http://news.byu.edu/archive10-jun-dualtracksellouts.aspx>

------
startuprules
US is in for another lost decade ahead for innovation, as:

\- US venture capital industry is expected to shrink considerably
([http://techcrunch.com/2010/07/13/report-u-s-venture-
capital-...](http://techcrunch.com/2010/07/13/report-u-s-venture-capital-
industry-expected-to-shrink-while-emerging-markets-grow/))

\- Immigration brain drain takes place. Only 18,000 applications had been
filed for regular H-1Bs so far this year.
([http://money.cnn.com/2010/06/14/news/economy/immigration_bra...](http://money.cnn.com/2010/06/14/news/economy/immigration_brain_drain.fortune/index.htm))

\- US manufacturing jobs keep slipping away, and the trend will likely
continue - Nation's 100 biggest markets have lost ~40% jobs compared to a
decade ago
([http://buffalo.bizjournals.com/buffalo/blog/the_score/2010/0...](http://buffalo.bizjournals.com/buffalo/blog/the_score/2010/07/manufacturing_jobs_keep_slipping_away.html))

We need to act now to reverse these long term trends, otherwise innovation
will dissipate rather quickly, as the world braces austerity and the second US
recession

~~~
cjy
Manufacturing jobs are disappearing but real manufacturing output has actually
been steadily increasing over the last 50 years.

~~~
jbooth
Very true, but still not a great place to be. Whether the boogeymen are robots
or chinese workers, not having a market for manufacturing labor is a bad
position for an economy.

~~~
dstorrs
Serious question: why?

I understand an economy that does not produce any of its own goods is in a jam
-- it's an external critical dependency that can be wielded like a club
against you. But if you have adequate internal production, what does it matter
if it's done by humans, robots, or hyperintelligent cyborg orangutans? It may
take a generation or so, but the people who would have been manufacturing
labor will be absorbed into other markets -- or should be, as I understand it.

~~~
jbooth
Should be? Why?

If "absorbed into other markets" means "wal-mart greeter", then that's bad.
I'm all about efficiency and won't advocate make-work jobs, but if you don't
have a base of demand in the form of a healthy middle class, it's hard to find
people to buy the goods that you do manufacture.

------
c00p3r
It could be called the end of PC era and personal computing in general. Look
at this shift from general purpose desktop devices to specialized (TVs,
consoles) and mobile ones.

Also the web is not something special nowadays. It is rather overloaded and
boring. To many blogs, social networks which no one read anymore.

The web will remain, of course, the primary commercial media, that is why
google buys that travel search service. Web is a perfect media for such
services.

But it is not for a small, let alone individual players. So, we could speak
rather about the end of PC-era, rather than lost decade of IT-investing.

It is a time to invest into a global services.

