
The Tech Bubble Didn’t Burst This Year - bilifuduo
https://www.bloomberg.com/news/articles/2016-10-20/the-tech-bubble-didn-t-burst-this-year-just-wait
======
Animats
Who's big and a steady money-loser? Twitter? Uber? Who else?

Investors may demand liquidation before money-losing companies with cash run
through all their capital. Stockholders have the power to force that, unless
there's some two-tier stock deal such as Google and Facebook have, but Twitter
does not.

What's the next big thing?

\- Self-driving cars that actually work are about three years from commercial
deployment. What businesses will be created around that? Automated parking
garages? Car-sharing? LIDAR manufacturing?

\- In a few months, the Chevy Bolt will be shipping. More charging stations
will be needed. Over the next decade, a need for a huge number of charging
points will appear. Somebody has to build those.

\- Surveillance cameras, including car dashcams, coupled to face recognition
and AI. Big Brother where something is always watching. But who? Google?
Samsung? ADT? G4S? NSA?

\- The blue-sky possibility: Lockheed-Martin's Skunk Works succeeds in
building a usable fusion reactor. They're not saying much other than that
they've made enough progress to justify investing more of their own funds. The
Skunk Works has a good track record of doing things others thought impossible.
(The U-2, the SR-71, the F-117, the F-22, and probably some things that
haven't been made public yet.) If that works, the world changes in a big way.

Probably not the next big thing:

\- Virtual reality. There's still no killer app, and we're into the holiday
shopping season. The hardware problem has been solved, and nobody cares. It's
the new 3D TV.

\- 3D printing. There are lots of good 3D printers, and they're bought by the
same people who buy milling machines. They're a useful industrial tool. But
home printing? Not happening.

\- Internet of Things. It's mostly gimmicks so far. IP-addressable lightbulbs
just aren't that useful. There's going to be a lot of crap manufactured, but
it may just be a fad like hoverboards and CB radio.

\- Hydrogen-powered cars. This is Toyota's answer to electric cars, and
they're on sale now in California. They've sold about 700 of them in the US so
far.

~~~
ghaff
>Self-driving cars that actually work are about three years from commercial
deployment.

Anyone who builds a business based on fully autonomous vehicles being
available in three years is in for a rude shock. 30 years is probably more
like it.

~~~
Animats
Most of the luxury car makers have Level 2 systems shipping now. Google and
Volvo have good Level 3 systems in test. Volvo plans to deploy 100 Level 3
cars next year. Google and Chrysler are building 100 Level 3 minivans in
Michigan. Level 3 isn't that far away.

~~~
ghaff
While true, Level 3 will be a (very) nice capability once available. And I
agree it's relatively close. But you're probably not enabling new businesses
(for general road use) until you have full door-to-door autonomy. Which was
what the original comment was talking about.

------
AndrewKemendo
To me the real scandal here is that while funding of startups is down, Venture
firm funding is up and cash in the bank is the highest since 2000 [1]. So that
means - like corporations currently - these funds are just sitting on cash
[2].

I'm curious why LP's aren't up in arms (maybe they are privately), but my
guess is that the answer venture funds give their LP's are that they are being
prudent so that they are protected from the impending "crash" and can start
investing when prices are lower.

What seems to be happening as a result is that venture funds are starting to
invest more like Banks - looking for more traditional metrics like ARR that
can protect them on the downside with the caveat that they still expect power
law distribution of returns.

So basically they want to invest in potentially billion dollar companies that
are cash flow positive from the start. IMO this is trying to have it all, and
discourages moonshot bets that are capital intensive before finding their
market.

It's a judgment call whether this is "good" or not, but it seems to me to
counter the original goal of venture.

[1] [http://www.wsj.com/articles/funds-flow-to-venture-
firms-1459...](http://www.wsj.com/articles/funds-flow-to-venture-
firms-1459295426)

[2] [https://www.bloomberg.com/news/articles/2016-03-09/more-
vent...](https://www.bloomberg.com/news/articles/2016-03-09/more-venture-
investors-are-sitting-on-the-sidelines)

~~~
smallnamespace
Sounds like the venture funds are actually doing their jobs then, namely
trying to get the best possible return and not just blindly throwing money at
everyone who walks through the door.

As an industry matures, returns to capital should naturally fall. This is a
normal process, as the 'obvious' opportunities are systematically exploited,
and the industry itself creates large incumbents that compete with startups.

The fact that venture funds are _smoothly_ pivoting is a good thing,
regardless of whether that's what LPs thought they were signing up for. If LPs
are really upset at cash sitting around, they can (eventually) ask for their
money back and find a different fund; that can't happen if the fund makes bad
investments and loses the principal.

The worst possible outcome would be if funds forced themselves to keep doing
business as usual until everything blew up.

------
pault
> Uber, valued at about $69 billion, is the most valuable American car company
> by some margin, worth more than General Motors and Fiat Chrysler combined.

Can someone explain this to me? What competitive edge does Uber have that
would stop literally any well-funded company from entering their market as a
competitor? I know they have pervasive brand awareness and a large driver
network but does that really justify a $69B valuation? What's to stop
consumers and drivers from jumping ship en masse?

~~~
TulliusCicero
Your comment sounds like another case of "how hard could copying this multi-
national juggernaut actually be??", ala
[https://news.ycombinator.com/item?id=12626314](https://news.ycombinator.com/item?id=12626314)

Copying Uber at a small scale with a limited feature set is feasible, just
like making a little boutique search engine to compete with Google is
feasible. But where do you go from there? _Seriously_ competing means you need
to do better than them, and with Uber already have advantages of scale and
brand, what's your angle?

~~~
justinlardinois
When did your parent talk about copying Uber?

~~~
TulliusCicero
Pretty much the whole thing?

> Can someone explain this to me? What competitive edge does Uber have that
> would stop literally any well-funded company from entering their market as a
> competitor?

~~~
justinlardinois
Looks like I misread.

------
pfarnsworth
I used to think there was going to be a crash, but not anymore. We have just
experienced a controlled deflation, probably the first time at least in my
lifetime. Most/many tech companies got deflated but somehow we avoided a
massive crash this time and sensibilities have increased without mass chaos.

~~~
damonpace
Word of Caution: The Dot-Com & Real Estate bubbles happened slowly and then
all at once. When a bubble slows down, everyone says we're just going through
a correction. The possibility of a complete crash is still there in the next
year or so. Especially, since a mega-hit ($10b+ val) hasn't been created in SV
in over 5 years. Investors need these mega-hits in order to justify the risks
they take and there hasn't been a break-out started since 2010.

~~~
crush_xc
Snapchat?

~~~
toomuchtodo
Is SnapChat's valuation anywhere near inline with their revenue/profitability
(or lack thereof)?

------
firasd
Good article.

It's true that tech in general may be facing challenges because smartphones
are not new anymore, but I was especially annoyed at the On-Demand bubble from
last year, which felt to me like a "fake startup" trend. Saying the total
addressable market of food is in the trillions so you're gonna make a food
delivery app and give away a dollar for 80 cents just felt to me like, is this
really a 'tech' business? There are no margins.

~~~
CN7R
To be fair, software has higher profit margins than hardware. Even higher when
you make that software as a service. A lot of the margins is diminished due to
the physical upkeep, which can be argued as "hardware".

I would agree that on-demand services, for the most part, aren't innovating:
they're just facilitating consumer-merchant relationships.

------
apsec112
Hmmmm... tech is in a bubble, where have we heard this before...

[http://blog.samaltman.com/were-in-a-bubble](http://blog.samaltman.com/were-
in-a-bubble)

Other than the company names, has anything really changed since the Richter
Scales put out "Here Comes Another Bubble" in 2007? "Make yourself a million
bucks, partly skill, mostly luck: now you can afford a down payment on a small
house."

~~~
ghaff
>has anything really changed

You can't afford a down payment on a small house in some areas any longer?

------
allenleein
For anyone who wants to dig more about tech bubbles:

Silicon Valley — The Wall Street Without Bubble

[https://medium.com/startup-blink/silicon-valley-the-wall-
str...](https://medium.com/startup-blink/silicon-valley-the-wall-street-
without-bubble-c5bc68135df#.5fpccngr2)

------
rapsey
Yes there is a bubble. But it's in bonds. Once that bursts everything will
hurt.

~~~
rayuela
This! Lately a lot of funding has been structured to look a lot like bonds as
well. Fixed income markets are where the troubles will start.

------
bedhead
Uber's valuation in particular worries me. Uber's product is 90 pixels on your
phone - that's it. Behind that is computer code and an admittedly powerful
network effect among drivers and riders. But I have to wonder about that power
of that network effect over time, especially with this race to develop self-
driving cars and other similar things. Meanwhile, Uber's business practices
are, shall we say, often times questionable. Customers increasingly dislike
the product, whether it's surge pricing, or dirty cars, or lousy drivers.

I just get nervous by these companies whose products are a single app on your
phone and some computer code. This is generally not a great setup for being
worth a lot of money 20 years from now.

~~~
tempodox
If you can look 20 yrs into the future you must be the richest man on the
planet.

~~~
bedhead
Yes, I am.

------
tracker1
Investing unwisely doesn't mean it's all going to come crashing down. There
are a lot of companies being much more responsible right now. There are more
companies than ever not going deep into VC over-reaching evaluations, that are
cash positive. I do think there will be some fallout. I think the same is
trending in real estate again too in a lot of markets.

Economies are cyclical, and any time you see double digit growth in any market
for over half a decade, there's usually a dip at the end... how big depends on
how over-inflated that market is.

------
ry4n413
Look, as the probably only credible person here to speak on Stock Valuations.
Tech is not, nor is any other specific Industry or Sector the issue here. The
issue here is interests rate.

------
yalogin
If we are really expecting a downturn what will happen to the self driving car
cycle that is barely beginning now? These companies need much more funding
than software startups.

------
mrcactu5
I get the sense startups were more optimistic in previous years. Emphasis
these days is more about making money.

Perhaps I could be talking to the wrong people.

------
DannyB2
Hey, the year isn't over yet.

------
jerianasmith
Right there is bubble.

