Bubble or Boom – Is Silicon Valley riding into another burst?

Silicon Valley – the largest and most influential high-tech center in the world. In this region the world’s largest technology companies are situated: Apple, Cisco, Google, Intel, Oracle and many others.

Silicon Valley is also accounting for 1/3 of all of the venture capital investment in the United States. But why?

Because of young, start-up companies like facebook, twitter, zynga or groupon, which suddenly appear – mainly through ideas regarding the social network hype or the mobile app industry – and are said to be worth millions and millions of dollars within a couple of months.

A very interesting article I found in the online version of the New York Times discusses whether this development may evolve into another big bust. Can this be a second dot com bubble?

In his blogpost “Storm Clouds”, Fred Wilson (Venture Capitalist) raises concerns about investors taking too much risk and getting done large deals within a couple of days without due diligence.

On the other hand there is John Doerr (Venture Capitalist), who states that we are currently in the middle of a third wave of innovation, after the PC revolution in the 1980s and the Internet boom in the 1990s.

In a discussion with Fred Wilson at the Web 2.0 summit he states (see video): “I prefer to think of these bubbles as booms. I think booms are good. Booms lead to overinvestment, booms lead to full employment, booms lead to lots of innovation. You know, there was a boom when they started the railroads. We’re in another bubble — or boom — and it’s an exciting time.”

So, both state that there currently is overinvestment in this area, they just name it differently. There are similarities to the dot com bubble, but there are a lot of differences as well. One never knows whether there is a bubble until one bursts.

“It’s like falling into a time machine to hear two venture investors talk this way. The lesson, as always, seems to be to enjoy the ride — and hold on to your wallets.” (Heidi N. Moore, NYT)

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3 Responses to Bubble or Boom – Is Silicon Valley riding into another burst?

  1. rudi2020 says:

    “It’s an interesting time” I could imagine to state the same in case I was in the top 600 richest people in the world, just as John Doerr is. This and more interesting stuff is stated in this blog , just about the same topic.

    However, whereever bubbles are, there are possibilities to make money, either from gain or bubble burst. It is just about foreseeing them. How and when this will happen with internet marketing companies, is explained in this blog.

  2. olexa5 says:

    Nice contrast you sneaked up to there. Not only are venture capital businesses ‘booming’ in Silicon Valley. Recently, I read an article in ‘the Economist’ that a British equivalent has popped up in London. They inevitably gave it the name ‘Silicon Roundabout’.

    Check out the following link to see how this area has even attracted a lot support from the government.

  3. bravenewloock says:

    Financial blogger Chris Dixon divides venture capitalists in booms or bubbles by their mindset: There are “builders”, who create more value socially than they extract in monetary terms (Dixon advises to think about Google, who have influenced and ameliorated so many lives and still make a considerable amount of money). “Extractors” on the other hand aim to extract the most they can from invested capital, no matter the created value or the sustainability of investment, according to Dixon. The frantic pace of investments without due diligence described in the post above in my opinion strongly suggests that there are a lot of extractors around…

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