This entry is a response (or rather, an extension) of an article written by British ex-pat Hermione Way about the US tech scene in Silicon Valley. It can be accessed at TheNextWeb here.
In Ms Way’s words, Silicon Valley is currently inundated with … Groupon clone after Groupon clone, yawn… yet another social media dashboard, a cloud-based enterprise solution or, worse still, another photo sharing app …
I couldn’t agree more. There’s a frenzy among VCs and other funding mechanisms to find the next Facebook. The normal due diligence and investor prudence seems to be increasingly tossed aside in favour of pre-money valuations in the range of $4-$5 million. That’s absolutely insane. Though I’m involved in the tech sector through a marketing analytics startup, I can’t shake off the conventional wisdom of my business education. How can anyone possibly value a company without sales, IP, or significant assets at four million dollars? Don’t get me wrong, I do feel that traditional valuation methods are a bit too stodgy for the realities of the internet technologies space… but the current VC culture in the valley is much more like a drunken frat party than a reliable investment vehicle.
Not to say that all funds down there are engaged in ridiculous practices, of course. I’m sure that there are still some partners and principals that haven’t gone loco.
This brings us to the root of the issue: the tech.
Why are talented developers only working on projects that are at best trivial, and at worst absolutely ludicrous? And I make this statement in the context of business opportunity, not usefulness. Sure, the Groupon model has its advantages (though I think Groupon is going to zero on a bullet in the medium-term… they lost $100m last quarter), and photo-sharing apps have a very kitsch consumerist, time-wasting usefulness. Enterprise-level cloud storage systems obviously have a market.
But all of these markets are saturated to the point of being opaque and hard like concrete (ever tried to penetrate concrete?).
If there are ten or twenty VC-backed firms in the space already doing more or less exactly what you want to do… why would you push forward? Personally, I might still push forward if I had some killer IP protection or some kind of USP that the competition couldn’t duplicate without a long development curve… but we’re talking daily deals, storage, and photo-sharing apps here. Those aren’t exactly novel concepts, and the technologies to service them work more or less in the same fashion. The only thing you can compete on is the interface and the user experience. Personally, I don’t want to beat myself over the head trying to outdo two hundred people who are just as smart as me on UX alone. Do you? Yes? Okay, move to Silicon Valley- and purchase a bottle of bourbon in the duty-free at the airport (you’ll need it). No? Read on.
Internet tech gives us, the everyday people, communication conduits through which we can change the world for the better. The internet is no longer a luxury, touching the lives of the majority of people on the planet… even the United Nations recently defined internet access as a basic human right (well, they actually declared disconnecting people from internet access a violation of human rights, but the sentiment is the same at its core: internet connectivity and access to global communications is a fundamental block of human existence). Why are we so enamoured with building trivial little mobile phone apps that do diddly-squat to improve our lives? The power of internet technologies can provide us with so much more.
I’m not saying that everyone should drop their current dev work and set out to conquer poverty, world peace, and global hunger with a 99 cent Android-powered app (though if you decide to, you have my utmost respect… and I’ll even take you out for a beer or two if you’re in town or vice-versa). Entertainment has its place within the digital ecosystem, and we need these products in order to be highly-functional human beings. But personally, I think there’s much more opportunity for greatness (and financial success) in developing internet technologies which change the way people think or which change the way people do. People who are zoned into tech entrepreneurship refer to these as ‘disruptive’ technologies or firms (though I prefer to think of them as ‘enabling’).
To close, let me pose this question to you future tech entrepreneurs out there: where do you want to be? Developing 99 cent apps for the App Store that make a fart noise, or the $5m/year SaaS application that helps retailers streamline their regional supply chains? Or maybe you’d rather be like my friends at Get Q’d, who are developing applications to eliminate waiting in line-ups (who doesn’t hate waiting in line?).
Let me give you a hint: if you’re after cash and/or personal satisfaction, there’s a lot more of both in the last two choices.