David Cummings on Startups

Are we in a tech bubble?

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David Cummings

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Last week a colleague asked me if we were in the middle of a tech bubble and I immediately said “no way.” He theorized that five years from now things will have settled down and tech would not be getting the attention it gets now. I fumbled through a response and thought to myself that I needed to better articulate why we aren’t in a tech bubble.

Here’s why the tech renaissance is going to last:

  • Fast internet access is prevalent everywhere — both wired and wireless
  • Widespread smart phone adoption means most people have a powerful computer on their person at all times
  • Costs to build and deploy a web/mobile app have gone down significantly due to open source, cloud computing, and new technologies
  • Startup funding, especially outside of Silicon Valley and New York, has been relatively steady, if not declining, meaning we aren’t seeing an unsustainable level of investment like in the late 1990s
  • Development of startup communities is more well understood, especially the concept of startup density, serendipitous interactions, strong networks, and more
  • Methodologies like the lean startup and customer development help de-risk part of the equation
  • Software-as-a-Service (SaaS) is a real phenomenon driving down the cost of IT while improving adoption and effectiveness

Overall, we’re only scratching the surface with how the internet and mobile are changing the way people work and live. We’re not in a tech bubble and the future is bright.

What else? What are your thoughts on a current tech bubble?

Comments

2 responses to “Are we in a tech bubble?”

  1. Riftstalker Avatar
    Riftstalker

    I was looking for a good definition of a tech bubble and here’s the best I found so far.

    Traditionally, bubbles need to components: cheap credit and an inflatable asset that can be used for more credit. This describes well the bubble phenomenon: from the first bubble in France (the Mississippi Company) to the latest housing bubble that burst in 2008.

    So what parts of tech are bubbly these days? Here and there, you can see bubbly activity. For example, we could look at the 170M dollar investment in Supercell on the strength of their #1 position in the appstore (best monetizing game, at rate of 2M/day).

    How does Supercell spend the money? Let’s speculate a bit. They could invest them in direct marketing and paywalls. In 6 months, they could be raking in 5M a day and ask for 250M at a much, much higher valuation. The question (thanks, Zynga) is how sustainable these games are.

    But is this a bubble?

    First, it’s definitely not wide-spread. Second, product usage and revenues are a pretty good indicator that a company is doing something right. Although they can be viewed as an inflatable asset, you’d be hard-pressed an alternative measure of company progress and success.

    So, no, there isn’t a bubble.

    Reply
  2. Charlie Avatar
    Charlie

    I agree with you David, we are in a huge greenfield for technology and I don’t see it subsiding. 60% of the world still is not connected to the Internet, either wired or wireless, and mobile internet will continue to expand beyond the current 1B users. Also, the expansion of Internet of Things and Advanced Mfg, just to name two disruptive areas, will drive significant tech opportunities.

    Reply

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