Where Did All The Tech Companies Go?

Yesterday, Om Malik asked an intriguing question Does Tech Matter?:

With all the mash-ups, scraping, and remixing, sometimes I wonder if pure technology matter? Seldom do I read reports on infrastructure, the chips and optical components. The analysis of this blog’s traffic patterns also shows that people are more obsessed with Google than with say JDSU. Mike Hirshland, a partner with Polaris Ventures, perhaps channeling legendary investor Peter Lynch, thinks most people like what they can use, and thus focus on it.

Yes, the world of technology has changed quite a bit in the 5 or 6 year ago.  Time was when every Silicon Valley startup I heard about had some new revolutionary optical switch, that would quintuple net speeds, and instead of hoping to be bought out by Yahoo! or Google, they wanted to be bought out by Cisco.  The names all blur together now--Monterrey, Sorrento, Sycamore.  Cisco once bought 39 of them in a two year span. 

Now you never hear about something so tangible.  As you know, the money is in Ajax desktops, and community building sites, and RSS readers.  In some way it makes sense.  That last bubble was about building up the networks, while this one is about finding something to do with them.  And yet, I think we're fooling ourselves if we think that tech is somehow 'done'.

There are a lot of tough problems left in hardware, like power usage and heat, not to mention more exotic frontiers like quantum computing, MRAM (the holy grail of memory) and optical pins (ever heard of Xanoptix?). Just as we seek, one day, a post-petroleum world, so too should we be looking post-silicon.  In other words, if tech is dead, it shouldn't be.  When companies like Samsung, Fujitsu, Hynix and Elpida start making major breakthroughs in this stuff, might feel sorta dumb for having invested so much money in Zoozio and Meebo.

I alluded to this very thing a few months ago in a post titled The Opportunity Costs of Web 2.0, in which I made a related point on the question of there being a Web 2.0 bubble.  It's true that if you look at the headline numbers of $200 million having been invested into new web startups then it doesn't seem like a big problem, but when you think of all of these brilliant minds being focused on new ways to milk Adsense, and not work on harder stuff, then the cost looks like a lot more.

So, let's hope that tech's not dead, but if it is, there should be appropriate mourning.

Comments

[Anonymous Angel Investor]

I see hundreds of seed stage deals spanning HW, SW, Nano, and Bio while doing several deals a year. The companies that need huge capital investment are a difficult area for angels since investment at a $25K to $250K level into a company that needs $1M to $15M to get to the next milestone and a total capitalization of $50M to $125M+ has high follow-on capital risk. The dilution scenarios aren't pretty since up rounds without preferences are difficult to get and IPOs are out. A web V2 deal that needs $2.5M to $15M total and a quick acquisition is another story.

The web has many enabling effects including some detrimental to the historic SV culture of tight local teams. It is now a sprout greenhouse with much of the farming done elsewhere.

The valley has undergone the largest restructuring ever in it's history. Unfortunately some VCs have little local loyalty, only fixation on getting a home run to "save the fund". Also the criteria for "early stage VC investment" has shifted drastically, almost to an old Series B. These evolutions may kill most of the species as the people experienced in designing, building and sustaining the big products die out leaving small furry web V2 animals.