Tech Life A technology IPO nuclear winter

Bubble 2.0

The whispers in the valley and in the weblog-o-sphere is the hint that we’re in the early technology bubble similar to the Internet nuttiness of the late nineties. The ideas sound familiar:

– Those VCs sure are investing a lot of money in start-ups!

– It’s sure getting harder to hire!

– Everyone I know is heading to a start-up!

– You know, I kind’a want to go to a start-up!

When you combine these hallway observations with the techno-marketing term “Web 2.0”, you might start scratching your chin and thinking, “Hmmmmm… another bubble? Should I be making a move? Will be this time I hit the BIG BUCKS?”

First, yes, you should always be making a move. This is the Better, Faster, More industry and you should always be making a step towards growth, but the idea that we’re anywhere near a bubble is pretty silly.

Let’s look at some actual data. First, I picked five technology stocks from my longer stock list and compared their price right now to early 1998 which is a time I’m going to call early-to-mid Bubble. Go take a look at these right now…

Some observations:

  • The effect of the bubble is pretty obvious in all of these stocks. Sometime during 1998 and 1999, everyone went crazy and money poured into these stocks resulting in nutty valuations for all of the above companies except for Borland who still has little stars spinning around it’s head from it’s early-90s beat down from Microsoft.
  • Of the five, only Symantec and Dell have really done well post-Bubble and Dell is a stretch — it’s been flat since late 2000.
  • What you see in these stocks and a majority of other tech stocks is that many of them are still struggling with growth in a post-Bubble world. Better yet, go look at the recent history of the tech heavy NASDAQ. I look at this graph think, “Yeah, it’s pretty much 1999 right now.” THAT’S FIVE YEARS AGO PEOPLE.
  • The final nail in the Bubble coffin is simple. Here are the big winners in IPOs for the last year. Go scan it and name every company that you know. I’m guessing the winners are Baidu and Under Armor. The grand total of successful buzzy IPOs this year includes a Google aftershock and the purveyor of shirts that looks great on super heroes.

Two lessons to be learned:

  • Lesson #1: Money isn’t pouring into technology stocks unless it’s Google or Apple.
  • Lesson #2: It’s still a technology IPO nuclear winter.

If you eschew risk, you can argue the best time to consider a change is when the technology sector is underperforming because, duh, there’s no where to go, but up, right? Maybe you could care less about dollars and you’re enthralled with the potential behind the Web 2.0 idea. I’ve have more bad Rands news.

I’m in the camp of folks who really wants to slap the term Web 2.0 across the face. My issue is that while Web 2.0 does describe a semi-nebelous set of fascinating ideas and technology, the term is being used more to describe the enthusiasm for these ideas and technologies rather than the practical realities. I’ve had the same intense negative knee-jerk reaction to other immense technology initiatives like OpenDoc, the .NET technology umbrella, and Network Computer fad. My thought, “Well, yeah, it’s a good idea, but you’re foaming at the mouth like it’s religion and that freaks me out.”

We really need these zealots because in their foaming they often stumble on brilliance, but in my world, I’ve got to ship product and shipping product is what will define Web 2.0 for me.

Web 2.0 is not going to be defined by the world slickest meme map, Web 2.0 will defined as the time when a technology company has a new idea which gives it’s employees the dollars and sense to go it alone. The technology companies which have the moxy to pull of an IPO pre-Bubble are now taking a different exit strategy. They’re allowing themselves to be snapped by the likes of Google, Yahoo, and EBay. That’s terrific. I’m happy for each and every entrepreneur who is being amply rewarded for their hard work.

I’m not suggesting that a definition of technological success is a successful IPO. We’re going to know that someone has hit it out the park long before their stock starts trading in public markets. What we don’t know is what flavor of Web 2.0 is going to give this company and how that flavor is going to create a sustainable business model. If you see it before me, I’d love to hear about it.