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There is always a vibe in the Valley. Something is in, something is out. Someone is the shit, someone is shit. It doesn’t matter what reality is, the vibe overcomes all in its way…
I wrote a piece in 2010, briefly summarizing the web then, and subsequently wrote something on the supposed re-inflated internet bubble.
The question is: What is the vibe today?
Ecommerce, collaborative consumption and enterprise software. These are the top three hot categories.
Growth. Revenue and users are not important, only your growth rate is relevant. Which makes sense… the compounding effect of growth (or the lack thereof) is far more relevant to the future value of your business than is the current absolute status.
2013 is the Year of the Business Model. Investors want to see a proven means of making money, rather than a theory. Yogi Berra once said: “In theory there is no difference between practice and theory. In the practice, there is.”
What is out?
The luster of social networks has been damaged by Facebook’s inauspicious IPO.
The likes of Path are rumoured to be on the verge of “focusing” (a euphemism for cost-cutting). Coupled with the spectacular descent of Zynga, it seems social is less tasty nowadays (the big exception is Twitter, in whom everyone still believes, in spite of rumours that Twitter advertising is a disaster).
It’s interesting how unpopular Facebook is. Why, I don’t know, but I don’t get the feeling it’s because it’s big and scary like Google and Microsoft. Facebook is a bit like Lance Armstrong. People either love it or hate it.
Or to use a Valley analogy, sentiment towards Facebook is Zynga-esque.
The VCs are keeping their heads down. A couple of years ago the money was flying around like plates in a Greek restaurant. Nowadays, funding rounds are lingering like a single guy at a nightclub after 2 AM. Maybe the smart money knows the music has stopped, and now everyone is scrambling for a chair.
If you’re trying to win the crowd, the big catch phrases are:
- Lets improve the optics (aka: Make it look better).
- I’ve evolved on the issue (aka: I was wrong, and I’ve changed my mind).
- We chasing a step function (aka: incremental growth is for boring losers. We will take our base from 100,000 to 10mil in one month).
There is much talk of a lack of real innovation coming from the Valley, and I’d tend to agree that we don’t see any awesome new things emerging. Most innovation is incremental versus disruptive. The US Dept. of Defense is cutting budget everywhere, and this will impact tech businesses all over America. Less money flowing through the system means less room for frivolous research, and lowers the likelihood of big leaps forward.
Facebook is losing competent people, as is Zynga (incompetent people generally don’t jump ship). This is good for start-ups because talent is more readily available.
No one talks about Amazon (which probably means Bezos is unpopular among the techies, and may actually be a great endorsement for the man and his business!)
Microsoft has always had trouble winning the crowd, but WP8 and Surface are disappointing thus far, and the Seattle beast is in danger of losing its fear factor.
Yahoo and eBay (PayPal) fall into the dreaded category of “boring”. No one talks about them (except to focus on what Marissa is doing), even though they make immense cash profits every year (if you’re not growing your user base, you’re not sexy).
Google is the gorilla in the room. It’s smashing the competition, even Facebook’s brief flare-up seems to have been doused. Its social network is a ghost town, but it keeps flogging the horse and who knows… maybe it’ll win social by dint of grinding out the competition through sheer perseverance.
Google+ may become like your political party. Not something you particularly enjoy, but better than any of the alternatives.
It’s difficult to conclude that Google has not out-thought and out-executed the rest. It owns search. It’s winning the smartphone OS wars. It’s winning the browser wars. It’s winning the email wars.
It’s proving the naysayers wrong, and in spite of a general feeling of unease at its dominance, no one can point at an alternative in the race to own the web. Its only weakness is too many employees.
Google is not the post office. Why does it need tens of thousands of staff? Maybe it’s a defensive strategy… hire the smartest people in the world so they can’t compete against you.
I have not changed my mind on one thing: do not take the Valley head-on. If any non-American is to win in this space, we must find a new angle.
Using the terminology of the Scrabble theory of growth, the Valley has many more letters than South Africa or Africa, or India for that matter and therefore has far greater economic complexity and is capable of far greater innovation.
Do not, I repeat, do not expect to successfully replicate Silicon Valley. That doesn’t mean other markets shouldn’t chase tech success, it simply means the Valley model is not appropriate outside of the Valley. We need to add our own magic, for example: developing a non-advertising business model, an edge that America will struggle to innovate towards due to its innate vested interest in this model for consumer web companies.
Instead of looking to big tech for a lead to follow, look at your local market for a problem to solve.
Some other tips
Now that the Valley is losing its appetite, social is contrarian. Always a good thing. Especially when you take a step back and consider the inevitability of social networks becoming more entrenched in the fabric of our lives.
Do not take on Amazon, and if you do then build a logistics network. Its logistical competence is more important that its website.
Don’t bank on a sale to a US company unless you are plugged into the Valley mafia. In the absence of those connections your only path to a profitable venture is dividends.
All in all, whilst interesting as always, the Valley is not inspiring, and I remain hopeful that those of us sweating in sunny Africa have an opportunity to gatecrash the big tech party.