Silicon Valley Watcher - conversations and observations at the intersection of technology and media

By Tom Foremski, for Silicon Valley Watcher
The killer skills for this next decade are going to be statistical analysis combined with business studies. I was just recently discussing this with my 18 year old son Matt, who is switching his second year college courses towards those subjects.

That's because in an online world where you have tens of thousands of business transactions and interactions happening in a day, or even in a minute, you need the tools to manage and interpret the behavior of large numbers of events.

Then three days later BusinessWeek comes out with its cover story: Why Math Will Rock Your World. I should remember to wear my tin foil lined hat more often--BusinessWeek is known for monitoring my brain waves :-)

By Tom Foremski for SiliconValleyWatcher

I love this American saying, "You can't get there from here," I'm told it comes from Maine. It seems to make no sense but when you need to use it--it makes perfect sense.

I find myself thinking of the phrase more and more these days. It's because I see companies and people defending dying business models because they are still profitable. And because the new business models are not yet formed.

That means an organization can't jump to the new business models because it doesn't recognize that there is a big change happening in its industry; or it can see it happening but cannot jump to the new business models because the new cannot support the old cost structures.

For example, that's what I see happening in the PR industry, which sees itself carrying on business as usual and defending its traditional methods of PR, with no threat to its business from new communications methods such as blogging.

While in the media sector, media companies can see the writing on the wall but they cannot jump over to become new media companies. Because the new media business models are too flimsy to support the old cost structures.

In both cases, "You can't get there from here." You have to be a new company you have to be a new rules company.

Is internet a disruptive technology?

"You can't get there from here," also helps to define a "disruptive technology." I define a disruptive technology as something which companies do not see coming, when they see it they pooh pooh it, then they grudgingly accept it, then they can't do anything about it.

A disruptive technology is like seeing the car crash in slow motion, it is seeing the train wreck happening right in front of you--and you can't get out of the way.

PC was disruptive

By Tom Foremski for SiliconValleyWatcher

SVW reader Penguin points to VC Rick Segal's recent post about the quandary venture capital is in.

To summarize: Web 2.0 companies don't need much capital and GOOG, YHOO and MSFT can step in and buy them just for the heck of it for a few million and the VCs don't get a look in. Plus there is not much distinction between the Web 2.0 startups.

Welcome to the world of the new rules startups; no VCs required, although an Angel or two helps... It's a knowledge capital world these days and GOOG and pals offer the largest platform for rolling out Web 2.0 services/products. How can VCs compete against that?

But also, there is widespread animosity towards VCs today. I've been covering Silicon Valley since 1984 and I haven't come across as much hostility towards VCs from startups, as I have over the past 18 months.

Why? Because of the many outrageous VC practices during the dotcom boom and afterwards. VCs always get their pound of flesh and then some.

But what goes around comes around. We live in a serial entrepreneur community here in Silicon Valley, and memories are still very fresh.

The strategy for startups these days is to bootstrap--go for Angels if you need money. And if you do need to pitch the Sandhill row, first raise your valuation as much as possible through your own efforts and financing.

I have a lot of respect for many VCs. Those are usually the ones I come into contact with, because they are out and about and pitching their investments.

There are hundreds of VCs that I never come across and seem to be baffled about what to invest in; they follow each other with a herd mentality and thus mess up the markets for all; and with almost no IPO market exit strategies rely on selling out to one of a small number of large companies--which keeps valuations in check.

When I recently met with VC M.R. Rangaswami of Sandhill.com, he said there were still too many VCs, and that the industry must come to terms with the fact that future returns on investments will be far lower than at traditional levels.

That means VCs have to tell investors in their funds to expect smaller gains. That's a tough sell, especially since the risk has not decreased. I could argue that the risk of failure for VC-backed startups has increased. . .(more on that in future posts).

While some VCs are twiddling their thumbs thinking about what to fund, they would do well to hire a PR agency to spruce up their image. Something along the lines of a benevolent "uncle" looking out for the best interests of their young charges might be an appropriate image to shoot for :-)

- - -
Please also see SVW: That giant sucking sound...will massive tech companies vacuum up all the cool/hot tech companies?