Today's tech boom is different than the one that blew up 15 years ago: This time we're creating more technology value. This time we have the cloud to vastly reduce time to market. This time the risk lies mainly in private equity rather than in a stock market bloated by silly IPOs.
But a brutally honest post last week by Mark Suster, a general partner at Upfront Ventures, convinces me that some of the worst excesses of the previous boom have come back to haunt us.
Suster takes aim at unicorns -- young tech startups valued at more than $1 billion. The term "unicorn" was originally coined to refer to the rare startups that reached a $1 billion valuation quickly. But now so many companies are crossing the B-line, the same magical sense that the normal rules no longer apply has returned -- and along with it a new crop of glory-seekers who seem awfully familiar.
I recognize these people. I rubbed shoulders with them during the dot-com boom. They're the ones for whom magical thinking is a way of life. They gravitate to the craziness and kick it up a notch or four.
When it all went south last time, those people left San Francisco so fast there was a run on U-Hauls. Now the "uninvited crowds," as Suster calls them, are back. That's not a good sign.
The magic has even crossed the Pacific. Last month, the Chinese search giant Baidu led a $1.2 billion series G round for Uber. (I didn't even know there was such a thing as a series G.) Everyone wants a piece of the action. As Suster proclaims:
Do you know how many people I meet these days who are "packaging up money in SPVs (special purpose vehicles)," or raising syndicates or doing secondaries or advising high-net-worth individuals how to get into unicorns?
The craziness is a lot worse on the consumer side, of course, but even in enterprise, the glut of me-too ventures popping up in hot areas keeps raising the stakes. It's barely an exaggeration to say I get pitched for a new big data or Internet of things startup every day. How are they all going to win? How many will even be sold for scrap in the end?
An inspired aspect of Suster's post is that he sees unicorns as part of a larger cultural phenomenon, including Tea Party delusions and fad dieting. You could add, if you like, the extravagantly wishful thinking that you can ignore common-sense security practices and avoid terrible data breaches or that guns can play a statistically significant role in protecting you and your family from harm.
In tech as in life, there are always real problems to be solved, many of them awfully complicated. But we live in the age of "one weird trick." When you have enough ventures taking magical shortcuts -- targeting imaginary markets, amassing technical debt, envisioning immediate opportunities that are actually 20 years away -- you know the end is near.
What the bust will look like at a time when most soon-to-fail tech ventures are private rather than public companies? InfoWorld's Caroline Craig did a great job examining that question a few weeks ago.
Certainly the impact on the economy at large won't be as bad as it was last time. Venture investment will swing from profligate back to selective. Special-purpose vehicles will crash and burn. The uninvited crowds will go home again. Meanwhile, real technologists will keep working hard and creating real technology.
Call me heartless, but that doesn't sound half bad.