The Tech Bubble Didn’t Burst This Year
bloomberg.com
bloomberg.com
Investors may demand liquidation before money-losing companies with cash run through all their capital. Stockholders have the power to force that, unless there's some two-tier stock deal such as Google and Facebook have, but Twitter does not.
What's the next big thing?
- Self-driving cars that actually work are about three years from commercial deployment. What businesses will be created around that? Automated parking garages? Car-sharing? LIDAR manufacturing?
- In a few months, the Chevy Bolt will be shipping. More charging stations will be needed. Over the next decade, a need for a huge number of charging points will appear. Somebody has to build those.
- Surveillance cameras, including car dashcams, coupled to face recognition and AI. Big Brother where something is always watching. But who? Google? Samsung? ADT? G4S? NSA?
- The blue-sky possibility: Lockheed-Martin's Skunk Works succeeds in building a usable fusion reactor. They're not saying much other than that they've made enough progress to justify investing more of their own funds. The Skunk Works has a good track record of doing things others thought impossible. (The U-2, the SR-71, the F-117, the F-22, and probably some things that haven't been made public yet.) If that works, the world changes in a big way.
Probably not the next big thing:
- Virtual reality. There's still no killer app, and we're into the holiday shopping season. The hardware problem has been solved, and nobody cares. It's the new 3D TV.
- 3D printing. There are lots of good 3D printers, and they're bought by the same people who buy milling machines. They're a useful industrial tool. But home printing? Not happening.
- Internet of Things. It's mostly gimmicks so far. IP-addressable lightbulbs just aren't that useful. There's going to be a lot of crap manufactured, but it may just be a fad like hoverboards and CB radio.
- Hydrogen-powered cars. This is Toyota's answer to electric cars, and they're on sale now in California. They've sold about 700 of them in the US so far.
I really don't get the negative vibe on HN. VR headsets are in the market for six months now. One of them is still incomplete. Both are price-targeted at the very top of the market. Sony's, the first consumer headset, hasn't seen its first holiday season. VR games are still in the exploratory phase. Yet, with all of these signs of current and active hardware, software and market development, there's enough hubris to call the death of the technology.
It's like saying that the electric car concept is crap because the Tesla Roadster has crappy range, no boot and sold only a thousand units.
I've been trying to make it work but it's not something you can really bootstrap (well, you can, but it's taking me a long time :P ).
Some validation: "When I was asked to see a 360-degree, fully spherical panoramic picture of The Colosseum in virtual reality, I thought, “meh, what’s so special about a picture?” I finished some work, perhaps made a cup of coffee or two, before I made my way over. Well, I was wrong. I’ve never been to The Colosseum, but I was blown away by how much it managed to make me feel like I was there"
Jeff Atwood:
"Adding hands to VR was revelatory, the one bit of VR I've experienced to date that I can honestly say I was blown away by.
Add hands, and suddenly you are there because you can now interact with that VR world in a profoundly human way: by touching it. "
People from the USA are not so used to these problems, but I live it every day - I work remotely, I have family in 4 continents, a lot of what I want to buy is not sold in my country so I have no way of knowing if it's what I actually want, and a long list of etceteras.
Contrast this with a device that pretty much no one wants, and everyone agrees is either humorously nerdy or frighteningly dystopic.
Individual implementations (Tesla/Leaf vs Vive/Rift) aren't the topic here. It's that both Tesla and Leaf were solving a problem nearly everyone agrees was there. What is VR solving?
Also your own linked article talks about how great Tesla is, how serious the need for something like it is, and then says "the only thing is it costs $94,000." So basically reiterating my point.
One can be successful company without solving a concrete problem (that existing products have), but simply producing something people want - in particular in entertainment sector.
And I admit: I would the much more immersive applications that VR offers. I also would love to experiment with building/"playing" completely new kind of applications/experiences that simply first become possible by VR. Unluckily I have much too little time and money. :-(
Wow, "no one wants" "everyone agrees"
You have a serious problem attributing YOUR PERSONAL OPINION to a larger group, this is a really nasty fallacy and it makes your argument look very weak.
You don't have to lie and inflate your opinion by saying "EVERYONE AGREES WITH ME" multiple times.
Just give your opinion and the reasons for it. If everyone agrees, that'll be evident, not something you need to inform us of.
P.S. LITERALLY everyone does not agree with you. LITERALLY more than no one wants VR devices. LITERALLY everyone does not agree that the devices are humorously nerdy / "dystopic"
Edit: Actually no I won't... I can't edit anymore. But yeah, you're right, I'm being a bit rhetorical :)
Mass market adoption is just right around the corner, I'm sure of it. Sarcasm aside, I'm not certain that it will never happen. It just seems like it's getting way more attention than it deserves.
I also think that the big players' involvement (namely Google and especially Facebook) is not doing VR any favors at all. Even the non-techy consumer class doesn't trust Facebook and I think they're right not to be interested in giving them a monopoly over their FOV.
I think the niche applications of VR or AR will be incredible. Things like engineering or medicine or maybe even data science will be forever changed by a successful VR platform. Unfortunately, that doesn't seem to be anyone's goal.
Clearly you're talking about a VCR, no wait, DVD player, no wait Laptop.
VR is not wildly popular outside of the home, or anywhere else for that matter.
Unless you're implying that Rift solves a distribution problem? It doesn't, obviously.
And in fact, movies were already in the home and had been for a long time. [1] (Of course, by the time VCRs were mass market, there was cable too.) So the question was really only how to watch movies in the home on your own schedule.
[1] https://en.wikipedia.org/wiki/NBC_Saturday_Night_at_the_Movi...
Oculus plus Vive should breach the half-million unit mark in the holiday season. Sony scaled up production reacting to launch demand, so I'd wager they should move another half million units. This new market should move a million devices in three quarters.
These are impressive numbers for any first generation. For reference, the first generation iPhone sold 5.5 million units. Not that it would ever be expectable for a non-personal device to ever reach iphone levels of adoption.
Long text to say that, if this is something that no one wants, it's a very special something that no one wants.
There's a huge amount of IoT happening in the industrial sector. For example, I just listened to a presentation about how container delivery and loading is being optimized in Hamburg using various sensors and command/control systems. It's just the consumer stuff that's mostly solutions in search of a problem.
I almost wish we had a different name for consumer and industrial IoT. Most of the consumer stuff is silly and ends of derailing so many IoT conversations.
Industrial grade IoT is an odd patchwork of devices all over the spectrum. Practically all of them exist in walled gardens if they're publicly accessible at all.
There isn't a big, cohesive IoT project that is solving all the problems. That's largely because people are still feeling out what is and isn't useful with these platforms. Don't mistake that for it not happening at scale.
/Averaged about 20 deployed devices per week since July
I disagree with this: 1) the only VR helmet which is confortable to wear is the PS headset which is tied to an underpowered console..
2) The resolution of the screens is still not good enough and it won't be good enough until you can read confortably text using VR glasses which will allow new use case..
3) a good VR helmet should have a camera to allow you to interact with the real world without taking off the helmet and currently only the Vive has this camera.
Once all these 3 points are solved and the price of the PC to drive the VR glasses is not too expensive then you could say that the hardware problem has been solved. And until this point is reached, we won't know whether the VR will be a success or a fad, currently it's only really interesting for 'enthousiast' so success or lack of success of current hardware isn't really an indicator of the future of VR (a bit like smartphones: there were many bad web browsing phone before the iPhone arrived).
As for 3D printing, IoT and hydrogen powered cars: I agree.
Real light field displays have already been demonstrated [0] [1]. As another example, the hype around Magic Leap seems to be largely due to some novel light field display technology using an oscillating optical fiber as a light field scanner.
[0] http://alumni.media.mit.edu/~dlanman/research/compressivedis... [1] http://www.computationalimaging.org/publications/the-light-f...
I also often tend to forget that, but unlike the Smart home, where I agree with your opinion, IoT for industrial applications like remote monitoring and failure prediction of mechanical parts seems to develop pretty well.
> IMO it's not fair calling industrial applications IOT
Particles' website [0] also uses IoT as an all-encompassing term, using specialized terms like "Smart Home" and "Industrial Internet of Things" where applicable.
(Consumer IoT rant follows)
Current consumer "Smart Home" products always remind me of the old joke about the guy who lost his keys in a dark corner and then goes to look for them under the streetlight across the street - "because the light is better there".
I think there actually are a lot of household chores where automation would really shine - such as cleaning up, doing laundry, doing the dishes, many aspects of cooking, etc.
Of course those tasks are far too complex to be automated to any satisfactory degree as of today - but oddly, there doesn't seem to be much interest in research either. Instead, the industry seems to be running after seemingly low-hanging fruit that on closer look are not even fruit at all: Their products seem driven by what is easily doable with today's technology and what data the vendor would like to collect. Whether the use-case that the product satisfies actually exists seems to be unimportant. Then people are surprised if such products don't sell.
My favourite example is the wifi-enabled water boiler: I could imagine a lot of tasks that involve boiling water and that I'd love to automate: If you live alone and could walke up to an already prepared cup of tea/coffee/porridge would be nice. Yet the makes of that product chose to automate the one aspect of those tasks where automation brings the least benefit: Flicking the switch on the water boiler.
I believe when we're capable of building a "laundry bucket/washer/dryer/wardrobe" combo where you put your dirty laundry in the bucket and it magically ends up in your wardrobe the next day, smart homes will become useful. Not if we stick to light bulbs that need internet access.
I'm more hopeful in the near term of an AI virtual assistant that can intelligently at least deal with things in the digital space.
The hardware problem is not yet solved until 8K (or even 4K) displays (and processing power for them) are widely available. The current generation uses too low-res displays for wide FOV.
> [...]
> - Internet of Things. It's mostly gimmicks so far. IP-addressable lightbulbs just aren't that useful. There's going to be a lot of crap manufactured, but it may just be a fad like hoverboards and CB radio.
The killer applications of IoT do not lie in home appliances, but in industrial context.
- Virtual reality: what time-frame are you talking about? The hardware problem has not been solved. Yes, it's better than in the 90's, no it's not good enough. VR can be big, it will also take a while.
- 3D printing: The disruption 3D printing promises is reducing the "industry" size (both physical and in capital terms) and exploding the variety of real-world products available. This is huge, and is happening, if a bit slowly. The 3D printer market itself is a small detail.
- IoT: I'm mostly vocal for not plugging your "things" on the internet... but "It's mostly gimmicks so far" is what people said about every big market change just before it exploded. I really don't know how you could be wrong (and 5 minutes ago would say you weren't), but that answer does not bring me any confidence.
- Hydrogen-powered cars: Yep, those are really stupid. Won't go anywhere.
I don't know of many people using 3d printing as exclusively for self-use. Most are people making toys, games, or components for machines which they sell to other people. So, I don't see how 3d printing has been a failure of anything other than idiotic futurists that think it's the ST:TNG replicator (it's not). If anything, I think 3d printing has taken off like gangbusters with small manufacturers and small businesses. They reap the benefits of having a small plastics manufacturing machine that doesn't need vacuum mold dies swapped out or machined by specialized tools. Just because VCs can't turn it into an firm with a successful IPO doesn't mean it's a failure is all I'm saying.
and a few years back there were a lot of printer makers proclaiming loudly that everybody would want to have a 3D printer at home and home printing would be "next big thing". Reality is a lot slower (there is some uptake in hobbies outside "tinkering with technology", and they are sold in mainstream-y sales channels now)
Is there a cost efficient alternative that would "just do"?
I believe that cars use hydrogen in fuel cells, which makes the hydrogen just a component of a different battery technology (the rest of the car still being electric).
Hydrogen can either be used in full cells (for this your statement is correct) or in hydrogen internal combustion engines:
> https://en.wikipedia.org/wiki/Hydrogen_internal_combustion_e...
Anyone who builds a business based on fully autonomous vehicles being available in three years is in for a rude shock. 30 years is probably more like it.
30 years ago was 1986; I don't know about you, but my Internet usage looked a lot different back then, and computing power was drastically different. Fully autonomous vehicles may still be a ways off, but imperfect partially autonomous is already here, with Tesla leading the the way for high-end consumers.
I think you forgot Lyft and Snapchat, and probably AirBnb, although I don't know about that last example. There are probably other companies that fulfill the bill, although I can't think of them right now.
Amazon, of course. But I guess they're an outlier amongst outliers.
This might hold in the consumer sector. But I can easily imagine that in the "professional" sector this is quite different. I see for example lots of potential in job training for possibly dangerous jobs or in the design/modeling/CAD sector.
How about being able to remotely be present at e.g. music or sports events? And have the best possible seat?
Mass adoption is the defining characteristic, so the absence of mass adoption indicates the absence of a killer app.
Amen brother. Current VR implementations are hot garbage. Not nearly enough pixels to be immersive, they make you sick and send you careening into walls.
I see a lot of potential for racing games and that sort of thing, but until we fix the more serious issues of mobility I just can't see this going many places.
Give me my office chair and my 4K display any day.
I'm curious why LP's aren't up in arms (maybe they are privately), but my guess is that the answer venture funds give their LP's are that they are being prudent so that they are protected from the impending "crash" and can start investing when prices are lower.
What seems to be happening as a result is that venture funds are starting to invest more like Banks - looking for more traditional metrics like ARR that can protect them on the downside with the caveat that they still expect power law distribution of returns.
So basically they want to invest in potentially billion dollar companies that are cash flow positive from the start. IMO this is trying to have it all, and discourages moonshot bets that are capital intensive before finding their market.
It's a judgment call whether this is "good" or not, but it seems to me to counter the original goal of venture.
[1] http://www.wsj.com/articles/funds-flow-to-venture-firms-1459...
[2] https://www.bloomberg.com/news/articles/2016-03-09/more-vent...
As an industry matures, returns to capital should naturally fall. This is a normal process, as the 'obvious' opportunities are systematically exploited, and the industry itself creates large incumbents that compete with startups.
The fact that venture funds are smoothly pivoting is a good thing, regardless of whether that's what LPs thought they were signing up for. If LPs are really upset at cash sitting around, they can (eventually) ask for their money back and find a different fund; that can't happen if the fund makes bad investments and loses the principal.
The worst possible outcome would be if funds forced themselves to keep doing business as usual until everything blew up.
It used to be that shoveling cash into a furnace to inflate the balloon was guaranteed to work. Someone always was buying whatever was inflating above the fire. SV selling to SV.
Now the question is whether the a rig is flight-worthy and has a reasonable chance to pay back even if not acquired. If IPOs are valuated along more traditional models sustainable revenue streams will become central. Some VC may eventually decide to chase a B$ unicorn and loose. Some VC may stop. Some VC may adjust. Paradigm shifts often leave people behind.
Risk management is becoming more important. That means smaller investments and a closer look/relationship. Traditional angel approach and possibly the industrialized version of YC and the like are becoming more important.
And yes, there is a systemic problem. Pumping money into the economy through financial means has proven not to be effective for medium to long term situations. If this is adjusted maybe bigger investments will flow again into SV. However the business models will be different. In the past the money was poured over SV and a significant part was used to build for SV customers. Customers will be to a larger extent elsewhere. The good news is that is more scalable and sustainable.
The advantage is that they can calculate their rate of return based on the period of their investment rather than from the first day of the fund.
The disadvantage is that during market upheaval (like the 2008 crises), there is a risk that limited partners (the investors in the funds) default on a capital call which can be a serious problem[1].
So no, VCs are not hoping for a crisis.
[1] http://www.pepperlaw.com/publications/capital-call-defaults-...
The A round is the new B round from 20 years ago. The firms raising huge funds are funding traditional "growth capital rounds".
The firms funding seed rounds (traditional A round) are still taking risks on low or nonexistent ARR companies.
The difference then is that the IPO has been displaced be the very late stage private round. Everything else is pretty similar to before, but with better early financing terms for angel/seed rounds compared to before.
Can someone explain this to me? What competitive edge does Uber have that would stop literally any well-funded company from entering their market as a competitor? I know they have pervasive brand awareness and a large driver network but does that really justify a $69B valuation? What's to stop consumers and drivers from jumping ship en masse?
> I know they have pervasive brand awareness and a large driver network
Look what happened to Uber in China where a local competitor had pervasive brand awareness and a large driver network before Uber got established there.
Uber bled cash, and bled some more cash, and bled some more cash while trying to build market share, and then finally gave up and sold their business to their competitor.
That's basically what's stopping a well-funded company from entering the market as a competitor, an aversion to bleeding cash to build market share which they might not ever be able to do.
And by "that won't last long," I mean that era has seemingly already passed. The quality degradations in the past few months alone in NYC have been serious enough for me to default to Juno whenever possible. I'm not saying Juno is sustainable either (I don't know), but so long as any ridesharing app is willing to burn investor capital at a loss, I'm willing to benefit from said loss. I have no allegiance to Uber and I doubt anyone else does either.
An AirBNB for self-driving cars will be as cheap or cheaper to operate: no overhead for managing or paying drivers, no need to invest your own capital upfront to buy cars or loan money for cars. You just connect car owners to people who want to rent their car for 30 minutes.
Even better: No need to subsidise fares to undercut competitors, just let your owners pick whatever price they like. Most of them will underprice for wear and tear, just as they already do, at no cost to the company making the connections between owners and riders. Meanwhile, Uber can't really ignore depreciation or wear and tear, even though it tries to place them at arm's length through loans to drivers.
The economies of scale in such a market are weakened. Sure, you can buy a giant fleet of vehicles at a discount. But your competitors don't need to and will never need to. And if your competitors have massive piles of their own cash, which they don't need hype to acquire, you're looking at a fairly brutal car-wreck.
Lyft won't kill Uber. Google Lifts will.
This is, of course, massively risky and commits tremendous resources in a very short time. There is no good way of evaluating how this will go, because(as is typical in this generation of tech companies) the KPIs might be the wrong ones for a sustainable business and this gets figured out too late to change course. But that's what the investors were sold on, and that's what they're going to build until the day the cash runs out.
The other two manufacture cars, Uber manufactures, well, nothing.
The economic value they have comes from 'creating' a market and being first in it (brand recognition), which gives them a competitive edge over newcomers. In addition, from investors, they have a 'war chest' which allows them to make the barriers to entry harder.
Some of these companies, I think, have realized that they are too dependent on the will of their suppliers; so now, they're actually manufacturing or creating something tied solely to the company. For example, Uber investing in self-driving cars.
https://news.ycombinator.com/item?id=12759649
Tl;Dr: Uberkiller focusing on Hitchhiking, proof of identity, and set-your-own-rates. Skims from % of paid transactions.
Copying Uber at a small scale with a limited feature set is feasible, just like making a little boutique search engine to compete with Google is feasible. But where do you go from there? Seriously competing means you need to do better than them, and with Uber already have advantages of scale and brand, what's your angle?
As long as it's possible for a small group to compete with uber even on the margins, Uber will never have monopoly pricing power. Someone can always start a small company to take people to the airport, pick up executives, etc. Anecdotally, most serious travelers I know in NYC have reverted back to using car services to do airport trips, since it's a much more predictable experience than Uber.
As long as that's the case Uber will never reap the windfall profits that accrue to a monopoly. Which makes me seriously wonder why they would burn such remarkable amounts of money thinking they can establish one.
> Can someone explain this to me? What competitive edge does Uber have that would stop literally any well-funded company from entering their market as a competitor?
The book seriously predates the dot-com bubble. It does not mention it. It's just that it perfectly fitted the events back then, and still does; something that is a hallmark of quality.
According to Drucker, a first boom and crash is followed by a more shallow boom and slowdown, and then the tech is absorbed into everyday life and causes no more large market fluctuations.
[1] http://nvca.org/pressreleases/venture-capitalists-raise-5-bi...
It's true that tech in general may be facing challenges because smartphones are not new anymore, but I was especially annoyed at the On-Demand bubble from last year, which felt to me like a "fake startup" trend. Saying the total addressable market of food is in the trillions so you're gonna make a food delivery app and give away a dollar for 80 cents just felt to me like, is this really a 'tech' business? There are no margins.
I would agree that on-demand services, for the most part, aren't innovating: they're just facilitating consumer-merchant relationships.
http://blog.samaltman.com/were-in-a-bubble
Other than the company names, has anything really changed since the Richter Scales put out "Here Comes Another Bubble" in 2007? "Make yourself a million bucks, partly skill, mostly luck: now you can afford a down payment on a small house."
You can't afford a down payment on a small house in some areas any longer?
Silicon Valley — The Wall Street Without Bubble
https://medium.com/startup-blink/silicon-valley-the-wall-str...
I just get nervous by these companies whose products are a single app on your phone and some computer code. This is generally not a great setup for being worth a lot of money 20 years from now.
Economies are cyclical, and any time you see double digit growth in any market for over half a decade, there's usually a dip at the end... how big depends on how over-inflated that market is.
Perhaps I could be talking to the wrong people.