Social networking hot lead Silicon Valley concerns

Sheng Yuan

As network service companies such as social media become the "new favorite" of Silicon Valley and the "new favorite" of venture capital, more and more people in the industry are beginning to question whether such a trend will hinder true technological innovation.

According to an article written by the US tech columnist Christopher Mims in The Wall Street Journal, the status quo shows that the valley has started to decline.

Another venture capital firm believes that the current wind has left Silicon Valley lost its way, and in the entrepreneurial world money is no longer flowing where it should go.

Investment direction shift

It's not hard, according to Sims, that social networking lets you send irrelevant words such as "yo" to your contacts, but based on the current situation, you can come to the conclusion that Silicon Valley has begun to decline It's Seems to have abandoned the entire Bay Area to solve any problem other than its own problems. This afflicts young people who start startups.

Silicon Valley innovator Steve Blank has also published an article on his blog that "Facebook is ruining the Silicon Valley." He said that despite the growing number of startups emerging in sensing, robotics, medical devices, and life sciences, venture capital firms seem to be only interested in whether they can run on tablets or smartphones.

Sims suggested that for science and technology development, this is a bit "unfair". Google, Facebook and Uber Have they changed or will likely change the industry?

Yatin Mundkur, a partner at Artiman in Palo Alto, Calif., Said: "Do you think innovation is more than 20 years old?" Mondik says innovation means changing basic research and development in life , Such as energy, medicine or food safety, not just optimizing the advertising platform.

At present, the entire advertising market in the United States is estimated at about 100 billion U.S. dollars each year, with a global figure of nearly 500 billion U.S. dollars and a U.S. GDP of more than 16 trillion U.S. dollars. This means that the total amount of advertising revenue a startup that each VC supports will be only 0.6% of the economy. In terms of employment, the number of employees in the advertising economy-related industries is only a few million.

However, the quest for advertising revenue still leaves many start-ups in the pursuit of size first, and calculates how to make money from users once they attract eyeballs.

Muntk said that the problem is not with entrepreneurs, but venture capitalists who invest, which leads to distortions in the way the society allocates capital.

Blank, said Facebook's listing of investor formula to make adjustments, the return on investment in social media, fast and impressive, which seriously affect the preferences of investors. Venture companies are now larger than ever before and many are over $ 1 billion. Therefore, they need more betting.

According to the American Association of Venture Capitalists, the total venture capital inflow into the software industry in 2013 was $ 11 billion, the highest level since 2000, close to the peak of the last tech bubble. Among them, the software company dropped 37% of all venture capital, which is the highest since 1995 when PricewaterhouseCoopers began collecting data. Last year, VC invested a total of 29.4 billion U.S. dollars in 3,995 projects, an increase of 7% over 2012.

Basic innovation blocked?

"Should Uber get $ 1.2 billion?" Muntk said, "How many start-ups can this fund?" Uber, the US Internet hit application, announced a new round of $ 1.2 billion in financing in early June, valuing the company at $ 18.2 billion USD, becoming one of the highest-valued startups in Silicon Valley.

According to overseas media reports, Fidelity invested about 425 million US dollars financing, Wellington management company invested 209 million US dollars, Blackstone Group contributed a total of 175 million US dollars. In addition, venture capital firms Summit Partners, Kleiner Perkins Caufield & Byers, Google Ventures and Monroe Ventures also participated in this round of financing.

According to Mymes analysis, one of the ways to think about how venture capital firms invest is the "Marlowe hierarchy of needs hierarchy," which divides demand from low to high into five categories: physical, security, social, respected, and self-fulfilling .

Facebook addresses the higher end of the second tier of needs, namely, respect and recognition of others. Artiman's goal, on the other hand, is to meet the lower levels of physical and security needs in the hierarchy of needs hierarchy. One of the companies, Cellworks, spent 6 years inventing a model of a human physiology that helps the company develop a new drug combination for existing conditions without testing in animals and even humans. Another company, Nutrinsic, is addressing the most basic human food and clothing problem and is cultivating bacteria that convert food waste into edible protein.

"I do not know if there's a bubble, but it's ok to overvalue the entire field." Dislocation investment enthusiasm raises issues that apparently also led some in the industry to question social networking fever in a similar way.

Whether it is a bubble or not, this is not a problem, according to Sims, and the key is how we can make the best use of the money that flows into technology at the right time.