Silicon Valley as we know it is dead! Or at least that is what David Sacks, CEO of Yammer, is claiming in a recent Facebook update. This sparked a very interesting discussion on his page that even Marc Andreessen decided to chime in.
The status update came in the heels of Microsoft’s purchase of Sack’s Yammer for $1.2 Billion. So it is curious to hear this kind of claim from him after.
Cause(s) of Death?
So why did Sacks say that Silicon Valley, home of innovative startups, is down for the count? In his Facebook page, he claims that to create a successful company at this time, you have to have an idea that:
(1) has escaped the attention of the major Internet companies, which are better run than ever before;
(2) is capable of being launched and proven out for $5M, the typical seed plus series A investment; and
(3) is one that you can protect from the onslaught of those big companies once they figure out what you’re onto.
These are valid points as it is difficult to come up with a new idea given the technological advancements already achieved in this generation. And even if you do, it is difficult to protect it from large companies.
As Andreessen emphasizes that, though difficult, human ingenuity is endless. Sacks argues that while human creativity has not changed, a lot of the opportunities will be had by the incumbents of Silicon Valley and not by startups.
Point being, according to Sacks, “We may not be running out of ideas, but we might be running out of big new companies.”
False Alarm?
Though valid concerns, hasn’t it always been like this? What we forget is that new innovations take time to get momentum going. As Andreessen said, people initially thought that Sack’s own Yammer is just Twitter for business. Twitter, similarly, has been bashed for its 140 character limit but is still one of the most popular social media platforms in the world.
Another solid example is cloud computing. While it has existed for quite a while, it has only gained traction the last couple of years. But now, companies even trusts their business telephone and file storage systems to the cloud.
Yes, incumbents hold more opportunities and yes, the Internet is responsible for a lot of technological innovations; however, you also have to remember that incumbents or established companies are also more averse to taking risks so real innovations still normally begin on the startup level, and while Internet has a hand in most technological progress, it is still just a tool. There will still be technological innovations within and outside the Internet and start-ups will still play a big role when those innovations finally arrive.