I’m asking myself a question this morning: Is LinkedIn the new Netscape? Then I’m wondering if all of the 23 year old entrepreneurs know anything about Netscape. Although, honestly, the cribb notes will suffice: Netscape was the symbolic kick-off point for what became the dotcom boom (and bust). It IPO’d and no one had ever seen anything like it (as technology or first day stock performance). It was iconic. It still is iconic. And it opened the internet IPO floodgates.
So, as we stand on the verge of the LinkedIn IPO, and the raft of potential IPOs that could follow (Facebook, Zynga, Groupon, etc), the question is worth asking. Are we standing at a similar moment in the historical cycle?
And actually the question is important because it can give us a read on the current angel/seed/bubble madness that either is or isn’t happening in the valley (depending on your perspective).
Here’s the underlying context question (one I’ve batted back and forth with Paul Kedrosky via email for a bit now): If the U.S. economy is stabilizing, and the tech landscape is getting flush with cash (IPOs, M&A, financings), could we be at the beginning of another “super-cycle” in VC/startup land? In other words, could this bubble last another 3-4 *years* from this point. My answer is firmly standing on “maybe.”
In that context, let me return to some predictions I made in December:
“4. The U.S. economy grows at a surprisingly strong rate in the first half of the year, then flatlines under spending, deficit, inflation worries: It should be noted that my main economic prediction for 2010 (”we finish the year about where we start it on unemployment, etc”) was spot on. So, in that glorious halo of correctness, I throw this out there — QE2 (the fed’s efforts) and the tax cut deal (aka, “Stimulus 2?) are a shot in the arm in the first 6-7 months of 2011. We’ll grow in the 3% range, and the stock market will feel good. By September/October, the talk will be focused so firmly on problems around the spending/deficit/and inflation rearing its ugly head, that things grind to a flatline, and growth settles down in the 1% range. Unemployment never goes below 8% — and, most likely, it goes above 10% again before going down.”
So far, I’m nailing it — though the prediction was hardly a stretch. My “gut” says that housing is firming up (starts, inventory); not “we’re gonna sell houses,” just firming up. My gut also says that things are steadying, and honestly, if we hold unemployment around 8% and give the housing market time to work off inventory — well, things will be okay. So, assume 1.9% GDP growth – that is low because it has the strong headwinds of inflation and austerity measures to reduce the deficit. Bottom-line: the economy won’t drag down the tech sector. If anything, the tech sector will see liquidity *because* it is the shining bright spot. Further, entrepreneurs/startups will be seen as the only real way out of this mess.
“5. Tech IPOs return: LinkedIn, Zynga, Twitter, Facebook, Etsy, Groupon, Jive Software — 2011 will see the Tech IPO return. The accompanying liquidity events will send Silicon Valley into a frenzy rivaled only by those silly vampires in those Twilight movies. Talk of an “angel bubble” will ensue. It’ll be correct, of course — but in true Heisenbergian-fashion, the timing will be off. This bubble’s got legs (several years worth of legs). The “new tech bubble” will run well into 2013-2014. This is just the beginning of that craziness. [Corollary: Fred Wilson is the new John Doerr — just go look at USV’s portfolio.]”
“The timing will be off.” Yep, I’m feeling that. Paul Kedrosky and I jokingly set June 15, 2012 as the top of the bubble, but my serious prediction thinks 2013 is the minimum timeframe on this puppy.
So, back to our question. If the U.S. economy sets up where it actually favors the tech industry (which it is, despite companies like Cisco and HP blowing it), and the timeframe on the “bubble” is longer than we think (which I think it is), then is LinkedIn the new Netscape? It’s too early to tell, but man, it sure feels like it.
Bottom-line: This “bubble” probably has legs into 2014, and if history rhymes, we could be looking at another 4-5 years (2015-2016). Brace yourself. It’s gonna get nuts.