This document discusses the possibility of a new tech boom or bust by analyzing technology sector activity and historical scenarios.
It first examines how technology causes disruption in many industries and how this is transforming the economy. It then reviews current venture capital trends and notable winners and losers in tech.
Two historical scenarios from the 1990s are presented: 1) The tech boom from 1995-1999 where stock prices of tech companies greatly increased. 2) The dot-com bust from 2000-2002 where many tech companies failed after overvaluation.
Finally, it outlines three potential future scenarios: 1) "Tech consumes the world" where serious innovation leads to widespread changes. 2) "Dot com déjà vu" where speculative frenz
5. Disruption
An innovation process where cheap, low-quality products
ultimately displacing expensive, high-quality products.
Disruption typically ruins the prospects of organizations
caught on the losing side.
Qualities of Disruptive technology
1. much cheaper + easier to use
2. improve at a rate much faster than the
competition
3. performance satisfies most demanding
uses
4. New technology dominates
6. Disruption transforming all industries
AUTOMATED
Hotels +
Travel
Industrial +
Manufacturing
Professional Services
Brick n Mortar Video
Floor Trading
Wired Telecom
Printing
Meter Reading
3d Printing Gene
Sequencing
Big Data
Mobile Apps
DESTROYED CREATED
7. Moore’s Law, and its Long-Term Implications
Moore’s Law: number
of transistors on a chip
doubles every 18
months
Implications:
• Your phone is more
powerful than a 70’s
supercomputer
• Computers are
steadily acquiring
human capabilities
8. Does Tech Enable Job-Free Growth?
Unemployment
drops, but no
one rejoins work
force
Productivity
grows, but not
employment
9. Where are displaced workers going?
% of workers on SS
Disability doubled
since 1980
Low wage jobs
growing fastest
10. Goodbye Middle Class. Hello Tech
source: NELP, Alan Krueger via Huffington Post
Left
Lower wage jobs dominate the recovery, though
higher wage jobs are holding their own
Right
The middle class is shrinking steadily, with job
automation playing a key role
11. income disparity will only worsen structural unemployment
successful tech = disruption
Tech = Disruption – Recap
automation = C U L8R middle class
13. VC Market Overview – Where and What?
sources: PWC Moneytree, Steve Blank
VC deals still dominated by
software, followed by biotech
California dominates - 46% of
all VC funding in 2013
14. VC Market Overview – How Much Money?
sources: PWC Moneytree, Steve Blank
VC funding actually higher
in 2011-2012 than today
Could VC trends be front-
running public markets?
15. VC Market Overview – Mark to Mystery
source: Wall Street Journal
Twitter, Pinterest, and Snapchat command huge user bases –
challenge is monetization
Snapchat specializes in disappearing content – makes
advertising more difficult
All of the above rely on digital ads as business model – can
the advertising business sustain GOOG and all the rest?
16. Winners - Four Horsemen
Facebook and
LinkedIn show
strength of large
social networks.
Netflix threatens
cable with
original content
& streaming.
Tesla disrupts
automotive and
dealership
models.
YTD, over $80B has been added in market capitalization.
17. Source: LA Times 8 March 2013
Winner - 3D Printing
Hewlett-Packard
announced 2014
entry into 3D
printing.
Key patents
expiring
February 2014 –
More growth?
DDD and SSYS
major players.
VJET & XONE
had 2013 IPO.
18. Winner - Cloud Computing
Here to stay
long-term. 36%
annual growth.
$200B market
Network
security & NSA
monitoring are
concerns now.
Players:
Dropbox,
Evernote, Drive,
iCloud.
19. Loser - Brick and Mortar
Online shoppers
killing big box
stores
Office Max
Office Depot
desperation
merger
Borders gone,
Barnes & Noble
shrinking.
Source: USA Today Business Insider
21. Tech Boom or Bust – Historical Scenarios
90s Tech
Boom
1995-99
Dot Com
Bust
2000-02
22. 90s Tech Boom
Fed hiked rates
6 times in 1999-
2000. Target
rate 6.5%
No rise in
defensive
equities (soap,
food)
S&P up 26%
annually, for
last 50 months
of bubble
source: HiddenLevers
550%
200%
Four Horsemen – high flyers, ushered in end of days
+4000% +1200% +8000% +1400%
23. Dot Com Bust
Yahoo bought
Geocities for 5b
Priceline went
from 1000 to 7
Brutal landing in
Four Horseman
Markets
followed in 2001
source: HiddenLevers
Nasdaq came back
in line with S&P
CSCO -88%
MSFT -63%
DELL -69%
INTL -74%
25. serious tech
dynamism being
unleashed, not
just dot coms
Scenario: Tech consumes the world
organizational
overhauls
involve digital
innovation
no spillover
effect between
tech + telecom
angels
succeeding now
came from 90s
IPO boom
global
dimensions, not
just US
private market
runs most of the
money flow
source: MSN
2013: Reasons it’s different
Defensive
equities best
start in 2
decades
26. Scenario: Tech consumes the world
Apple
rebound
Netflix
rebound
Priceline
dominance in
hotels
Priceline first
S&P 500
company at
1000/share
Amazon
Web Services
source: Marketwatch, Moscow News
Hints of 1996
Autotrader.com
2001: 47m loss
2013: 62m profit
paradigm shifts
smartphones
photos
analytics
Facebook
rebound
27. Scenario: Dot Com Déjà Vu
2013
Nasdaq +20%
4HRSMN +230%
Elon Musk says
Tesla overvalued
Facebook IPO.
(enough said)
Four Horsemen – current Nasdaq outperformers, leading way to hell?
1 car on fire
showed Tesla
speculation
FB Instagram
purchase was
done in 1 day
source: HiddenLevers, NY Times, ValueWalk, CNN Money, SeekingAlpha
28. major tech
innovations end
in speculative
frenzies
Scenario: Dot Com Déjà Vu
Doubts about
economic
returns of
innovation
Increasing size
of early funding
rounds
Big companies
buying their way
into relevancy
Lackluster due
diligence
source:
Bungled IPOs
leading to
disappointment
2013: Reasons it’s the same
29. Yahoo buying
Tumblr for 1b,
no rev for years
Scenario: Dot Com Déjà Vu
Priceline double
top at
$1000/share
Class actions
against Zynga
Color – 43m in
first funding
round, now bust
Corporate
profits up
20%/year since
2009
S&P annual
gains since
March 09 match
dot com era
source: NY Times
Hints of 2000
Groupon hijinks
turning down 6b
Repositioning
Firing founder
Pinterest
1/3 valuation of
Twitter with no
revenue
Square
versus
MasterCard
Solyndra = Fraud
tainting green
tech altogether
30. Tech Boom or Bust – Future Scenarios
Jury’s Out
Tech
Consumes
the World
Bad
Dot Com
Déjà Vu
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