Is Silicon Valley’s investment bubble about to burst?

At least one prominent tech investor is warning about the imminent risk of another Silicon Valley crash

About to pop: inexperienced tech companies could soon fall on their swords causing another big tech bubble to burst.

About to pop: inexperienced tech companies could soon fall on their swords causing another big tech bubble to burst.

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Many of the Silicon Valley venture firms gambling on new, inexperienced tech companies will soon fall on their own swords causing another big tech bubble burst, says prominent technology investor Bill Gurley.

Speaking at the SXSW Interactive event last week, Gurley, a current partner at Benchmark, a San Francisco-based venture capital firm, has been predicting a Silicon Valley bubble burst for some time.

This weekend he warned that the fallout from such companies going bust will have far-reaching implications for the tech industry and beyond.

“There is no fear in Silicon Valley right now,” he said at the South by Southwest music and technology conference. “A complete absence of fear.”

He cites the multiplicity of so-called unicorns, or private companies valued at more than $1 billion (1944 million) by investors. By some accounts, there are more than 50 of these billion-plus companies in the Valley at the moment, with more added seemingly every other week.

“I do think you’ll see some dead unicorns this year,” Gurley said.

Some of these companies compete in the same field, like Stripe and Square, two payments start-ups, or the ride-hailing services Uber, Kuaidi Dache and Lyft.

If one of those start-ups dominates its field, competitors could falter and eventually fold. Valuation on users “Some of the big products that sell themselves on having lots of users rather than making money have huge valuations currently,” says Paul Quigley, chief executive of Irish news aggregator NewsWhip, who have to date raised $1.1 million in VC funding.

They also attended the SXSW Interactive event.

“I don’t know if that’s justified or not. I don’t think anyone knows. It’s hard to put a value on human attention. In my experience, most Irish venture start-ups are focused on making money,” says Quigley.

“In Ireland you can’t just focus on making a lot of noise and getting attention. You need to actually build a business to make sure there’s more fundraising the next time you come knocking.”

Noise and attention

In Silicon Valley, however, noise can garner attention and Mr Gurley believes any collapse will extend beyond the tech industry itself, particularly in areas around San Francisco.

Real estate, for example, could take a hit. Home prices in the San Francisco Bay area have appreciated by 97 per cent since January 2000, according to a study published by the Paragon Real Estate group.

If the influx of tech industry wealth begins to dry up, Bay-area property owners will have to deal with the potential drop in prices.

“Competing business and technology models are at the heart of the rapidly changing tech industry, and does not necessarily imply an impending bust up,” says Simone Boswell, senior vice president for internet, media and entertainment sectors for Enterprise Ireland, who is based in Silicon Valley.

“The world’s needs for more effective technology-driven solutions continues to grow.

“Silicon Valley remains at the heart of that with all the pressures that can imply. It is complemented by capabilities in other clusters linked to Silicon Valley both within and outside the USA, like Dublin.

“If this ‘bubble’ does burst we’ve got some time to see it coming and work through it. It is part of a normal cycle of adjustment and Ireland is in a much stronger position now.

“In terms of dead unicorns, it’s a non issue for Ireland, as we haven’t seen a live one yet.

“But stay tuned, we are closer than ever before – impending bust or no bust.” - Additional reporting: New York Times Better family affairs Now there’s an app for that Can you run a family like a business? If so, would you? Should you?

Maybe if Gordon Gekko was your granddad. On the surface, it sounds like entrepreneurial zeal might be getting the better of our judgment.

But in an SXSW Interactive talk entitled, ‘Why is my company more transparent than my family?’ chief executive of family content app DJED, Darren Reid, offered some useful insights into how the two worlds might collide.

“There are endless tech tools for business to help improve collaboration, tools to get better and faster and cheaper and promote transparency,” he says.

“To store and retrieve data really fast. To add and remove employees. It’s become so easy to use that most companies don’t even need an IT director anymore.

“Technology works really well for consumers and for enterprise but family is under-represented.

“Three out of four people say that family is the most important thing in their life. So where are the tools for that group of people?”

Transparency, Reid argues, should be the goal in both business and family life.

But is he comparing apples and oranges?

Clarity in business helps avoid financial complications and corruption and improve efficiency.

Family transparency can help with communication and overall harmony. In each case, improved relations is the goal but for very different reasons. There could be some overlap, though, particularly in the realm of finances.

Using a quote from Psychology Today in 2012, Reid makes the case for opening up families to more financial pellucidity: “Couples fight about many things – from child rearing to sex, to household chores, to dealing with in-laws. But above everything else, frequency of money disputes remains the single best predictor of divorce.”

“Financial issues are the main reasons why spouses break up,” he says.

“Couples are more likely to know each other’s weight than their salaries. Why? Because money is taboo and talking about it embarrasses people. But it shouldn’t be, particularly between spouses.”

For this reason, Reid argues that family budgeting should be approached in exactly the same way a company might run its finances. “A good financial system needs to be available to everyone in the family which is simple, has a good balance sheet, profit and loss statements and rough budgeting.”

Reid also recommends recording and collecting data on family experiences in much the same way as a business might. “Keeping records of business activity allows us to shift deadlines, avoid wasting resources, and make more informed decisions,” he says.

“The same approach could also be applied in the family setting.”

He goes as far as suggesting a wiki for families. “Digital information should be able to equip us with tools to help reduce the amount of friction in our families, the same way it does in business.”

– JOHN HOLDEN

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