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Old 01-27-2013, 12:29 PM
 
Location: surrounded by reality
421 posts, read 494,989 times
Reputation: 424

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There's no denying that the city is engulfed in several bubbles - rents/real estate, tech, social, even sports (but that's a different story altogether). I think some of them are interdependent and one of the roots of it all is the atmosphere of the gold rush created by the proliferation of start-ups. As we all know, things develop in cycles and a bust in the start-up activity will certainly follow current boom. I'm just curious, what exactly will it look like? What's your prediction of the form of the bust the timing of it? And what kind of an effect is it likely to have on the rents/home prices and the rest of the city life? Does the example of the internet bubble provide a good guidance for what to expect?
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Old 01-27-2013, 12:34 PM
 
Location: South Korea
5,245 posts, read 6,916,153 times
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At some point someone will realize that you don't have to be in the Bay Area to start a tech company. (actually, people in places like Detroit and Iowa are doing that now...) And at some point, investors and venture capitalists will realize that they don't have to foot the bill for high Bay Area salaries for kids making shovelware.
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Old 01-27-2013, 01:36 PM
 
Location: San Francisco
622 posts, read 437,899 times
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Quote:
Originally Posted by mayorhaggar View Post
At some point someone will realize that you don't have to be in the Bay Area to start a tech company. (actually, people in places like Detroit and Iowa are doing that now...) And at some point, investors and venture capitalists will realize that they don't have to foot the bill for high Bay Area salaries for kids making shovelware.
The problem is that now there is really a benefit to being in the Bay Area if you're in tech. NYC is a bit of a challenger as it's got a vibrant start-up culture now too. That's more because start-ups have access to money and big business in general there. Here though you can't beat this environment. In fact, almost all of my friends in tech are here or are in NYC. What makes it harder is people in tech also echo the sentiment and tell people to come here.

I think a city would be smart to try to create tech industry friendly policies to draw business from the Bay Area. I think success will happen if a few companies built in a city like that get big. (Not just one.) The problem is the big companies like to scoop those companies. Example, Gowalla, which was based in Austin, TX was a challenger to Foursquare. Gowalla got bought by Facebook.

It's pretty crazy how much is concentrated here. However, the big players are here: Oracle, Cisco, Apple, Facebook, Salesforce, Google, Twitter, Yahoo, VMWare, etc. They're surrounded by start-ups like Netflix, which actually started in the late 90s because I remember having friends talking about it then. One way to lead an exodus is maybe one or two of these major companies choosing to move elsewhere, but why would they do that?

I'm not even sure that would work. Microsoft has been in Redmond, WA forever, and Dell was founded in Austin, TX. There are tech people and companies in those locations, but there is no chunk of techies really itching to move to those places. The way things are going now, it's going to continue unless other cities get aggressive.

I actually think L.A. could be a player if tech companies there tried to work with local and state government. They've got CalTech and some strong universities there. Hell, SpaceX is there. They've got companies like Hulu, MySpace (which is slowly ramping back up), and a bunch of smart start-ups.

We'll see. For now though the strong-hold is here.

Quote:
Originally Posted by peninsular View Post
There's no denying that the city is engulfed in several bubbles - rents/real estate, tech, social, even sports (but that's a different story altogether). I think some of them are interdependent and one of the roots of it all is the atmosphere of the gold rush created by the proliferation of start-ups. As we all know, things develop in cycles and a bust in the start-up activity will certainly follow current boom. I'm just curious, what exactly will it look like? What's your prediction of the form of the bust the timing of it? And what kind of an effect is it likely to have on the rents/home prices and the rest of the city life? Does the example of the internet bubble provide a good guidance for what to expect?
I also don't think that start-ups now are a craze per se. Sure. There are some people with crap ideas, but they've got to claw through the masses to get money along with everyone else. Tech is definitely an industry to be reckoned with now. That's more a sign of the times. From consumers to business everyone is using this new technology. I'm sure there was some dude with a horse and buggy who said industrialization would eventually go away too. Tech isn't going anywhere. There has been a shift for years from other industries. Maybe the best tactic is to look forward to see what industries will develop as a result of tech.

Also, people learned from that first tech bubble. This one will level out at some point, but I don't think it will half as dramatic when it does.
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Old 01-27-2013, 11:24 PM
 
Location: surrounded by reality
421 posts, read 494,989 times
Reputation: 424
Quote:
Originally Posted by rkwalton View Post
...

I also don't think that start-ups now are a craze per se. Sure. There are some people with crap ideas, but they've got to claw through the masses to get money along with everyone else. Tech is definitely an industry to be reckoned with now. That's more a sign of the times. From consumers to business everyone is using this new technology. I'm sure there was some dude with a horse and buggy who said industrialization would eventually go away too. Tech isn't going anywhere. There has been a shift for years from other industries. Maybe the best tactic is to look forward to see what industries will develop as a result of tech.
I don't have hard numbers, but from what I see around, it is a craze. Most people I knew 10 years ago worked for Apple, HP, Microsoft and the like. Now the majority are in start-ups. I never said tech was a craze, there is no doubt it's big and will grow bigger, but I wonder about social and other nebulous things like the cloud (which now is not quite as hot as it used to be a couple of years ago), mobile (OK, I can get a ride and buy some groceries on my phone, but is there much more than this?), big data (I'm yet to see a consumer application of big data) are here to stay. One thing I have to agree with, we'll just have to wait and see.
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Old 01-27-2013, 11:39 PM
 
Location: LA
6,244 posts, read 12,050,600 times
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i work for a start up in LA and the amount of money being thrown around to companies such as mine is really unbelievable. i see the bubble and know it will have to end some time. i think the age of the average workers at start ups is part of what's driving the current bubble. i know plenty of people under 35 who don't want to work for the 'man' and are going out on their own or are buying into other peoples' ideas and risking it rather than being a desk jockey for a large, stable company. many of these people will grow up eventually and have kids at some point and require a more stable income to support a family. if the next generation of techies doesn't take over the industry will implode.

from the investor side, it's even crazier. there's this idea that you have to get in on the next big idea or you'll miss out completely. large companies and investors are betting on half-assed ideas in order to get some play in the game. when enough of these deals fall through, money will move elsewhere and things will normalize.
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Old 01-28-2013, 01:01 AM
 
Location: San Francisco
622 posts, read 437,899 times
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Quote:
Originally Posted by peninsular View Post
I don't have hard numbers, but from what I see around, it is a craze. Most people I knew 10 years ago worked for Apple, HP, Microsoft and the like. Now the majority are in start-ups. I never said tech was a craze, there is no doubt it's big and will grow bigger, but I wonder about social and other nebulous things like the cloud (which now is not quite as hot as it used to be a couple of years ago), mobile (OK, I can get a ride and buy some groceries on my phone, but is there much more than this?), big data (I'm yet to see a consumer application of big data) are here to stay. One thing I have to agree with, we'll just have to wait and see.
Yeah, an analyst I'm not.

I'm also older and remember when that first bubble was growing. One of my close friends worked for Sun and her husband at the time worked for HP, so I had friends working for those companies too. I was really amazed at the money being thrown around. I'm seeing some of that now too, but it doesn't seem to be quite as crazy. Like not everyone with a start-up idea in tech gets funded now. The parties can still be overblown and cost way too much but that's all a tax write off.

What a lot of folks bank on is starting up, and hoping one of the big guns buy them out. Usually that way they end up with a bit of cash and a job if they want it because those companies are also doing talent grabs when they buy start-ups.

Quote:
Originally Posted by BRinSM View Post
i work for a start up in LA and the amount of money being thrown around to companies such as mine is really unbelievable. i see the bubble and know it will have to end some time. i think the age of the average workers at start ups is part of what's driving the current bubble. i know plenty of people under 35 who don't want to work for the 'man' and are going out on their own or are buying into other peoples' ideas and risking it rather than being a desk jockey for a large, stable company. many of these people will grow up eventually and have kids at some point and require a more stable income to support a family. if the next generation of techies doesn't take over the industry will implode.

from the investor side, it's even crazier. there's this idea that you have to get in on the next big idea or you'll miss out completely. large companies and investors are betting on half-assed ideas in order to get some play in the game. when enough of these deals fall through, money will move elsewhere and things will normalize.
Maybe in L.A. I won't argue it because I'm not an investor nor am I looking for one, so I'm only observing it from a distance.

From what I see, and I'm more familiar with freelance coders and VCs in NYC, it's hard to get money unless you've got a killer idea and some traction. But maybe that's NYC because the investors are more hard core. They can invest in tech but they're also in an environment where they can easily find other sorts of businesses that need money. I could see some entertainment guy or trust fund baby in L.A. throwing money at a crap idea (maybe), but they'll learn fast when the idea doesn't pan out. Plus, when you get money, you have to yield control. When I think of the last bubble I think of companies like Pets.com. I'm not really seeing that sort of stuff now.

I know a few coders and one thing they hate is being a "code monkey". Their term, not mine. It basically means they're stuck bringing someone else's vision to life. That's definitely what they'd be if they worked for larger companies, so I get the appeal of the start-up and working for a company that they like and support. I don't blame them. I also know a ton of them that you'd NEVER get to work at a start-up and they freelance.

If they've got the skills to avoid it, why not?

You're right that they'll mature. My perspective is just one that's a bit more optimistic that it won't be a complete mess when things finally level out.

Anyway, this is an interesting discussion.
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Old 01-28-2013, 12:00 PM
 
6,805 posts, read 1,482,062 times
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Quote:
Originally Posted by rkwalton View Post
You're right that they'll mature. My perspective is just one that's a bit more optimistic that it won't be a complete mess when things finally level out.

Anyway, this is an interesting discussion.
I'm kinda with you here as they have learned to monetize the internet now and hopefully all the startups aren't simply cash cows sucking down investors dollars with less than little hope of any return. That was one of the problems with the first dot com crash.
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Old 01-28-2013, 10:07 PM
 
Location: SF Bay Area, CA
5,252 posts, read 4,739,997 times
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Start-ups flourish here because of the existing ecosystem of talented and educated engineers, venture capitalists, and techies. Without them, start-ups would not be able to gain any traction.
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Old 01-28-2013, 10:23 PM
 
1,893 posts, read 1,210,598 times
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The start-up craze will end when people can't sell their start-up companies to Google or Apple or Microsoft or Amazon. Since this is the way most new products and services are created, don't hold your breath.
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Old 01-29-2013, 12:27 PM
 
303 posts, read 385,914 times
Reputation: 118
A bubble will last as long as there are buyers. One thing that sustains the elevated prices in the Bay Area is the belief in the value (and market value) of the underlying asset (real estate, companies, etc). Landlords will will charge high prices if renters will pay them. Ditto, companies that go public and the shares that they sell across the US and World. Someone in Detroit that buys FB or GOOG, is supporting the Bay Area bubble. Start ups that look for funding from VC's tap pension funds, high net worth individuals, etc.. A pension fund that invests with a VC could be representing state employees of Iowa or the teachers of NY, or an investment could come from retirees, or widows and orphans that bought an annuity from an insurance company (the insurance company has to invest the money somewhere in order to pay the interest on the annuity). They are all believers in the value of the asset. As long as everybody is on board, the bubble will continue.

There may be start ups in other places, but for 99% of the time, start ups start up where there are other start ups. It is just like the real estate mantra: location, location, location. Location of universities for r&d and a labor pool; location of money (bankers, vc, high net worth individuals), and the important element: the networking factor: who do you know, who can you help, who can help you achieve your goals.
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