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Tech Bubble? What To Do Now?

Investopedia defines a tech bubble as a “pronounced and unsustainable market rise attributed to increased speculation in technology stocks. A tech bubble is highlighted by rapid share price growth and high valuations based on standard metrics like price/earnings ratio or price/sales.” Furthermore, “during the formation of a tech bubble, investors begin to collectively think that there’s a huge opportunity to be had, or that it’s a “special time” in the markets. This leads them to purchase stocks at prices that normally wouldn’t even be considered…a bubble may end with a crash, or may simply deflate as investors slowly lose interest and sales pressure pushes stock valuations back to normalized levels” (see Investopedia “Tech Bubble”)

Are we in a tech bubble? Many analysts have weighed in on this question in recent months, and they are divided as to whether there is indeed a tech bubble or not. One thing is certain, though:  despite the tech bubble, there has never been as good a time to start a technology company than now.  Why do I say this? For the following reasons:

1.         Technology advancements, including programming language improvements that have made yesterday’s seemingly complex tasks easier when actually done today, mean shorter product development cycles. If you have an idea for a product, and you act on it now and put up your own company, chances are the product will make its way out of the door and into your target market’s homes in a relatively shorter time compared to, say, 10 years ago.

2.       It does not take that much anymore to start your own technology company.  The rise of open-source means that software development is now much cheaper compared to a few years ago. In an article entitled “You Don’t Need to be Rich to Be An Entrepreneur,”  Martin Zwilling maintains that “only a few years ago, it would cost at least a million dollars ($1M) for a team of professionals to produce any commercial software product. Now, with open source software components, and low-cost development tools, the same job can be done by one good hacker for a few thousand dollars.” Furthermore, Chris Devore, in “Carlson’s Law, Software Innovation and Venture Capital,” says that “between powerful, open-source development frameworks like Ruby and PHP and cheap, pay-as-you-go cloud infrastructure services like Amazon Web Services, Urban Airship and Twilio, world-changing software innovations can now be created and brought to market by small teams of two or three developers. Ideas that once required millions of dollars of venture capital to build now require hundreds of thousands – or for the right team of motivated entrepreneurs, none at all.”

3.         The advent of online distibution, viral, social and new media platforms have lowered marketing costs, making it easier for tech startups to market their products. In “Money Ball for Startups: Invest Before Product/Market Fit, Double Down After,” Dave McLure writes: Marketing now typically means using a variety of online distribution channels via paid & organic search (SEM/SEO) on Google, viral/social amplification on new media platforms & social networks like Facebook, Twitter, & YouTube, and the quickly-growing mobile platforms of Apple iPhone & Google Android. With the exception of search, most of these distribution channels didn’t exist 5 years ago, yet they now easily reach over 100M-500M+ users, with very low cost and measurable marketing campaigns such that even a small team can reach billions of people globally.”

4.         There is an abundance of available capital from both traditional VCs and angel investors on the market. This means that tech startups, as long as their ideas or products are viable, can get access to this capital. JS Cournoyer writes in “The Implications of Combining Excess Supply of Capital with the War for Talent in the Digital Economy,” that “as stock markets continue to be volatile and we start to see more exits however small, we should see a steady increase in angel investing activity, resulting in even more capital in the market. More capital means higher valuations, bigger seed rounds that close faster, and less reliance on VCs to get companies to exit. In addition, many VCs already invest at this stage and more will do so over the coming years, further increasing supply. The good projects will continue to be oversubscribed and the decent ones will continue to get funded for years to come, keeping the market in an oversupply state for years.”

The excess supply of capital, as explained in the immediately preceding section, means that there is a tendency to increase the valuation of a startup very early in the game. As explained by Mark Suster in “On Bubbles…and Why We’ll be Just Fine,”  “a bubble occurs when a market is willing to pay greater than intrinsic value for an asset class.” Adding to the higher valuations are investors’ fear of missing out, or what Suster calls, FOMO.  Suster further explains that higher valuations during the early stages of a startup’s life is not necessarily bad, given the changes in market conditions from the last time a bubble happened. These changes, which were affirmed by Ben Horowitz in an online debate with Steve Blank on whether there is a coming tech bubble with (see Debating the Tech Bubble with Steve Blank: Part II), include

a.       Larger number of Internet users and widespread use of broadband

b.      The ubiquity of smart phones and Internet-based technologies

c.       Software eating the world

d.      The Proliferation of social distribution

As I mentioned above, there is a real danger though that investor behavior triggered by FOMO may lead to investors not exercising due diligence before putting money in a startup. As Fred Wilson states, “there are a few storm coulds out there that we need to be watching. In particular, I think the competition for “hot” deals is making people crazy and I am seeing many more unnatural acts from investors happening. If it were just valuations rising quickly, I’d be a bit less concerned. But we are also seeing large deals ($5mm to $15mm) getting done in a few days with little or no due diligence. Investors are showing up at the first meeting with term sheets. I have never seen phases like this end nicely.” (see Storm Clouds).

I hoped that I have adequately explained above the reasons why there is no time like the present to put up your own tech startup. As an entrepreneur, don’t be deterred by all the talks of another tech bubble. Instead, build up your business model and never let go of your vision to create value for your company. Only in this way can you survive another tech bubble, if it indeed occurs. Remember that Google and survived the last tech bubble by doing just that.

Jerome Gentolia is Co-Founder of ComeUnite and Tech-Launch Solutions


Feeling Burned Out And Unproductive? Rejuvenate Away From Work

As the co-founder of 2 start-up companies, ComeUnite and TechLaunch, to say my day is busy is an understatement! I am usually wrapped up in a multitude of projects at any given time. My days consist of numerous conference calls, meetings, emails, listening to pitches, writing blogs, reviewing new proposals and meetings with clients. Needless to say, with so many things I need to get done in a day, I have become very good at multitasking. For instance, if I do get the chance to watch TV, I will read email, news, blogs, twitter, and facebook updates during commercial breaks. When I’m hungry, I will eat while working. Now, with such a busy work life I know how important it is to keep myself healthy so I commit to still working out in the gym 3-4 times a week. I’ll workout for an average of 1.5 hours, but you can bet I’ll be checking my blackberry every 10 minutes for any updates.

Over the years I have found that is important to take a break from your work from time to time. You can eliminate getting burned out if you can just disconnect from it all once in while. I mean leave the laptop at home! Disconnect and be aware of your surroundings. If your surroundings are work related…leave! Find somewhere totally unrelated to your business. Put work completely out of your mind. Force yourself to take a vacation. If you can’t take a week, just one day is enough to rejuvenate your mind and body. I will occasionally call some friends to go away and enjoy some outdoor activities. When I do get away for a day or two, I feel energized and I am more productive when I return. It’s a win, win for everybody. I feel better and my business grows because of it!

Burnout is not good for any company. So, if you find yourself feeling overwhelmed or confused by non-productive thoughts and emotion and you have the strong desire to release them, regain clarity and energy, and even experience more inner peace.
Simply ‘taking a break’ will help you return to work ready to tackle all your projects with a clear mind. I find after I return to work after a short time away, the ideas flow with ease and my memory is sharp.

I hope after reading this article you walk away realizing how important it is to rest and take a break from all work related activities. Your body and mind will thank you!

Why You Can’t Work At Work – The Burning Question

Ok, how many times have you left work and at the end of the day thinking, “I didn’t get anything done today”? Well, my answer to that is, “far too many “. You would think its simple, just go to work and have a list of things to get done that day and “Voilà” you’re done. Yeah, not so fast there fancy pants. It just doesn’t work that way. Why? You ask. Because you can’t work at work. Yes, you read it. You can’t work at work.

I recently had the opportunity to view a short video on this very subject. The video was done by a gentleman named Jason Fried. He is the co-founder and President of 37signals, a Chicago-based company committed to building the best web-based tools with the least number of features necessary. This video really hit home with me for many reasons. I find myself many times sitting in a quiet corner of Atlanta Bread Company in White Plains, New York just to get some work DONE. I often meet some of my colleagues there as well. Great minds think a like. I also find myself working a lot from home.

I do have my office at work but, I have far too many interruptions. Some that are urgent and others that are not. When I go to work and sit down at my desk I should be able to dig right in and get to work. By noon, I would love to have half of my to-do list done. Instead, by noon I have been on two conference calls, one meeting, countless phone calls, emails to return, and I have overheard the results of the reality show that was on last night (the water fountain is right outside my door). While watching this brilliant video I couldn’t help but think how many others have to deal this same situation.

So I thought I would write about it and maybe, just maybe, people would see there is real value and beauty in the basics.

My Perspective On The Optimal Workplace

Keep it simple. Simplicity has real value, and it can’t be measured in cold hard cash. It has delivered some of the world’s coolest, most user-friendly gadgets. By keeping the work place simple we can challenge conventional business wisdom and show a better way to make work more fulfilling and less frustrating.

What if everyone realized that work does not have to be as complicated as we make it? We don’t’ have to gunk it up with too much planning, too many meetings, and too much process and paperwork. What we really need to do is to stop talking and start working.

I believe that in order to simplify the workplace we will have to re-prioritize, re-think, and revolutionize the way our company approaches how we do business.

Simplify The Workplace – Can That Really Be Done?

Yes, I believe that if we take out all the unnecessary meetings, phone calls, and whatever else is slowing our progress down we can definitely be more productive at work. Now I am not saying that “Meetings are bad!” “Interruptions are bad!”. What I am saying is they need to be kept to a minimum for our workplace to run optimally. This in turn will lead to better morale and better quality of life.

I believe that technology can change and improve how people get their work done. The technology available today can really make our jobs and life’s more enjoyable and fulfilling. Who doesn’t want that?

So, after reading this article you find a few interesting nuggets to take with you and you find yourself nodding a few times, then I have done my job.

Let’s all go out there and call for more down to earth, hands-on, simple, smart, flexible, efficient, realistic businesses!

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