Ms. Estrin traces Silicon Valley’s troubles to the tech boom. She said that’s when entrepreneurs and venture capitalists started focusing more on starting companies to turn around and sell them and less on building successful companies for the long term.Yup.
“Starting in 1998, there was such a shift in Silicon Valley toward chasing money and short-term returns,” she said.
Part of the reason, she said, was that Cisco and other fast-growing big companies started acquiring start-ups with innovative technologies instead of developing new ideas internally. Entrepreneurs began founding companies with the goal of selling to a big tech company, and venture investors encouraged that.
Ms. Estrin acknowledged that innovative ideas still appear all over Silicon Valley. But, she said, the technologies at the root of new products like Apple’s iPod or the Facebook social networking service were actually developed several decades ago. If entrepreneurs do not continue to develop groundbreaking technology, she said, the valley will be in dire straits in another decade. She compared the situation to a tree that appears to be growing well, but whose roots are rotting underground.
The problem is driven by an investment community too fixated on short term results. For example, what does it say when VCs will not generally invest in companies unless they have finished technologies ready for market? It says that only companies that can raise enough money from friends and family, or only companies that can self fund can get launched. This is small money. And little money can't generally fund hard stuff.
Hard does not always equal better, but real innovation is usually not cheap.
But what is worse, in this tech economy, real innovation is not respected. It used to be that if you talked about changing the world, people took notice. Now if you say such things with a straight face, you will be laughed out of the VC conference room. It seems almost silly to aspire to do something so great that it really moves the bar. And in fact, it is true that when most people today say such things, it is little more than hyperbole. The problem is that in the current environment there is little place for actually trying to *do* such things. There is little money for it, but more importantly, there is little patience even for the concept.
In fact, in our elevator pitch, fast money, thin veneer, social networking tech econonmy, real innovation is a dirty word. And I have no idea what to do about it.