Technology Revolutions

Last night my partner Brad and i spent 2+ hours guest lecturing at NYU Business School on the VC business. We did two classes. The first one was on when VC is a good source of capital and when its not. That's a class i've taught for about 3 years now. It's fun to do because i mostly argue against VC as a source of capital. And that's not an argument i usually get to make.

The second class was about what has changed in the tech VC business in the past four years. As we all know, a lot has changed.

Brad did a great job infusing the second class with some good analytical thinking. He has just finished reading Technological Revolutions and Financial Capital: The Dynamics of Bubbles and Golden Ages by Carlota Perez. Now this is a tough read. I admit that i couldn't get through it. It's very dry for my taste.

But its a brilliant piece of analytical thinking which basically argues that the last ten years were just another typical buildup, bubble, and burst phenomenon that happens in every technological revolution.

The book compares the manufacturing revolution, the auto/oil revolution, and the IT revolution, both in terms of the diffusion of the technology throughout the economy and the valuations associated with the companies involved. It turns out the crash we just went through was typical and now we are on to the synergy phase where a lot more money will be made, but in different kinds of businesses.

I wish i knew how to put the charts from the book into this post, but i don't. So i'll just suggest you go out and get the book.

Comments

[hugh macleod]

Umm... Excuse the layman's question:

By arguing against the case of using VC capital, does this mean...

You make people more reluctant to use VC money, ergo raising the barriers to entry, therefore culling more weaker candidates quicker, ergo raising your batting average?

My business is non-tech, it doesn't really need venture capital (and the ones I know in my field who did use it are regretting it now).

A fascinating world, this one.

[Fred Wilson]

good questions hugh.

i just think that entrepreneurs who are starting out shouldn't view VC as a critical success factor. there are many ways to finance a business. and for most businesses, VC doesn't make much sense.

that is the point of the class i taught on monday night.

if by getting that word out, i also raise my batting average, that's a nice, but intended side benefit.

[debforwes]

Wow that's an interesting take on the techno bubble theory. And its just the opposite of the mindset here in the Beltway IMHO. I've talked with several VCers in the DC area the past couple of years. They're always talking up VC financing in the small high tech niche communities of interest. It's always in the context of having already established your business and product base though.

I think it's great VC classes are actually being offered in colleges nowadays. Hope they listen up.

[Aparaty cyfrowe]

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