Don’t Be Too Cool For School
- Posted by Leigh Drogen
- on March 25th, 2011
I’m in San Francisco for a week of interviews, meeting people, and seeing everything. It’s only been a few days but already I can get a feel for this place, and I love it. This is my first time in the bay area and it’s a huge departure from San Diego where I spent two years, a VERY slow city, and LA which I can’t stand, it’s just a sprawling disaster of a place, I don’t understand why anyone would live there out of choice. San Francisco on the other hand I really like, it has a good pace to it, I’d say around 70% of New York, and that’s important. You need to feel the rush of people and ideas around you to be innovative or in touch with the markets. There’s a reason why the best traders live in New York, you are literally more connected to the world in that environment. It’s also an accessible city, especially on a bike, which I love.
I went down to Palo Alto yesterday to hang out with a friend at Stanford and a few others in the venture capital space that I’ve had the fortune of meeting through StockTwits, all awesome people. It’s immediately obvious why there is so much innovation taking place there, so many smart people in such close proximity. While I was having coffee with Eghosa Omoigui and David Shen, in walks Peter Pham who just launched Color, we all had a chance to chat for 20 minutes. The fact that these people stroll down the street to the coffee shop and exchange ideas is such a departure from the New York City culture of scheduled office visits in high rise buildings. I guess it’s the definition of community, and the whole thing is greater than the sum of its parts.
To those veterans of the tech world this may all sound very naive, of course the valley is a special place. But those who’ve spent a lot of time in that ecosystem might not realize how special it is, it’s easy to lose perspective, I do all the time in New York. There is a lot of talk about New York becoming a big place for startups, and it is, there is a community forming there, and I love going to NY Tech Meetup. But it doesn’t compare to this, it just doesn’t, it’s a whole different ball game.
I can feel something unfortunate taking place though, out here and in New York. I hear it when I speak to certain people and I see it on my Twitter stream and in blog posts from around the tech community. Some people seem to think that they are becoming too cool for school. All of this innovation that has taken place over the last few years is wearing on people, it’s hard to keep up with the next game changing app or site, especially when they are fetching such high valuations. Some people are starting to think it’s cool not to try or believe in what’s next, that the social sphere especially is overloaded with tools and platforms, why would we possibly need another one. Some people believe that these companies don’t deserve their rich valuations, that the valuations being this high somehow invalidates the product or idea itself.
I feel sorry for these people, they’ve lost sight of what is taking place, probably because they are overwhelmed by it, and in some cases I think maybe they are a little jealous. It’s my belief that we have hit a point on the curve created by Moore’s law where the extent to which we innovate year to year will start to feel extremely fast. Think about it, how many years did it take to get a room sized computer into a box on your desk? How many years did it take to get that same computer onto your phone? A hell of a lot less. And how many years do you think it’s going to take to get all of that power from your phone onto a device that allows for augmented reality? Probably less than the phone. Why? Because computing power doubles every two years, exponential growth, and we are now at a place on that curve where the doubling of power is a huge step.
It will only get bigger with the quantum computer, coming soon.
But I want to get back to this feeling that some people have become overwhelmed.
It is so important, especially right now while everything is changing, to keep an open mind, to try everything, to leave your bias at the door. Yes it’s abnormal that Color launched with the valuation it did, but that doesn’t mean a thing about the product itself and how innovative it is. Yes there is a lot of money chasing not enough investments right now, you can thank Ben Bernanke for that, but it doesn’t mean those companies aren’t worth it. Investors here are obviously chasing, and investors who chase will eventually get shaken out of any market, they’re all the same.
I believe the valuations also have to do with the fact that many of these new technologies are not looking to focus on a specific vertical, they are going for the whole shabang. StockTwits is an extremely innovative site, we did some amazing stuff there to change the way the financial community interacts. But StockTwits’ valuation is somewhere between 20 and 30 million, if they execute well on the road map it might be a 100 million dollar company in a few years. Why? Because that community and user base is only going to be so big. Color on the other hand, has the opportunity to reach everyone with a smartphone, around the world, yea. That’s why it gets the valuation it does, because the opportunity is much bigger, the idea is more profound.
Execution is always the hardest part though, everyone here has great ideas, very few can make them a reality.
Don’t be too cool for school, don’t think that we’ve hit some wall in the number of apps we can all use, we are in the first few innings of social and local. The valuations are a result of too much money chasing after too few assets, but that doesn’t say anything about the quality of the assets, I only see them getting better.
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Leigh Drogen is the founder and chief investment officer of Surfview Capital, LLC, a New York based investment management firm employing an intermediate term long/short momentum strategy. More »
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