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Are the tech boom times over?
Interesting piece by a writer I enjoy reading: https://www.theterminal.info/i/8...
Some choice quotes:
"I think it’s pretty clear by now the software-led tech boom of the 2010s is pretty much over. The combination of pandemic stimulus and tech-enabled remote work kept things ebbing along a few years longer than they perhaps would have otherwise, but the party’s over. There are the mass layoffs — helpfully tracked here — plunging stock prices and missed revenue guidance, but all of those can be blamed on a generally flagging economy. The rest of it is in the vibes."
"You don’t have to look far for those vibes. Elon Musk ascending to the throne of Twitter atop a pile of middle manager skulls. Mark Zuckerberg pumping the spoils of a decade of social media dominance into brute forcing the existence of a parallel universe nobody wants to spend any time in. Legions of platform businesses collapsing on their own rickety scaffolding. The form and function of the smartphone growing stagnant, such that it is no longer really possible to discern the difference between iPhone models. The slushy cultural output of a legion of streaming services chasing what few potential subscribers remain. Elizabeth Holmes going to jail."
What do people think? Personally I think there is a significant correction occurring and the easy money spigot, is obviously given what is happening in the global economy, has turned off. At the same time I still hear about significant fundraising success for startups. I am definitely a skeptic and a bit of a doom guy so I'm interested in other takes and thoughts?
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I'm a skeptic and a doom guy as well, but, I think the story is more complicated than a straight "over and done with" narrative.
First things first, the Zuckerberg rule of "Move fast and break things" is over. As is the story around "get customers for free and then monetize."
What remains is the vast majority of software that doesn't use either of these processes.
Notion, Slack, and other software are running strong. Collaborative systems like Figma bring out the big bucks, and the retail investment dependent on third-party apps is going nowhere.
However, booming valuations, high-flying people, and content companies masquerading as tech need to count their days.
In essence, I think companies with good gross margins (think 70-75%) will survive the downturn even if they won't pull in revenue as before. If you're doing an IPO, then profitability will be very important, and if you're building in private, be prepared to shell out more equity for fewer funds.
But, at the end of the 2 years (I am including 2023 too), software companies with good fundamentals will thrive and build new products. Also, I think this is the perfect time to market enterprise SaaS, since, there is huge money to be made there and those companies can survive even major downturns
@uttiya_roy @product_at_producthunt yes well said, indeed. I of that quote: "In the short run, the market is a voting machine but in the long run, it is a weighing machine." I think we are entering the era of the weighing machine. Probably a good thing. I am curious about the type of tech (You mention Notion and Slack as two examples) that probably will weather things versus those that won't. I'm thinking social media and advertising driven companies are probably highly exposed - but looks like a lot of businesses that rely on consumer spending (recipe-box companies etc.) may also not do so well. It makes sense if consumers are cutting back that these companies are at risk.
@product_at_producthunt @rupert_denton I agree with anything that depends on consumption spend, those will hurt badly once the credit card bills stack up and spending power becomes reduced.
My more indirect observation is that B2B SaaS software that depends on consumption (B2C CRMs, Shopify, etc) will see a downside too.
Enterprises will cut down the costs so short-term pain but, the LTV should remain more or less the same for most of the duration. So, I think B2B SaaS will probably weather it the best. So will anything that is sticky (collaborative software, talking, video conferencing, investing).
But, let's be fair, everyone is getting a haircut in the next year, so, any company which hasn't stored revenue and money in the bank will go down, regardless of segment.
@product_at_producthunt At this point, whatever you do to protect your gross margins and get to default alive will be a good step.
Yes, the market is changing drastically, so obviously, the tech epoch is over. The global crisis has affected lots of industries, and I can't even imagine what to expect in the nearest 5 years.
Interesting! your POV is certainly revolving around the "dark side of the moon" and it is quite intimidating for a startup co-founder. For me, I think the cycle of booms and drops can never be ignored or prevented. It certainly looks a more frightening time with so many layoffs and things you have already talked about. But, whoever survives will reap the benefits of the eventual upward trends too.
This was one of the most significant cycles of wealth creation and its time for stabilization . This will go on and on..need not worry just ride it
smarter tech enabled solutions would be on rise IMO. Likes of GPT4 coming and enabling real life use cases will be sought after instead of AI models just being built to play 50 games in parallel. The nature of boom is changing, but it still be powered by tech in a grand way
Tech like all other industries and even agriculture in most countries, runs boom and bust cycles. Industries like shipping and mining are older and are more mature. They actually plan for these. Tech being newer, does not yet plan for the busy cycle.
Why is it happening and who will benefit. Had written about this couple of days back on my ocassinal blog. You can check it out here
https://kkumarkg.wordpress.com/2...
It absolutely is. It's over in the exact same way it was over in the late 90s when thousands .com businesses went belly up. In the same way that Blockbuster was the end of all video rental innovation, and IBM did everything that anyone could ever want from computers.
As far as lack of innovation in the current market, the root of the problem is that a small handful of bloated conglomerates are dominating 98% of the industry. They prioritise getting rid of upcoming competitors (be it through regulation, acquisition or sabotage) than they do innovating to stay ahead.
But as every time in the past, we'll see that these companies will rest on their laurels for too long and eventually even they will get pushed out and replaced by newer, faster moving alternatives. Just a waiting game at this point.
@michaelflux Yes I hadn't thought about the impact of big companies trying to just use brute force rather than including intelligence and innovation to continue to stay ahead. Its interesting, feels like history repeating.
@rupert_denton It goes both ways though. It's shocking the amount of founders I talk to where their entire strategy is 'we'll just pump this thing until Google/Apple/Meta buys us out'. The entire growth strategy becomes less about producing a compelling product, and more about just being a thorn in the side of some other company hoping you're enough of a nuisance to make it worth it getting rid of you.
@michaelflux that's a really interesting insight - again something I hadn't really thought about at large. But I totally understand this mindset is pervasive - particularly given the signals the big giants have given in terms of acquisitions over the years.
This definitely suggests (confirms) that the fundamentals of building a solid startup are the most important things to focus on. It's the best way to achieve long-term stability, decrease reliance on outside capital, and ensure that you're listening to the market when designing products.
I suppose it's always been that way, but the boom times also created a parallel track where you could potentially focus on raising tons of money and growing fast, without first nailing down the core elements of success. It's not that investors were foolish or cavalier in every such case, it's just that an influx of available capital created an opportunity for this type of alternative strategy.
Going forward I think that opportunities to raise money will continue to be strong and available, but it will just go to the companies that truly deserve it most.
Good read. I think it is far more important right now to build a product with good business fundementals. Instead of building a product in hopes of getting invested.
Well written! The market is reaching it's saturation point some corrections will be made in the upcoming days. But still its technology and business anything can happen.
The tech industry is undoubtedly undergoing a shift, with signs of correction like layoffs and stock price drops. While there are still fundraising successes, it's essential to acknowledge the changing landscape and potential challenges ahead, reflecting a mix of optimism and caution among experts and observers.
The tech industry indeed appears to be at a turning point, with signs of both correction and innovation. While some established giants face challenges, startups continue to secure funding, indicating a dynamic landscape with opportunities amidst uncertainties. Adaptation and genuine value creation will likely be key.
The tech boom of the 2010s seems to be waning, evident in layoffs, falling stock prices, and uninspiring innovation. The industry faces challenges, and skepticism about its future is growing.
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