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■ 1.6 B. Spring Comes Early to Silicon Valley

Michael Moritz is a partner at Sequoia Capital, the California venture-capital firm that has helped to organize and finance some of NASDAQ’s companies.

A venture capitalist explains why rotten news will help fertilize future growth

One statistic is missing from the slew of data published about the state of the U.S. economy. It is the length of the commute between San Francisco and Silicon Valley. Since last fall, when the layoffs began in the valley, this journey, which I have been making twice a day for the past 15 years, has started to shorten.

There are plenty of signs of the shockingly sudden eco­nomic slowdown during my commute. The radio isn't filled with the hopeful jingles of Internet retailers, and I can almost always get a cell-phone circuit. Some of the signs are just that—vacancy signs dangling from buildings whose land­lords until recently were demanding shares in the companies started by their tenants. And the blank billboards along Highway 101—the valley's main thoroughfare—mutely ad­vertise the downturn. There are few tire kickers in the lots of the luxury-automobile dealers. Near my of­fice, the people who sometimes paraded along the sidewalk bearing placards that said will work for equity have mercifully disappeared.

All this is good news for those of us whose business is to help start and or­ganize young companies. Today Silicon Valley is akin to Fort Lauderdale, Fla. after spring break. The tourists have abandoned us. Most of the people who came here in search of a quick buck during the past few years have gone. The foreign billionaires have scuttled back to Europe and Asia, the corporate parvenus have retreated, and Hollywood celebrities no longer swish through our office seeking a smattering of pixie dust.

Suddenly, starting a company is no longer a fashion state­ment. Now only the genuine believers want to leave large companies to create or join a new business. Everyone has become far more prudent about spending money. Unbridled optimism has been splattered with a large coating of reality. Today the climate for investments in tiny, unknown valley fledglings is the best it has been for more than 10 years.

I don't mean to belittle the human consequences of the recent convulsions. If it's any consolation, plenty of compa­nies with which I've been involved have encountered their share of bad news and hard times. But this is the inevitable result of the excitement and chaos that surround any new industry. Think of all the dreams that were shattered, careers that were ruined and money that was lost as a result of the birth of the huge industries that developed around oil, tele­phones, movies, automobiles, airplanes, semiconductors and personal computers. Working with young companies can be dangerous for anyone. It doesn't matter whether that was in Akron, Ohio, in the 1870s, Detroit in the 1920s or Santa Clara, Calif., in the 1990s.

In Silicon Valley the cycle of enthusiasm and disap­pointment has been compressed as the years have gone by and the pace of innovation has increased. The 1960s spawned the rise of the semi­conductor business. The 1970s brought personal computers. The 1980s gave us computer-networking companies and bio-tech firms. And the 1990s produced a rush of Internet companies. Each of these waves was followed by dis­appointments as hundreds of weak companies collapsed or were gob­bled up by their larger competitors. But all these periods gave rise to the formation of a handful of venture capital-backed firms that have come to occupy major roles in the U.S. and the global economy, such as Intel, Compaq, Amgen, Microsoft, Sun Microsystems, Dell, AOL, Oracle and Cisco Systems.

If the savagery of a young industry leads to casualties, so does the chaos surrounding rapid corporate growth. There is barely an important technology company that has not had a close encounter of the worst kind. Over the past 20 years, business writers have penned plenty of premature obituaries for all the companies I just mentioned. These com­panies seem to go through similar phases: a period of obscure labor followed—in rapid order—by glowing noto­riety, loosely controlled growth, chest-pounding arrogance, a rude comeuppance and public humiliation. The fortunate recover and become stronger. The weak surrender to eco­nomic necessities.

Although stock-market indexes are dropping to ankle level, there is still little reason for gloom about the long-term prospects for U.S. technology companies. Progress will not stop. Invention will not cease. Ambition will not evaporate. Many years ago, during a similar period of bleak­ness, we encountered a little company with a dozen employ­ees attacking a market that few people understood. Eight weeks after the crash of 1987, when the only sound in the air was of checkbooks slamming shut, Sequoia Capital became the first investor in this unknown company. Its name was Cisco Systems.

Vocabulary

spawn – to make a series of things happen or start to exist

scuttle – to move quickly with short steps (along, past, down); to sink a ship by making holes in the bottom, especially to prevent it being used by the enemy

swish– to move or make something move quickly through the air with a smooth quiet sound; swish(n);swish (adj) – fashionable and expensive-looking

akin to– very similar to

gobble(up)- to eat something very quickly or in a way people do not consider polite; finish a supply of something quickly; gobbledygook/ gobbledegook – complicated language, especially in an official document which seems to have no meaning

encounter – to experience problems, difficulties or opposition when you are trying to do something; to meet someone or experience something unexpectedly; encounter (n); chance encounter (=a meeting caused by luck or chance); close encounter(=situation that could have been dangerous or unpleasant)

obscure– not at all well known and usually not very important; difficult to understand; obscure (v) – to make something difficult to know or to understand: obscure the fact/ issue etc; to prevent something from being seen or heard clearly

glow– to shine with a soft, steady light; to produce a red light and heat without flames, if your face or body glows, it is red or hot as a result of exercise or strong emotion; glow with pride/ pleasure/ triumphetc – to look very happy because you feel proud etc; glow (n); glowing report/ account/ description – a report full of praise: in glowing terms – using a lot of praise

cease – stop doing something: cease fire!; wonders will never cease; cease (n): without cease; ceaseless

bleak– without anything to make you feel cheerful or hopeful: bleak news/outlook/ prospect/ future; cold without any pleasant or comfortable features

abandon – to leave someone, especially someone you are responsible for; to stop doing something because there are so many problems and it is impossible to continue; abandon hope; abandon yourself to (=to feel an emotion so strongly that you let it control you completely); abandon (n)with gay/ wild abandon (= in a careless or uncontrolled way without thinking or caring about what you are doing)

Date: 2015-12-24; view: 1030