'The Golden Age of Silicon Valley Is Over, and We're Dancing on its Grave'

[xchrom]

http://www.theatlantic.com/business/archive/2012/05/the-golden-age-of-silicon-valley-is-over-and-were-dancing-on-its-grave/257401/


To help make sense of the Facebook IPO, we caught up with Steve Blank, a professor at Berkeley and Stanford and serial entrepreneur from Silicon Valley. This conversation has been edited and condensed.

THOMPSON: What does the Facebook IPO mean for Silicon Valley?

BLANK: I think it's the beginning of the end of the valley as we know it. Silicon Valley historically would invest in science, and technology, and, you know, actual silicon. If you were a good VC you could make $100 million. Now there's a new pattern created by two big ideas. First, for the first time ever, you have computer devices, mobile and tablet especially, in the hands of billions of people. Second is that we are moving all the social needs that we used to do face-to-face, and we're doing them on a computer.

And this trend has just begun. If you think Facebook is the end, ask MySpace. Art, entertainment, everything you can imagine in life is moving to computers. Companies like Facebook for the first time can get total markets approaching the entire population.

THOMPSON: That all sounds pretty good for Facebook, actually.

BLANK: For Facebook, it's spectacular. But Silicon Valley is screwed as we know it.

If I have a choice of investing in a blockbuster cancer drug that will pay me nothing for ten years, at best, whereas social media will go big in two years, what do you think I'm going to pick? If you're a VC firm, you're tossing out your life science division. All of that stuff is hard and the returns take forever. Look at social media. It's not hard, because of the two forces I just described, and the returns are quick.

THOMPSON: Half the tech and innovation world seems to think this is just evidence that we're in the middle of a dot-com remix. You disagree?

BLANK: In the last bubble, venture capitalists went into a frenzy if anything had an ear and eye. I don't think this a bubble. I think the valuations are a bit of a bubble, but social media is real.

[onehandle]

1. Facebook is expected to tank the Stock Market at opening.

Facebook and Google have no sustainable value.

Ad companies make nothing but nuisance.

[cbdo2007]

3. the stock tanking isn't a bad sign for facebook, they played the hype and put more money

in the company coffers, $16 Billion vs $12 Billion.

Compare this to other recent IPO's where the investment company underpriced the stock so that when it shot up they could make money themselves, it's better for the money to go to the company like it did here.

The stock price is only relevant to the company at the IPO (In the short term), after that the only people making money on the shares are Wall Street banks.

[FarCenter]

4. Not much, if any, money was raised for Facebook, the company.

The IPO shares were sold by insiders and early investors for their personal accounts. These people are getting their money out of Facebook.

[cbdo2007]

6. Um, I don't think you understand how this works.

Facebook as a company sold 450,000,000 shares on the open market for $38 each. The money from this sale goes directly to the company.

At that point, once the secondary market value is set, insiders and early investors can sell their shares easily at that current market value. This money goes to their individual accounts, but the secondary market value and sales have nothing to do with the original money raised by tthe company which they'll put back into the company to try to grow.

[FarCenter]

7. You are partly right, FB sold 180 million shares, others sold 240 million shares.

Facebook IPO: Who Is Selling Stock?

Facebook Inc. sold 180 million of its shares in its initial public stock offering. Another 241.2 million came from existing stockholders, including the company's earliest investors and CEO Mark Zuckerberg.

Even after the IPO, Zuckerberg remains Facebook's single largest shareholder, with 503.6 million shares. And he will control the company with 56 percent of its voting stock.

The IPO sold at $38 per share, generating $6.8 billion for Facebook and $9.2 billion, collectively, for existing stockholders.

Here's a look at early Facebook Inc. investors who sold stock in the IPO, how much money they gained and how many shares they still own. Most of the social network's early funders never publicly disclosed how much they invested in the company.

— Mark Zuckerberg

Number of shares sold: 30.2 million

http://abcnews.go.com/Technology/wireStory/facebook-ipo-selling-stock-16380405

More private equity sellers at the link. Such as:

— Goldman Sachs and affiliates, investment bank and one of the IPO's underwriters

Year invested in Facebook: 2011

Number of shares sold: 28.7 million

Value: $1.09 billion

Number of shares still owned: 37.3 million

[Romulox]

11. Err, they only offered a small amount of the overall stock. Zuckerberg et al retain about 80%

of the company.

That means the stock price is very relevant to the owners of Facebook.

[Starry Messenger]

2. k&r

Steve Blank is an interesting guy. Check out his blog on the history of Silicon Valley if you have time. http://steveblank.com/ The conclusions he draws I don't always agree with, since he's a cheerleader for privatization, but he's a tireless researcher who knows his stuff about the development of the culture and industry in our little slice of madness out here.

[FarCenter]

5. Their might be some minimal semiconductor research factories left, but no real production

The semiconductor manufacturing plants are not in Silicon Valley.

Try Hillsboro, Chandler, East Fishkill, Austin, ...

[MrScorpio]

8. I think that we'll end up having to log on to the net to run any software on our computers

Everything on your device will be nothing more than a series of links

If the they want to own us and make them our slaves, that's the surefire way to go

[Confusious]

13. You're a little behind

They already started doing this a couple of years ago.

Microsoft has played around with running office via the net, some games I own have to be unlocked via the Internet to run.

[Marr]

14. I believe Adobe is doing it with their latest software suite as well.

It can bring a lot of real benefits, but I have to say, so far I've been a lot more put-off by the downside than I have been excited by the upside.

[Dash87]

9. The new Golden Age of Social Media has started, basically.

And it has changed everything forever - mostly improving life as we know it.

One consequence - forced professionalism by law enforcement, knowing that anything bad they do will travel instantly around the world.

Another - The internet is a direct threat to authoritarian governments everywhere. That's why you had the Arab Spring. For the future, picture Wikileaks X1000.

[FarCenter]

10. Alternatively, the new age of the Mayfly Startup

It feels a lot like the late '90s, when there were a lot of companies being started for the express purpose of creating enough buzz to be able to go public or to sell out to a venture capitalist.

[Romulox]

12. Facebook (down 12% today) is merely our current version AOL. nt