David Sacks of Yammer wonders if Silicon Valley — meaning the venture-backed bastion of innovation and wealth creation in the Bay Area — has started to lose it’s mojo. His argument — more of a handwave really — is that a/ the economics don’t work in a system with such large incumbents (like Google, Microsoft, Apple, Facebook, etc.), b/ partly because todays agile, ramen-fueld startups don’t have the cash to effectively compete against the incumbents, and c/ the number of ideas that can be juiced into existence given that context are few.
It’s important to consider his arguments in light of what happened to Yammer. My belief is that Sacks intended originally to IPO to raise a large pile of cheap cash so he could effectively compete with SalesForce, Cisco, SAP, IBM, and Microsoft. However, the declining fortunes of Facebook, Groupon, and Zynga made an IPO unattractive or impossible (considering the huge amounts Yammer had raised). So Yammer was left in the unenviable position of having to fight it out against these huge established competitors, all of which fielded competitors to Yammer… except Microsoft. And Microsoft could have made the argument that they could knock off Yammer’s technology in a few months, if necessary. So, he gave in, and accepted the deal.
So, we are seeing — at the least — the completely maturation of this generation of work media tools, like Yammer. These are stream-based coordination and collaboration tools, intended for use behind the walls of the business, and which play a key role in the socialization of business. (I think there is another generation coming, based on other principles, but I’ll leave that for another post.)
Sacks looks at this corner Yammer found itself in, and thinks we’ve hit peak Silicon Valley (= peak VC + peak tech incumbents).
(There is an echo of the recent brouhaha around Dalton Caldwell’s encounter with the inner circle at Facebook, where they basically offered him a deal and said ‘surrender, or be crushed’.)
Most of the commentary on Sacks’ Facebook post is about point c, Sacks’ comments about the small number of ideas that can make it in today’s environment. Like George Zachary’s channeling of Chance the Gardener from Being There:
As long as the universe keeps changing, there is opportunity.
or Andreesseen’s generalization to Sacks’ question about how many ideas can get through this context,
An infinite number — human creativity is limitless. Which doesn’t make it easy, but does mean the opportunity is unending.
But they aren’t answering his question. He’s really saying, yes, a turtle can lay 1000 eggs, but in an environment with dozens of hungry seagulls, how many make it off the beach? Or past the sharks? The commenters keep focussing on how many eggs can be laid, but not the beach, the gulls, or the sharks.
The prediction that we’ve come to the end of all useful inventions is dumb. Julius Sextus Frontinus, Roman Engineer said ‘Inventions have long since reached their limit, and I see no hope for further developments’ back in 10 AD. But I don’t think Sacks is saying that. Sacks is saying that the game is rigged so that innovators are in an environment that makes it harder for really innovate ideas to escape the current VC/incumbent trap, and that’s a discussion worth continuing.
- After Selling His Startup For $1.2 Billion, Yammer CEO Calls The End Of Silicon Valley (MSFT) (businessinsider.com)
- Yammer CEO: Silicon Valley as we know it may be ending (geekwire.com)
- After Microsoft Deal, Yammer C.E.O. Issues Gloomy Outlook for Silicon Valley’s Start-Ups (dealbook.nytimes.com)