In the aftermath of the technology boom and bust in Silicon Valley, the tech industry is in the early stages of yet another revolution, focusing on innovation instead of making billions, reports Newsweek Senior Editor Steven Levy in the current issue's cover story, "Welcome Back to Silicon Valley." "It's a great time to start a new company," Heidi Roizen of Mobius Venture Capital tells Newsweek.
Levy writes that the computer geeks who stayed in Silicon Valley after the tech bubble burst are meeting with their friends at places like Starbucks and tech shows, giving informal demos of new projects. They're then working on how to get their ideas into the marketplace. What's different this time is the difficulty the new startups may have in raising cash. "For two years really crappy companies got funded. It's impossible to get a crappy company funded now," says Mike Edelhart, a former venture capitalist who's COO of a digital publishing startup called Zinio.
"The bubble years were like the last days of the Roman Empire -- business practices were totally weird and dysfunctional," says Greg Galanos of Mobius Venture Capital. Now he won't consider companies without viable business plans, working prototypes and a sense of commitment instead of a delusional exit plan, Levy reports in the March 25 issue (on newsstands Monday, March 18).
The cover package also includes an essay by Paul Saffo, director of the Institute for the Future, in Menlo Park, Ca., who writes that the dot.com collapse may have been a disaster for Wall Street, but it was a blessing in Silicon Valley. "It was the welcome end to an abnormal condition that very nearly destroyed the area in an overabundance of success ... Failure is what fuels and renews this place. Failure is the foundation of innovation."
Newsweek also excerpts an upcoming book by Philip J. Kaplan, who created a Web site called F--kedcompany.com, a site whose purpose was to track the layoffs and the bankruptcies of dot-com companies and ridicule their business plans. The book chronicles the tech crash through Kaplan's take on more than 100 ill-fated companies, including Kozmo.com, Furniture.com and iHarvest.com.