Steve Blank, a well-known and well-regarded entrepreneur/guide to the start-ups is of the opinion that we’ve been in a valuation inflationary environment for nearly six months.
Blank measures the bubble by three metrics: valuation expansion of very-early-stage companies, very-late-stage companies and when the time it takes to drive across Palo Alto, Calif. via University Avenue doubles. “In last six months, we have seen that happen,” he laughs.
Currently a professor at the Stanford University, Blank was the co-founder of E.piphany. Prior to E.piphany, he was involved in chipmakers — Zilog and MIPS Computers — and a long list of companies since forgotten. He has tasted success, but more importantly, he has tasted failure. He has seen bubbles and he has seen busts.
The trick for entrepreneurs is to take advantage of this ongoing bubble, says Blank, who is the author of The Four Steps to Epiphany, a must-read book for all entrepreneurs. “If you are an entrepreneur in 2011, would you do things differently that you have would have done in 2008?” he asks. “[The a]nswer is yes.” The same goes for venture capital investors as well.
In a video conversation, Blank outlined how this bubble might actually be different from the Internet bubble of the 1990s. He points out that for first 25 years, venture capitalists and entrepreneurs focused on building revenues and profits, and when things went right, they all went public. VCs of that era, he says were company builders. However, in 1995, things changed with the Netscape initial public offering, when the public markets started accepting vision and Internet as ways to value companies.
What happened later is all very well-known. Ten years later, Blank says we’ve gotten rid of the rubble of the past bubble, and now we have a much bigger platform, which includes new Internet economies (Brazil, China and India), new devices (smartphones and tablets) and new tools of development and measurement, which makes this a more egalitarian phenomenon. “The first bubble was the elite bubble for the industrialized societies,” Blank adds. In his opinion, we could be in an up cycle for at least five years.
Blank, who has been preaching to startups to focus more on building products and less on hyping themselves up, feels that now, the time has come for startups to stand up and shout for attention, because if they don’t, their competitors will get that vital attention.
I urge you to sit back and watch this most thoughtful commentary from one of the true entrepreneurial sages of our time.