Why you shouldn’t listen to VCs about the state of Tech

For the last year, I’ve been reading about the imminent market implosion coming in technology. Some of the most vocal critics have been prominent venture capitalist. I first heard rumblings via my day-to-day work in July of 2015 while I was fundraising for a project. I was listening to a partner at Cooley's Santa Monica office tell me how funding was "getting out of control". Then again when Mark Suster of Upfront Ventures drove the point home at his Upfront Summit in Los Angeles in February of this year.

Embroiled in my memory was an overly dramatic slide referencing game of thrones (seen below)

This point was emphasized by famed VC, Bill Gurley of Benchmark Capital in July. When the source of doom and gloom continues to come from one source I began to ask myself—why just them? If things were truly on the verge of a collapse wouldn’t other people speak out about it?

Then along came the Federal Reserve to weigh in on public technology companies, saying, “Valuation metrics in some sectors do appear substantially stretched — particularly those for smaller firms in the social media and biotechnology industries, despite a notable downturn in equity prices for such firms early in the year.” (Full report:https://www.federalreserve.gov/monetarypolicy/mpr_20150715_summary.htm) Janet Yellen even touched on it in her testimony.

This sort of rhetoric (along with the dot com bubble and financial collapse in most people’s recent memory) created a gloomy and hawkish outlook on both public and private technology companies. Bill Gurley even called it the "14th or 15th inning". WOW.

I’m here to tell you just the opposite:

We are just getting started.

To quote Churchill, “Now this is not the end. It is not even the beginning of the end. But it is, perhaps, the end of the beginning.” Remember VC’s motives. They clearly want a “poor” fundraising environment; this means they can demand better terms from the entrepreneur. A great means to accomplish this is to scare aspiring startups via the media.

One thing no one seems to talk about? The benefit of a crash.

What exactly do I mean? We all know how bad the 2008 and 2000 bubbles were but there is a silver lining. We’ve learned how to better evaluate technology companies, and we’ve grown from our mistakes. This latest boom cycles has produced SOLID companies with real growth, real significant revenue (last time around a lot of the revenue wasn’t real). And in some cases this has meant PROFIT. Look at Facebook—it’s absolutely killing it with a 20% net profit margin for 2015.

One of the key indicators that the aforementioned Federal Reserve uses in almost every major decision it makes is the unemployment rate—which in theory, is a statistic that gives you a strong indication of the relative strength or weakness in the job market. By their own admission, job growth is almost always considered a larger and better indicator than company valuations.

I can tell you from my work, my co-workers work, that we haven’t missed a beat. We are all humming along just fine. I do believe there is a bit of a shift going on. I like to refer to it as tech 3.0. Some things I’m noticing as that teams are getting smaller and more efficient, the 1.0 dinosaurs have struggled to catch up. This is why you’ve seen a large number of lay-offs these corporations (IBM, Intel, Broadcom, Blackberry) or you seen companies like HP break up into two smaller entities.

I don’t claim to be smarter than the Fed Chair, Bill Gurley or even Mark Suster. These guys (and gal) have valid points around company valuations. But here’s the thing: to most of us, it doesn’t matter. Unless you’re a founder or investor it’s almost completely irrelevant.

And I’d even say the technology economy is STRONGER THAN EVER.

Let me give you a bit about myself: I have a BA in Economics from the University of Connecticut and worked at an investment bank before getting into technology recruitment in Los Angeles. I was instrumental in building the team that scaled TrueCar.com to an initial public offering of $1b. I have spent the last 6 years running my own Technology (sub-specifically startup) focused recruitment firm. All of this has given me a unique understanding of the markets, economies, and the specifics of the LA startup job market.

Exits in just the past few days should be also noted as clearly bullish indicators for the sector. Change is coming. Some start-ups will fail and shock you. Some of the 1.0 giants might fail. Don’t fear change—it’s just the Adam Smith’s creative destruction.Our new tech wave is very far from over.

VCs have fun sitting this ever-thriving market out, the money will flow in from somewhere and you'll miss your seat on the ride.