re: Outlook 2007Stevery writes: The risk/reward on telecom looks like:
Reward: Great if it succeeds, zero if it doesn't. Risk: Lose my cushy job for doing something crazy.
Unless you have a cushy job at Huawei, your cubicle seat is about as safe as a General Motors assembly line job in Detroit.
The title of this thread... Herd mentality, captures the essense of the problem. Startups that follow the herd discover that big companies have created nearly identical products so there is no market for startup product. To succeed as a startup, you need to create innovative, disruptive technology. You need to give a hyper-conservative monopoly a compelling business reason to pick your solution rather than what 50 other bovine companies have produced. Some C- player with a cushy VP job at a monopoly isn't going to bet his career on a startup unless it is a huge business winner for the monopoly. I can't believe the amount of VC money that got poured into herd mentality startups. That produced little or no return over the last half-dozen years so the VCs have now concluded that there's no money to be made in telecom rather than the correct conclusion that they'd invested in a bunch of unoriginal ideas that couldn't possibly have a winning exit strategy. Startups are all about innovation and the good ideas aren't being funded in telecom at the moment because the VC community got burned by the VC herd mentality.
re: Outlook 2007The future's so bright that I got to ware shades!
2007 is the ideal time to get started in a telecom focused start-up and IGÇÖll give you four reasons.
1) Big name semiconductor companies have been so burned by the telecom sector that they have all killed their internal OC-whatever programs and have long ago lost interest in FTTX, or anything called Sonet or SDL or Ethernet.
2) VTSS and AMCC are just shells of their former selves and Exar is a joke, yet with a rebound slowly happening the chips have to come from somewhere. This means even if there are only a few box vendors they will still need to source their chips from someone. Where I come from this is called opportunity knocking.
3) Consumer / Communications Convergence is finally happening, LCDTVGÇÖs with integrated Mpeg decoders and IPTV will open up unimaginable integration possibilities in the Home entertainment space, not to mention targeted advertising.
4) VoWiFi and GSM will be integrated, combining this with Iphone like devices, get me hot just thinking about it!
Full Disclosure: IGÇÖm addicted to startups, there is nothing like the rush you get when you start with nothing and make that first $1M sale. Even when you hit $100M you can still remember your first sale, but it all pays off when one day the phone rings and on the other end is ML,UBS or GS wanting to talk about IPOGǪ
re: Outlook 2007Well, $750 million went into cleantech just in Q3. Then there is the consumer, digital media, mobile convergence, and the old standby plays in security and India/China infrastructure. The money is going to areas where entrpeneurs are enthused, and VC's can see the prospect of making money. As I know Why is aware (but I bet the rest of you aren't), the best performing semiconductor IPO last year was Techwell, whose stuff goes exclusively into consumer gear (I can see all of you saying WHO? as I type).
There is life after telecom. And after EDA. And after Enterprise software applications.
re: Outlook 2007Unless you have a cushy job at Huawei, your cubicle seat [at a VC firm] is about as safe as a General Motors assembly line job in Detroit.
Webvan anyone? What fraction of the partners who approved that deal were shown the door?
(Extra points: Substitute your own favorite bad idea for webvan above. Does the result change?)
re: Outlook 2007Is there a limit to the amount of Money the Fed can Print?
ItGÇÖs obvious the Fed is willing and able to print an infinite amount of money.
So why wouldnGÇÖt they?
The answer lies in the fact that if people expected a never ending blizzard of paper they would take steps to protect themselves from holding such a depreciating item. How? By buying those items whose supply remains relatively inflexible for example Gold.
Taken to the extreme, if expectations of complete and rapid money printing (debasement) became commonplace, the rush out of paper would become a MAD dash for the exits.
Therefore, in the interest of holding onto the money creation reigns, the Fed is restrained by peopleGÇÖs expectations of how quickly their money will lose its purchasing power. That is, if expectations of inflation are low, the Fed can print a Lot and if expectations of inflation are high, the Fed can only print a Little.
Are we now entering the Print a GÇÿLittleGÇÖ stage?
By 2003 the Fed had slashed short-term interest rates from 6% to 1%, the world began reflating from the Nasdaq collapse and asset prices were being fuelled by never-ending cheap money.
The problem was/is that such money had to go somewhere and the money flowed into almost every asset class including Bonds (fuelling the Housing Bubble), the stock market (large caps and emerging markets), private equity funds (fuelling M&A) and ofcourse commodities (most notably Oil and Industrial Metals).
But remember inflation expectations?
Rising commodity prices and more precisely rising Gold prices raise the red flag on inflation expectations.
To combat this, the Fed started its mini-rate rising campaign to convince the market that any inflation problem was being dealt with, thereby keeping a lid on inflation expectations.
All the while, cheap money continued to flow from other central Banks, most notably the Bank of Japan, ensuring the monetary system was well supported and lubricated whilst inflation expectations remained low.
The net result has been a global explosion in debt levels and a universal biding up of asset prices.
But alas, the laws of nature apply to markets as well. Those micro Fed rate increases have begun to take their toll. As the Yen : Dollar rate stabilized the Yen Carry Trade has also slowed. And ever so subtly the tap of Fresh Money is being stopped up.
The markets have responded through a drop in Home Building Stocks, a haphazard rise in Bond Yields and of course brutal corrections in commodities such as Oil.
Now we find ourselves in a crazy situation where the Fed requires a slowdown and asset prices to fall in order to justify the next round of rate cuts and more money printing. Remember, inflation expectations must be kept low at all costs to keep the game going.
Wow! What a dangerous game.
We have entered into a Fed sponsored slowdown where an element of deflation will be allowed to enter the system. The Fed is attempting to land a debt laden Jumbo Jet. Refuel and take-off again. A lot is at stake and a lot could go wrong. Will they be successful? WeGÇÖll have to wait and see.
re: Outlook 2007Wow, man, that's intense. You're either addicted to startups, or...ecstasy. Whichever, it's working.
True, semi seems to be a decent place to live these days - Passave (PMC), Teknovus, centillium, wintega, Bay Micro - not companies in the doldrums. But, alas, IMO it's systems companies that really make a market.
The rest of what you list is also hot, but consumer-oriented, and again I'd say that's a different market, with different economics and supply chain realities than telecom networking.
But, hey, enjoy. Just don't mix whatever you're taking with alcohol, or drive.
Scott
The future's so bright that I got to ware shades!
2007 is the ideal time to get started in a telecom focused start-up and IGÇÖll give you four reasons.
1) Big name semiconductor companies have been so burned by the telecom sector that they have all killed their internal OC-whatever programs and have long ago lost interest in FTTX, or anything called Sonet or SDL or Ethernet.
2) VTSS and AMCC are just shells of their former selves and Exar is a joke, yet with a rebound slowly happening the chips have to come from somewhere. This means even if there are only a few box vendors they will still need to source their chips from someone. Where I come from this is called opportunity knocking.
3) Consumer / Communications Convergence is finally happening, LCDTVGÇÖs with integrated Mpeg decoders and IPTV will open up unimaginable integration possibilities in the Home entertainment space, not to mention targeted advertising.
4) VoWiFi and GSM will be integrated, combining this with Iphone like devices, get me hot just thinking about it!
Full Disclosure: IGÇÖm addicted to startups, there is nothing like the rush you get when you start with nothing and make that first $1M sale. Even when you hit $100M you can still remember your first sale, but it all pays off when one day the phone rings and on the other end is ML,UBS or GS wanting to talk about IPOGǪ
re: Outlook 2007Geoff, Thanks for making my point! TWLL is a $350M Market Cap company with less than $15M/Q revenue, it has a 7.5 PS ratio. Now tell me your VC is not eager to hear more.
If you want the inside skinny TWLL is only managing to pick up the sockets that everyone else rejects, hence the focus on security apps. for winners look at what TRID and Mediatek are achieving, there are also a couple of private Taiwan start-us that are really kicking butt.
You guys need to get hooked into what's hot and what's NOT! Check out a company called Actions Semiconductor (ACTS) and tell me dedicated group of experienced engineers couldn't knock that chip out in less than 6 months! ($750M MCap)
For me it is easy to stay motivated and interested in the startup area I just need to look at the competition. I know that with $5M seed I can put together a dream team, another $15M to get the ball rolling and I'll deliver $50M rev in less than 2 years.
re: Outlook 2007Well, it's been a hectiuc week, and this is the first chance to get back on....
No Drew...oh well.
I agree the economics of things strongly favor a systems level venture, outsourced at the hardware level. But I don't see this being a place you can stake out a defensible territory...
Scott,
You slay me. Why would any singleton in the herd stick his neck out? The risk/reward on telecom looks like:
Reward: Great if it succeeds, zero if it doesn't.
Risk: Lose my cushy job for doing something crazy.
Compare (for example) Web 2.0 / Biotech:
Reward: Great if it succeeds, zero if it doesn't.
Risk: Everybody else is making the same mistakes, so my job is secure.
Funding companies is not exactly a line of work for independent thinkers.