At the Montgomery Summit this week, aside from escaping the Boston winter for beautiful Santa Monica, I had the opportunity to hear some great speakers. The conference draws a crowd of 2000 entrepreneurs, VCs and bankers from around the world, and mixes the tech world “sneakers and hoodie” types with blue-suited growth investors and glam LA personalities. It was fun to listen to pitches from tech startups like SOASTA, Bracket Computing and Coho Data, followed by Gwyneth Paltrow, Andy Jassy and Evan Spiegel.
What struck me most about the mood at the conference was the sense of being in the middle, maybe the high point, of a major tech wave. Call it a bubble or not, this week combined the highs and lows that typify this moment in tech. Starting with the end of GigaOm, and the cancellation of its Structure events, we swung to the importance of building a personal brand via social (think Gwyneth and Jessica Alba, not Justin Bieber). From there Andy Jassy described the early days of AWS to its present world domination. “Who would have thought,” he said, “that we would have 6-7 years completely unchallenged to lead the market?” In the meantime, SimpliVity announced that they were the latest company to join the Unicorn Club, with a valuation over $1B just two years after launching.
Most analysts, including the Montgomery Summit’s presentation on “Is this a tech bubble?”, seem to want to explain why this is not like 2001 and why all the unicorns with billion-dollar valuations are actually worth the numbers. And there are many good examples of companies building true value with real products and happy customers and financials. But quietly in many meetings with investors and other entrepreneurs, I heard over and over the belief that we are reaching the high point in a cycle and that we are likely to see the inevitable slow down shortly, with concerns about potential future rounds and exits. At some point, the party must be over.
It occurred to me that at Netezza, it took us over 7 years to reach a billion-dollar valuation (and 5 years from launch), and that this only happened at over $100M in revenues and cashflow breakeven. In today’s market, it seems reasonable to reach this point much faster and at a much earlier stage in the company’s development. What this means for the founders and management teams is yet to be determined for most of the unicorns, but it reminded me how critical it is even in this unusual tech market moment to take the long-term view in building a company and product.
The best advice I ever received was from a mentor and very experienced entrepreneur and angel investor, who cautioned me: “If you can ride the up-cycles, that’s great, but don’t confuse that with what you’re actually doing. Stay completely focused on building the team, product and customer relationships – nothing else matters. Don’t get distracted by the ups and downs happening in the market; things may look great if you raise funding during a peak period, but there is always the next milestone coming, so keep your eye on the fundamentals.”
This is what guides our thinking as we build ClearSky. Creating an enterprise offering requires time and commitment from the team and investors, as well as the fantastic early customers and partners who work with us to develop the product. Taking the long-term view is the only way to succeed in this business, with the creation of billion-dollar value a result and by-product of the hard work and creativity of everyone involved.