Silicon Valley Tea Leaves: The End of the VC Game?

Friday's WSJ ran a front-page story on how difficult it may turn for new companies to make money in WiFi. Why? he quickness of the market dominant tech companies to respond.In the prior high-tech cycles, the entrenched tech leaders were often overtaken by the little furry mammal companies. This time the entrenched leaders have stolen from the VC playbook and quickly jumped into the WiFi arena. Cisco bought two leading compaes, Aeronet (Clarity) and Linksys, and dominates the access-point market. Intel is commoditizing WiFi chips so rapidly it caused the leader (Intersil) to sell out. Verizon and SBC are jumping into the hotspot business, following T-Mobile. Even Microsoft is involved, having launched its own consumer line of access points. In the mid-90s, James Fallows of The Atlantic told the tech leaders at Agenda that they were about to become a normal industry. How right he was. Now we are subjected to antitrust claims, get out-lobbied by the entertainment industry, get dissed by a standing President in favor of old-line industries, and are outsourcing feverishly to China, India and Russia. PCs are a slow-growth, mature business; enterprises have cut back on tech purchasing; and a debate rages in the Harvard Business Review over whether IT matters.

The implication is that the rules may have changed. Instead of this being another cyclical downturn in Silicon Valley, it may reflect a more fundamental maturing of the tech game. The 'normal' process of starting a company, getting VC funded, and making it rich, may be over.