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There is no big Silicon Valley tech bubble, says VC king

Just hundreds of small ones

Internet Security Threat Report 2014

Forget what you may have heard: there is no massive tech bubble in Silicon Valley.

Instead there are hundreds of little bubbles, and they're set to begin popping at the end of this year. That's according to investor and "co-maintainer" of the bubble-blowing AngelList, Naval Ravikant.

Speaking at The Founder Conference in Mountain View, California, Ravikant foresaw and mocked the future when he announced "some reporter is going to feel really proud at the end of this year when they show a lot of companies have gone under."

And why is that? "There were a lot of companies financed at the end of 2010 that should haven't been."

Isn't that exactly what a tech bubble is? Not according to Ravikant, who has swapped the "macro" bubble concept from the dot-com boom for the "micro" bubbles of, well, whatever period it is we are currently living in.

The reason people shouldn't worry about these micro-bubbles popping is that "the jobs that will be lost will be very small," Ravikant says, with most companies destined for the scrapheap having only three or four employees, all of whom should be "extremely employable."

Ravikant carried this theme of many, smaller companies into the main point of his talk: how venture capitalism has changed in Silicon Valley – and changed permanently.

There are far more investments now being made in the startup world, he pointed out, but they're much smaller than before. The structured and modular "Series A, Series B" multimillion-dollar investments from big VC companies are gradually being replaced with continuous investments of smaller sums.

This is possible because of the number of "platforms" that exist for companies to build on top of. IP platforms such as Apple's iOS or Facebook's Connect make creating a product much easier; YouTube, Twitter, Quora, etc. make marketing a company much easier; and the investor community has developed Kickstarter, SecondMarket, AngelList, and the like to make finding investment much easier.

All of this has been made possible thanks to the internet, said Ravikant, but these changes do come with their downsides. You need to have a product ready, and possibly even have customers already in place before you get any money, and you may get less investment in terms of time and advice from experienced businessmen.

Another downside will be what Ravikant predicts will be some "spectacular fraud" – soon – because "no one was watching the store." Even so, this spectacle will amount to "only" a few million dollars.

But perhaps most eye-opening was Ravikant's claim that the creation of "New Grad Schools" and a huge number of new-style incubators to harness young entrepreneurs represents "the complete and utter failure of the MBA program."

"If you plan to start a company, you are wasting your time with an MBA," he told attendees, pointing out that although an MBA program may teach you management skills that would be useful in a large company, at the new schools you are "graded by the real world, not a professor who has been there 15 years and is out of touch." ®

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