Silicon Valley Is Dying - Yammer CEO

David Sacks prediction comes just a month after he sold Yammer to Microsoft for $1.28B

on August 21 2012 7:20 AM
Sacks
David Sacks took to Facebook over the weekend to air his grievances about the state of the revered San Franciso Bay Area long assumed to be the centerpiece for innovation within the tech industry, giving a gloomy prediction of the tech industry's future shortly after selling his own company to Microsoft. Wikimedia Commons

This may be the end of Silicon Valley as we know it. At least, that's according to early PayPal employee and founder of the freemium enterprise social network Yammer David Sacks.

Sacks took to Facebook over the weekend to air his grievances about the state of the revered San Franciso Bay area long assumed to be the centerpiece for tech innovation. In a grim forecast quickly scooped by TechCrunch, Sacks listed four reasons the Valley and its once-vibrant startup culture might be facing impending doom.

For startups to be successful today, Sacks says entrepreneurs have to successfully attempt all of the following:

1)      Escape the "attention of major Internet companies," which he claims "are better run than ever before."

2)      Be able to launch and maintain a business for $5 million or less.

3)      Find an idea that can be protected (read: patented) from big companies once they realize the potential of a new innovation or brand of intellectual property (IP).

4)      Avoid patent lawsuits.

"How many ideas like that are left?" he asked.

Last month, Sacks himself sold his most recent experiment in Internet start-ups, Yammer, to Microsoft. Yammer offers a unique angle on social networking that focuses on enterprise social software --  type of communication that offers a greater degree of privacy, discretion and inclusiveness for many businesses and commercial interests than an open service like Facebook or Twitter offers.

Ironically, if Sacks was using Yammer itself, his comments probably wouldn't have expanded out into the wider Internet community through TechCrunch. "A few thoughts posted privately to my Facebook profile have it into the NYT," he tweeted after seeing that the story had drawn the attention of the New York Times. "Perhaps I hit a nerve?" he asked.

But maybe by broadcasting his concerns on Facebook, a company that facing its own round of poor financial performance and public embarassment, Sacks was hoping to stimulate debate rather than simply mourn the death of Silicon Valley.

After asking how many ideas were left, Internet finance mogul Marc Andreessen responded: "An infinite number -- human creativity is limitless -- which doesn't make it easy, but does mean the opportunity is unending."

Other Internet luminaries then rushed to Andreeseen's aid, including George Zachary, co-founder of Netscape and of Andreessen Horowitz and a partner at Charles River Ventures, and Shervin Pishevar, a partner at Menlo Ventures.  

"As technology and innovation continue to spread to all 7 billion people on this planet, especially via mobile, human creativity continues push the boundless boundaries ahead of us," Shervin wrotes. "There are growth opportunities for big companies and momentarily small startups."

Sacks' gloomy opening note inevitably led to speculation about how his current sentiments might be linked to the recent deal he closed with Microsoft. But he dismissed rumors that Yammer's acquisition had anything to do with his current anxiety.

"This is a great, lively discussion, and TechCrunch has picked up on it, wanting to know what the connection is with Yammer," he wrote on Monday. "In short, the answer is not much. My argument explicitly applies to software categories where there's an incumbent. Yammer created a category that didn't exist (Enterprise Social Networking)."

Really, he concluded, the problem returned to a central question of innovation as the chaos and creativity of the Internet solidifies into a massive commercial industry unto itself. "Creating new categories, rather than iterating at the margins of existing categories, is what I'm arguing entrepreneurs need to do," he wrote. "The question is whether that's getting harder or easier as the Internet matures. Personally, I think it's getting harder, but VCs like Marc, George, Shervin, and others may have a better vantage point to make that assessment."

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