Silicon Valley venture capitalists are pouring money into a new generation of companies that will ride the social networking wave. Am I the only one having flashbacks?
Yesterday's Wall Street Journal featured an article about how Silicon Valley VCs are investing in "companies that hope to unshackle social networking from personal computers -- and shift it to the cellphone."
Is social networking shackled? According to the WSJ:
On Thursday, Color Labs Inc., a phone-based social network founded by veteran entrepreneur Bill Nguyen, is opening its doors. The Palo Alto, Calif., start-up recently secured $41 million from top venture-capital firms including Sequoia Capital even before the company's iPhone and Android apps were ready to debut.
Color, a new app, launched Thursday with the goal of re-inventing the idea of social networking for the smartphone era. Now the question is whether it's worth the $41 million in funding—and whether users are ready for its notion of privacy.
Does any of this sound familiar? Are we so far from the tech bubble that we've forgotten how the Internet was going to reinvent the notion of pretty much everything?
The idea behind Color is that a phone's location-sensing abilities can build a user's social network for them, allowing users to share photos, video and messages based simply on the people they're physically near. The company's view on privacy is that everything in the service is public—allowing users who don't yet know each other to peer into each other's lives.
Color is just one of a growing number of social start-ups betting on smartphones that are now attracting a venture-funding rush. Many of the companies feature photo taking and sharing at their core, such as Path Inc., founded by former Facebook executive Dave Morin. It received $8.5 million last month from Kleiner Perkins Caufield & Byers and Index Ventures. It has also had conversations with Google Inc. about a buyout, according to a person briefed on the discussions. Google declined to comment.
My problem with this is multifold (aside from the idea of sharing photos with the stranger standing next to me). Back in the heyday of the Internet, anyone with a PC could start up an Internet business. The same appears to be true now for apps. The Internet was going to revolutionize the way business was conducted; social networking is poised to do that. Venture capital investments reached their all-time peak in 1999; a venture-funding "rush" is now on, according to the WSJ. And the issue with privacy... enough said.
I can only speak for the electronics supply chain industry, but in the pre-bubble days, we'd get two to three announcements per day of a new Website, startup, or auction site that was going to change the world. How many days have gone by this week without a new app or smartphone hitting the market? The market is quickly becoming saturated with products for the Great Unknown -- the social network.
Like the Internet, the social network is going to change things. It already has. But how? And why? It has taken a decade to even get a handle on the Web's role in commerce -- and it has put other businesses, such as publishing, on tenuous ground. Once again, it seems as if venture investment is going toward a business that relies on "views" as a measuring stick. Google and Facebook remain the exceptions in a dotcom market that was flooded with similar offerings. Will this time be any different?