When I talked earlier about why it might be better to start a tech company outside of Silicon Valley, perhaps the biggest point was avoiding the echo chamber. The fact that Yammer, a Twitter clone for the enterprise, had won the TechCrunch 50 conference, reinforces this point.

Therese Poletti had a great column in Marketwatch that discussed this a little.

Product features and improvements are important to keep technology evolving, but some of these seemed like incremental extensions to existing products and ideas, and not really "new, new things," to quote the popular Michael Lewis book of the same title.

She goes on to question whether these are sustainable businesses by themselves.

So the variety of startups I saw makes me wonder: are many of these companies long-term horizon plays that are not yet obvious winners? Or are many just flash-in-the-pan startups, looking for a quick exit via an acquisition by a larger company, since the initial public offering market is pretty much dead in tech right now? Maybe a little of both.

"These businesses may not appear to be large opportunities because the issues they solve are just appearing in the marketplace," Ressi said. "Give it a few years, and at least five of the companies will be really large, operating in markets that nobody would predict to be interesting."

Suffice it to say, I don’t think that something like Birdpost, a social network for bird watchers, will ever be anything but a lifestyle business with modest growth. It’s a niche community site – which can certainly make money – but there are simply not enough birdwatchers in the world to achieve the scale that most VCs would look for.

Jason Calacanis has said that one of the big reasons they chose Yammer is that it’s Twitter with a business model. The only issue is that I think it’s a very flawed model. The problem, I think, is that many of these people on both sides of the startup equation think the answer is “selling to the enterprise” – after all, enterprises are willing to pay for things that consumers are not – but they have no enterprise experience themselves (working in one or developing for one) and don’t fully appreciate the dynamics here.

Therese puts it more tritely: the biggest innovation at TC50 is that the winner asked “What are you working on?” instead of “What are you doing?”

Ironically, Jason discussed on TWiT 161 how big problem with the first bubble was everyone was pursuing the same opportunity; he says that today we’re in a similar situation - “there are tons of copycat sites” just like the first bubble - except that they haven’t taken 100 million in VC funding.

In other words, we’re not in a funding bubble, but it sure looks like we’re in an innovation bubble.


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