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Imminent slowdown – Blame the “YouTube effect”

Posted by Arun Uday on September 19, 2007

It appears that after nearly 3-4 years of frenetic activity, VCs, entrepreneurs and technologists are entering a phase of self reflection. Ref. – Fred Wilson’s piece, Read Write Web et al. The dampening impact of the sub prime crisis is already too well documented for further elaboration. The big question now is whether and to what extent will the spill over to the tech world happen. (Worth mentioning here that real estate and financial institutions happen to be big advertisers on the net and needless to say that both of these sectors have been thoroughly whipped by the current turn of events). Coincidentally, I was watching an interview of Henry Blodget, one of the alleged villians of the previous dot com bubble (along with some others of his Analyst/IB ilk such as Frank Quattrone, Jack Grubman, Mary Meeker etc – all employed by blue chip Inv Banks on Wall St.). And he admits there that back in the 1.0 heydays, things had gotten so hyped up and the whole air so full of pretension that everyone “understood” what was happening, that for someone to seem unbelieving or doubting was like signalling to the world that they had fallen out of tune with the times. In such situations, it takes a proverbial simpleton to call the bluff on the emperor’s new clothes. While VCs aren’t particularly incentivized to play that role (if anything they are highly incentivized to do exactly the opposite), I have decided to take that risk in any case. Consequently, I have to admit here that as far as YouTube goes, I “still don’t get it”. I will in fact go a step further and say that some of the froth we see today has been an indirect consequence of this “YouTube effect”. And I say this with full realization of the fact that the emperors we are talking of here are no ordinary ones either – one of the most revered VC firms on the planet – Sequoia and the world’s largest “startup” with a $160 bn mkt cap – Google.
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