Have we seen peak tech? Is it becoming a game only giants can play?

On Thursday, LinkedIn posted some very disappointing numbers, and the result was a massive bailout on the stock. The companies reported losses and slowing growth led to erasing nearly $11 billion in the professional networking site’s market value. Combined with lowered forecasts for the year, this translated into about 40% drop in the company’s valuation.
Another major collapse in confidence seems to be hitting Tableau, which dropped 45% in after hour trading on Thursday, after announcing higher than projected revenue and earnings per share, but a real slowdown in licensing revenue.
Twitter continues to stumble, losing 5%. Facebook likewise took a 5% drop. The tech selloff with Apple (2.67% drop) and Amazon (6.36% down). Box fell 7.44%.
The tech market appears to be getting whipsawed by the uncertainties in the world economy, with those showing the most significant drop off in past and projected revenues getting hammered.
But is there something larger at work? I read a great analysis by Jessica Lessin at The Information, suggesting that there may be. In The End of Tech Startups she writes,

[…] the period where tech startups can readily disrupt larger tech companies is ending for a simple reason: Today’s tech behemoths aren’t the lumbering giants of yesteryear. They are leaner and meaner and more competitive precisely because they have co-opted the same technologies startups used to attack them.
Take cloud computing. Sure, AWS makes it dead simple for two developers in a garage to spin up a company. But Microsoft, Facebook and Google have massive cloud infrastructure advantages of their own. In fact, they’re the ones powering some of these startups. Anything startups have access to, big tech companies have access to in a much deeper way. So they can operate faster—and test faster. And because they can test faster, they can build faster.
Then consider internal communications. One of the biggest advantages any startup has is the ability to make decisions and communicate quickly without layers of bureaucracy. Often they do so by adopting the latest sort of collaboration method quickly.
[…]
To all you aspiring tech entrepreneurs out there, it’s time to get creative if you want to take on a tech company. And if you don’t, there’s still plenty of opportunity going after non-tech incumbents in everything from media to education and health, which is probably why we’re seeing so many startups turn their attention outside of tech these days.

Lessin suggests we’re moving to an era where the Internet giants simply will have too much juice for startups to prevail against them. I think this borne out in many sectors, like the melting away of the valuations (and opportunities) for file sync-and-share companies, like Dropbox and Box, as the monsters move in and drop the price point to zero.
So, as the bull market grinds on in the coming months, note the difference in the losses that the market will deal to larger and smaller players. The LinkedIns and Tableaus will lose much more than the giants, and the giants will continue to turn the screws, leveraging their positional, financial, and operational advantages. They will continue to win even as investors lose.
And startups will face the worst conditions: less capital, worse valuations, very strong entrenched Internet giants dominating in all important markets.

Two charts that show why Uber’s valuation isn’t ridiculous

Uber’s latest funding brings the company into the stratosphere of private company valuations.

At $40 billion, Uber is believed to be four times more valuable than Airbnb, Snapchat, Palantir or Dropbox. Its valuation is eight times larger than Pinterest’s, fifty-seven times larger than Lyft’s, 100 times larger than Instacart’s.

The news sent the tech world into a tizzy. People called Uber’s new valuation eye-popping, ridiculous, absurd. Just like Uber’s last round of funding, it was heralded as proof of a bubble, an upcoming crash, the tech apocalypse, etc.

[dataset id=”898119″]

But when you plot Uber’s valuation compared to big public tech companies, it looks less dramatic. [company]Amazon[/company], [company]Facebook[/company], [company]Microsoft[/company], [company]Amazon[/company], [company]Oracle[/company] and others are — as you’d expect from mature companies — much larger by market cap than Uber’s current valuation. Twitter is much smaller. Investors are essentially saying that they think Uber will be nearly as valuable as [company]Yahoo[/company] or [company]eBay[/company] and more valuable than Twitter when it goes public. It’s not a totally outlandish conclusion for them to bet on, given current tech hype and market trends.

Uber’s staggering valuation says more about the changing nature of tech fundraising than it does about Uber investors’ ridiculousness. Companies are staying private longer, choosing to develop their product outside of the prying public market’s eyes. Uber is leading that trend, a pioneer for a new kind of growth model.

Without much precedent, it’s hard to know what Uber’s eventual IPO will look like. It has more money and time to hone its business, so it’s not entirely fair to compare is to the IPOs of yesteryear and call its valuation outsized. We’re playing by a new set of rules.

[dataset id=”898108″]

There’s another way to look at Uber’s valuation. CEO Travis Kalanick isn’t content for his company to remain a car-hailing app. He plans to move into urban logistics and shipping, doing everything from delivering food to transporting supplies. When Uber drops off kittens on National Cat Day, it’s not just a publicity stunt — it’s logistics testing.

On that note, perhaps Uber should be compared to public transportation, logistics and automotive corporations. Companies like [company]Ford[/company] and [company]Tesla[/company] are distant cousins to Uber, but given that Kalanick wants Uber to replace car ownership, they may be competitors down the line. The same goes for [company]FedEx[/company] and [company]UPS[/company].

Uber’s valuation puts it at less than half the market cap of UPS, but close to the market cap of FedEx ($51 billion). From an automotive standpoint, the numbers are even more optimistic, with Ford and [company]General Motors[/company]’ market caps not that much bigger than Uber’s valuation. Tesla and Hertz’s market caps, $29 billion and $11 billion respectively, are smaller than Uber’s $40 billion valuation.

Uber’s investors are essentially saying that they think when the company goes public, it will be worth at least half as much as GM and Ford and more than Tesla and Hertz.

[dataset id=”898118″]

Kabam joins the $1 billion club after Alibaba investment. Can it avoid the fate of Zynga?

Gaming company Kabam, creator of such little known hits as “Kingdoms of Camelot” and “The Hobbit: Kingdoms of Middle-earth,” has joined the elite-ish $1 billion valuation club following a sizable Series E from Alibaba. With a “diversify and prosper” strategy, Kabam hopes to avoid the rocky roads paved by Zynga and Candy Crush’s King.com.

Measuring media

In an effort to more accurately portray the U.S. economy as it grows ever-more dependent on intellectual property and innovation to create wealth, the Bureau of Economic Analysis has created a new GDP category called “intellectual property products,” which includes “entertainment originals,” such as books, movies and TV shows.

Breaking down 2012 tech acquisitions by the numbers

Which companies and sectors were the biggest winners in tech acquisitions for 2012? A new report from CB Insights breaks down where trends in M&A for 2012 among private tech companies acquired during the year.

Attention: The social-web IPO window is now closed

A lot of hopes were riding on Facebook having a superstar IPO, including the hopes of venture investors that it would help trigger a wave of interest in other social-web companies, which could then also go public. But now those rosy assumptions are in question.