What will happen to Silicon Valley's boom?

What will happen to Silicon Valley's boom?

Summary: Silicon Valley has only just recovered from the 2008 crash... what will happen now?

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TOPICS: Banking
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Turmoil in global financial markets and economies is never good for Silicon Valley despite the fact that the regional economy has its own boom and boost cycles that operate on a different timetable.

Currently, Silicon Valley has been booming, recapturing p the trend that was in place in the second half of 2008 before the financial meltdown, of growing VC investments and jobs. But like that recovery in 2008 which ran smack into an economic crisis, will this recovery again be nipped in the bud?

Maybe. Profits by the large Silicon Valley companies such as Google, Intel, etc are good and projected to be good for the rest of the year.

When it comes to startups, VC investments are at healthy levels and Angels are taking care of the very early, still pivoting, startups.

To a large degree, the current market correction is expected following the large decline in late 2008. All large market corrections are followed by a second correction, and the second one usually signals a longer, but slower period of recovery.

For example, following the crash of 1929, the Dow made a reasonable recovery before it crashed again in 1932, to just 11% of its value in 1929 . The Dow returned to its pre-1929 levels in November 1954. That's a long time to wait for your stock portfolio to get back to where it was before the crash.

So will this current financial crisis hurt SIlicon Valley's recovery? Yes but it's not clear to what extent.

Because of the momentum of capital and the scale of current investments, VCs are committed to a greater extent than before, and therefore they can't easily pull back, or out of many investments, because they are expansion investments.

Problems: VC firms currently raising funds are worth watching. Also, Angels, will they be able to continue investing or have they been harmed by the stock market sell-off? It's different for each individual.

Either way, expect a chilling effect on SIlicon Valley until the picture becomes clearer. And prepare for an M&A boom as cash rich Silicon Valley companies make bargain acquisitions.

Topic: Banking

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6 comments
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  • Silicon Valley is in for a rough ride

    And there are several reasons. The stock market crash is just one of them. Another big one is that Silicon Valley has become a hollow shell for many companies. You've got ones like HP that are "American" in name only; they employ most of their people overseas, make all their products overseas, and get most of their revenues overseas. Now these companies are moving R&D overseas as well, so all that is left is an accounting office and a bunch of signs on buildings.<br><br>The middle tier companies and startups took up the slack for awhile, but many are in no shape to weather the coming economic storm. As in most of the other tech recessions, Asia and BRIC will recover first, and more companies will move out of the Valley to take part.<br><br>The next several years are going to be excruciating for all of America, Silicon Valley has no immunity or buffer from it. The economists will look back on this period and learn that they were watching the wrong economic indicators all along, since corporate profits and stock prices never did "trickle down" into new jobs and increased earnings for the people as a whole.
    terry flores
    • RE: What will happen to Silicon Valley's boom?

      @terry flores
      Agree.
      randycpu
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  • RE: What will happen to Silicon Valley's boom?

    I think to call it a "boom" is a misnomer. If anything, it was a bubble that if lucky will deflate rather than burst. One of my acquaintances, somewhat of a wise man called Manfred Haldenwang of Esolve Capital, always says: what comes up must come down. An apparent platitude that however is deep and which truth is always forgotten; again and again ...
    Walt-E
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