Among the rampant fear the bouncing market has instilled in entrepreneurs and venture capitalists, there are more than a few people hyperventilating about what that means for the high tech market. On the other hand, there are some who are trying to take an objective view on what this really means, in the long term.
One of those taking a calmer view of the markets is William Quigley of Clearstone Venture Partners (a sponsor of socalTECH), who recently crafted this editorial on his perspective. We’ve republished his editorial here (it ran on VentureBeat earlier this week) for the benefit of our readers.
It is hard to believe that just 8 years ago, venture capitalists were facing what we all thought would be the ‘great crash’ of our lifetimes. Meaning the one and only significant crash we would see before we retired. After all, even with two world wars, a cold war, and an unprecedented energy shock in the 1970’s, the 20th century only had one Great Depression. The Dow dropped 90% from its high during the Great Depression. NASDAQ dropped 80% from its high after the tech bubble burst. Market collapses of that order are only supposed to happen once in a lifetime. But now, due to the financial crisis of 2008, the consensus opinion among wall street and venture investors is that we are at the beginning of another great crash and long term economic malaise (note Sequoia’s amazing comment about a 15 year secular bear market).
If this were my first bubble bursting experience, I might buy into that dire consensus view. But it isn’t and I don’t. The figure that stays with me more than any other during these trying times is the performance of the Internet and hospitality sectors from 2002 to 2007. In the dark days of 2002, two years after the tech bubble collapsed and a year after the terrorist attacks, the hospitality sector was crushed (who wanted to fly) and many Internet stocks were trading near their cash balances. What happened? Over the next 5 years, Internet and hospitality stocks, which you could barely give away in 2002, were the #2 and #3 best performing sectors out of 75 tracked by the Wall Street Journal…