The Fourth Wave
A few days ago, Michael Arrington posted The Third Disruptive Wave in which he postulates we are entering the Age of Facebook. He later goes on to say that the "Third Wave is happening, but that doesn’t mean that Facebook, Zynga, Groupon, Twitter and a few others are the only winners, or even the biggest winners. Facebook may have created a monster that it simply cannot control, for example."
Before commenting on Arrington's post, I'd like to point out that we are in the FOURTH wave, not the third. In my opinion, each wave of disruption in the computer industry since the invention of the PC is easy to identify because the era was defined by a company which reached a market cap of $100B+ faster than any in history.
In the 1980s, Microsoft grew in dominance to become the fastest company to reach $100B market cap. It took 25 years (11 years to IPO). Casualties along the way were IBM, Wang, DEC, Novell, Lotus, Word Perfect, Apple and many others.
In the 1990s, Cisco grew in dominance to become the fastest company to reach $100B market cap. It took 14 years (6 years to IPO). Casualties along the way were IBM, 3Com, Bay Networks, AT&T/Lucent, Alcatel, Nortel and many others. Cisco helped fuel the golden age of venture capital by acquiring more than a hundred VC backed companies (and propping up valuations and exit prices of hundreds more).
In the 2000s, Google grew in dominance to become the fastest company to reach $100B market cap. It took them 8 years. Casualties along the way were Microsoft, Yahoo, AOL and many others. (Interestingly, during the same decade, Apple was reborn and created even more value than Google as it grew from $16B to $200B market cap).
So, in this decade, in the middle of the FOURTH wave, which startup will grow to become the next $100B company? The obvious answer is Facebook. HOWEVER, if the question is which company will shatter Google's record for fastest to reach $100B market cap, the answer is not so clear.
Facebook is already more than 6 years old. Even if they reach $100B market cap within the next 2 years, it will NOT shatter the record. Remember, Microsoft crushed the prior record by decades. Cisco got there 11 years faster. Google got there 6 years faster. Each new record holder got there more than 40% faster.
What's amazing to contemplate is that, during this decade, we may see a company start from scratch to reach $100B market cap in seven years or less.
We are indeed entering an exciting age and it's not at all clear that the winner of the FOURTH wave will be Facebook. As Arrington noted, "Facebook may have created a monster that it simply cannot control."
As a VC who has lived through the 1990s and 2000s, I am more excited than ever about the tech industry. The pace of innovation and growth of great new products and companies has been mind boggling (see Arrington's post for recent examples).
As we look back, the 1990s was fantastic for VCs and entrepreneurs. The 2000s were tough - really tough. In the decade ahead, we might see another fantastic run by VCs and entrepreneurs as fund sizes shrink, capital efficiency comes back in vogue, and the pace of innovation and value creation continues to accelerate. It'll be fun to see how it all plays out.
