5 Out Of 6 VCs Agree: Now Is The Time To Hype Wireless
By Mike Masnick, Sat Jan 15 00:45:00 GMT 2005

When a large group of VCs all agree that something is hot, you can almost hear the bubble expanding. This is both good and bad, but everyone should go in with their eyes open.

The Seattle Post-Intelligencer asked six local venture capitalists for their predictions for 2005, and four out of the six specifically named wireless as the hot area to watch in 2005. One of the two who didn't name it specifically danced pretty close to wireless with all of his predictions ("consumer home control, digital media and computing appliances; Ultra-microcomputing; Voice-over IP infrastructure"), so it seems reasonable to include his vote for wireless as well. As in any case where "five out of six experts agree!" you may wonder what that last one was thinking. In this case, his focus is on business intelligence and hosted applications, suggesting he's still looking back at the farm for the big enterprise applications and data services -- but even those are starting to go mobile as well.

Is this good or bad? It certainly depends on who you are. Most people in the wireless industry, obviously, would claim this is a good thing. The industry is getting plenty of attention, people who are paid to judge these things have big expectations, and the purse strings are likely to be loosened. It's obviously a good thing for startups in the mobile space looking for money. If you want to drive up your valuation, you just need to be in the space that every VC is talking about and suddenly they'll all seem quite interested.

The downside, however, is the hype and pressure that comes along with tremendous VC interest. The business models for mobile data are still very much up in the air, and many VCs will push startups to go with more short-term business model strategies than taking any sort of concrete long term thinking. In other words, there are going to be a lot of failed startups littering the side of this road. Still, the long term view suggests that those failed companies will hopefully pave the way by figuring out the business models that work. Not all bubbles are bad, in that the rapid investment allows many different models to get tested quickly. It just might not be fun to be a VC's guinea pig when some other company comes along two years later and turns your failed business model into their successful one.

For larger companies and users, however, the thing to remember is that just because a company has raised a lot of cash, it does not mean they have the answers. One of the biggest problems in bubbles is that people start confusing investment money with revenue. Raising $100 million is meaningless if you can't figure out a way to build a sustainable business that brings in revenue. So, get ready for lots of hype, lots of buzz, and lots of money, but don't get carried away and watch out for the dead business models (and companies) littering the side of the path as everyone tries to figure this market out.