News Column

What Will 2014 Hold for the Tech Industry?

December 28, 2013

By Peter Delevett, San Jose Mercury News

Expect more tech companies to join Twitter's lead in 2014.
Expect more tech companies to join Twitter's lead in 2014.

The best year for IPOs in more than a decade is nearly in the books, and 2014 will be even better.

Or not, depending on whom you ask.

The dueling answers were just part of the fun when we rounded up new year's predictions from a gaggle of Silicon Valley venture capitalists, finance experts and tech executives.

Prognosticators and crystal-ball gazers say big data will remain sexy; the mobile revolution will push further on; and more startups will rely on crowdfunding as venture capital firms steer further away from seed investments.

But whichever slice of technology you favor, you probably want to know if the IPO market can maintain the momentum gained in 2013, when more companies went public nationwide than at any point since the dot-com crash.

After all, a well-oiled stock offering can mint millionaires by the hundred, creating a ripple effect of wealth enjoyed by restaurateurs, gardeners, landlords and luxury car dealers.

Through Friday, there have been 222 initial public offerings of stock in the United States, according to investment advisory firm Renaissance Capital -- the most since 2000.

What's more, 45 of those stock offerings came from tech companies, the third-highest tally since that time.

While some pundits have worried about a new tech bubble, IPO expert Tim Keating of Colorado-based Keating Capital said the stock markets are still far from their dot-com peak. In 2000, he noted, there were 406 IPOs.

Keating and Jackie Kelley, who heads the American IPO practice for Ernst & Young, both think 2014 will see continued demand for stock debuts. The head of Silicon Valley Bank, though, takes a slightly more cautious tone.

"I have a hard time seeing how it will be a better year, because this was such a good year," said Chief Executive Greg Becker, whose firm lends money to venture-backed companies.

Becker also noted that the health of the IPO market depends a good deal on the broader economy.

Other experts focused less on the IPO slot machine and more on the underlying technologies that a new breed of companies hope will change the world. Among them:

"Big data" may have become one of tech's big buzzwords, but it's more than hype: The chief strategist of Mountain View software maker Revolution Analytics said big dollars are following the trend. With companies increasingly able to track and mine information about their businesses and customers, "The demand for data analysts will rise" in the new year, said Michele Chambers.

Universities are catching on, she added, and in 2014, a new wave of trained data scientists will begin entering the workforce. That could be good news for employers who've been scrambling to fill those jobs.

Jason Green of Emergence Capital Partners, a San Mateo venture capital firm that invests exclusively in cloud computing companies, said the rise of mobile and work-collaboration apps means big companies will put less emphasis on cramming employees into centralized campuses.

He expects spending on such applications to "rise sharply in 2014 to enable the virtual workplace." And Green and Krish Ramakrishnan, CEO of Mountain View videoconferencing startup Blue Jeans Network, both say Americans will turn increasingly to online meetings rather than face-to-face confabs.

Of course, the mobile revolution also creates new hazards, said Verisign co-founder David Cowan. He now specializes in cybersecurity investments at Bessemer Venture Partners in Menlo Park.

"There will be large scale malware attacks on smartphones," Cowan warned, along with bigger, nastier denial-of-service attacks on computer networks. "The U.S. will start to shift budget dollars from kinetic warfare to cyber warfare."

Cowan also said corporations and individuals will demand more encrypted email services and protections against data leaks. He attributed that to the "Snowden effect" -- the revelation by former National Security Agency contractor Edward Snowden that the NSA is hoovering up users' online and mobile data.

Patrick Chung, a partner at venture powerhouse New Enterprise Associates, agrees that l'affaire Snowden will lead to a "backlash against permanence," as users move away from sharing their lives publicly on Facebook and Twitter.

Chung is less sanguine about the rise of crowdfunding, which lets accredited investors -- and, once new federal rules are in place, nonaccredited ones -- pool their money into startups.

"Crowdfunding will be the new lottery," Chung fretted. "Now anyone can invest in the startups that are reported on breathlessly in the news ... regardless of whether people actually make money."

In part because crowdfunding makes it easier than ever to raise a seed round of capital, Ajay Agarwal, managing director of Bain Capital Ventures, said traditional venture firms will continue to phase out their seed investment programs. Pete Moran, a general partner at Menlo Park venture firm DCM, said that will just be part of an ongoing shrinkage in the venture capital ranks.

"Half of the major firms from 10 years ago will not raise another fund," he predicted, as the pension funds and endowments that invest in venture capital focus increasingly on a handful of proven winners.

Moran also offered the most unconventional prediction for 2014: Much as smartphones are increasingly used to transmit pictures and video, he believes, "Smell is coming to the mobile phone."

Contact Peter Delevett at 408-271-3638. Follow him at Twitter.com/mercwiretap.


For more stories covering the world of technology, please see HispanicBusiness' Tech Channel



Source: (c)2013 the San Jose Mercury News (San Jose, Calif.) Visit the San Jose Mercury News (San Jose, Calif.) at www.mercurynews.com Distributed by MCT Information Services


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