May 2nd, 2003
watched you suffer a dull aching pain
Now you decided to show me the same...
Wild horses, couldn't drag me away
Wild wild horses couldn't drag me away"
- Rolling Stones,
in the Silicon Valley, a man with a long beard, no
hygiene to speak of and a long coat is holding a sign
that says, "Repent, the end is nigh."
four horsemen of the apocalypse have officially arrived.
After death (Sep 11), famine (drought) and war (Iraq) we
have plague (SARS). What's next... locusts?
is now well over three years since the horses started
out of the barn for the technology industry. The world
economy has suffered along with us in tech, but the
recent string of events continues to hamper any chance
of a recovery. If corporate IT buyers need any more
excuses to keep from opening their wallets, world events
like the SARS outbreak give them ample reason to sit
tight. SARS has been especially cruel to Canada and Asia
in terms of economic impact. Southeast Asia has
essentially shut down. Entire supply chains in
technology have been impacted and the only hot market
for IT customers has been quarantined. Economists are
tripping all over themselves to revise GDP growth
numbers in Singapore, Taiwan, China and our home and
native land. For those technology companies lucky enough
to have cultivated a channel into Asian countries (Japan
and Korea seem to be SARS free), and starting to see
good growth in revenue, this is a cruel turn of events.
Iraq war may have ended up being a lopsided battle, but
the work up to the war caused a whole quarter of grief
as spending was slow and confidence was low. The
expected surge of optimism after the war has been
dampened by SARS. Now that the first quarter is done,
what can we expect for the year? How will SARS impact
any hopes of growth?
all warnings and travel advisories given by pretentious
doctors in Geneva, I ventured to Toronto this week to
see the impact first hand (Actually, I was going there
anyway… It's not like I have an investigative travel
budget from T-Net!). As many of you have already guessed
or figured out for yourselves, this "epidemic"
is ridiculously overblown. The fear created by the
reporting of this disease is not present in Toronto at
all. I rode the subway, I shopped in the underground
malls, I sat for hours in the airport and I shook hands
with at least two dozen people. I even rode in a small
car with a man who had spent the better part of early
April in the Hospital for Sick Children for his
daughter's surgery. I have no fever and I'm not going to
sit in my house for 10 days upon my return. Most people
in Toronto acknowledge that the economy has been hit
hard, but they don't understand why the technology
business should grind to a halt. It is one thing to have
tourism decline and conventions cancelled, but quite
another to have a scheduled sales call or contract
negotiation delayed by this outbreak. Production,
development and manufacturing should not decline at all.
have spoken with two individuals living in Hong Kong and
one in Singapore in the past week (Did I mention that I
had no travel budget to go there myself?). They say that
the magnitude of the disease's effect is larger there
than in Canada, but it is still miniscule relative to
the population. Nevertheless, the precautions ordered by
the government have crippled the economy there. Unlike
Toronto, people are wearing masks, refusing contact
(like hand-shaking) and staying away from public areas.
Workers are not showing up at manufacturing facilities
and conventions have been cancelled. It is near-panic in
some places even though my contacts acknowledge that
they know no one who knows anyone who knows anyone that
has SARS. The business leaders seem to be resigned to
the fact that the next couple of quarters and perhaps
the whole year are a write off.
of my contacts in Hong Kong, a telecommunications
analyst, said that, although the actual number of cases
is low and the draconian tactics have appeared to slow
the spread, the lights are effectively off for at least
May and maybe June for any business there.
assessment is that Toronto is going to bounce back
quickly, especially from the good news coming out of
there this week. But Asia's (over?) reaction has been
very different and the economic impact there may be far
worse than the actual impact of the disease.
think the world economy (and hopefully Southeast Asia)
will bounce back too. Apocalypse be damned! There are
too many optimistic signs out there to ignore.
- Investor confidence in technology is back. After a
sustained rally since October, the NASDAQ is up 12%
this year already. When a poor economic indicator
shows up, investors come up with excuses as to why
the number is pessimistic (it was during March when
war fears were highest). Six months ago, the number
would have sent the market tumbling. Today,
investors give it the cold shoulder. The glass is
half full again.
- Earnings by companies in the first quarter largely
met or exceeded expectations. It was the first time
in a long time that people weren't moaning about
- A slew of recent CIO polls and IDC reports show
modestly improving sentiment for corporate IT
spending. I've seen predictions for anywhere between
1% to 4.5% growth in 2003. That's an improvement
since January, when predictions were between -1.5%
and 2%. In the US alone, that's $372B in spending by
enterprises large and small on technology. If it
grows at 4 - 5%, that number will be over $500B by
- In a completely un-scientific survey, I saw good
first quarters with expectations being met or
exceeded in about ¾ of the early stage companies
that we work with. Everyone is learning about new
expectations and capabilities needed to reach those
goals. It is a refreshing change from the last three
despite the rash of bad news and the "if it's not
one thing it's another" feeling you get when
something like SARS rears its ugly head, the outlook is
much better for the technology industry and the broader
The four horsemen are headed back to the barn. If I see
grasshoppers in my yard this summer, all bets are off.
From Last Time -
I had a flood of well-wishers and sympathies for Peter
Standeven and his family after eulogizing him last time.
Since I wrote the piece, I attended his memorial service
with a good number of my colleagues in the technology
industry, which was appreciated by Peter's wife and
kids. If you met Peter at some point and want to leave a
lasting note or thought for his family to read and
remember, please go to www.obituariestoday.com
and search for Peter Standeven. You can leave a brief
note and read others that are there.
What Do You Think? Talk
Back To Brent Holliday
Something Ventured is a bi-weekly column designed
to supplement the T-Net British Columbia web site with
some timely, relevant and possibly irreverent insight
into the industry. I hope to share some of the
perspective and trends that I see in my role as a VC.
The column is always followed by feedback (if its
positive or constructive. I'll keep the flames to
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