San Francisco Advantage

Controversial Venture Capitalist Warns of Tech Bubble 

by Monica Villavicencio, Office of Marketing Communications

Billionaire venture capitalist Tom Perkins delivered a harsh prediction to the city’s legions of aspiring entrepreneurs at USF on April 28: The current tech boom is a bubble.

“If you want a pep talk, you’ve come to the wrong place,” Perkins told an audience of more than 300, mostly School of Management students. “I see some real storm clouds.”

Ghosts of the dot-com bus

Perkins is the founder of Kleiner, Perkins, Caufield & Byers, widely recognized as one of the most established Silicon Valley venture capital firms. He’s funded more than 150 start-ups that went public, including Genentech, Google, and Amazon.

In 40-plus years in the industry, Perkins has seen his share of booms and busts. The frenzy behind the current wave of start-ups — into which venture capitalists poured $30 billion last year — reminds him of the 2000 dot-com bubble, when all you needed to do was set up a website and the money would pour in.

Today, it’s all about apps like What’s App, a messaging service for smartphones, which Facebook recently purchased for $19 billion. “What’s App has no income,” he said. “Maybe something is out of whack there.” 

“Kids are dropping out of MIT  (Massachusetts Institute of Technology) to do startups, but they’re not starting companies, they’re writing software code,” he warned. “There are millions of apps out there, but there’s a huge difference between a product and a company.”

Advice for would-be entrepreneurs

Among his best advice for would-be entrepreneurs: Learn how to build a company by working for one that’s well run.

And if you have a start-up and are pitching your idea to venture capitalists? “Take some of the blue dye out of your hair, some of the metal (piercings) from your face, and wash your hoodie,” he advised, only half joking about Silicon Valley’s casual business environment. “We didn’t interview Steve Jobs and the Apple people because they looked like rats.”

Though, he added, that was clearly a mistake.

Perkins is known not only for his business savvy but also for courting controversy. Earlier this year, he wrote a letter to the Wall Street Journal comparing the war on wealthy Americans to Nazi attacks on the Jews before the Holocaust. His letter sparked a firestorm. 

Perkins’ talk was sponsored by the School of Management.

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