Structure News: The end of the easy money in tech

Where Life Is Just A Party And Parties Weren't Meant 2 Last April 22, 2016 / by Tom Krazit This week, we'll talk about Mesosphere's new open-source project, the death of a tech industry legend, and perhaps the strongest warning yet that winter is coming for Silicon Valley. STRUCTURE NEWS THE STRUCTURE SHOW: IBM'S SLOW DECLINE, MESOSPHERE'S OPEN-SOURCE FUTURE, MAGIC LEAP'S PROMISE Stacey Higginbotham joined me this week on the Structure Show to discuss the most eclectic group of topics we've yet tackled on the show. We cover IBM's earnings, Mesosphere's big open-source announcement of DC/OS (more on that in a bit), and the drip-drop of information that is being carefully parsed out by Magic Leap, a company which appears to be on to some interesting advancements in virtual reality -- assuming it ships. Check out Wired's big profile of Magic Leap -- which is extremely interesting but short on details -- for a look inside the company.   INDUSTRY NEWS HACKING TEAM'S "ILLEGAL" LATIN AMERICAN EMPIRE The Hacking Team is quite controversial within security circles for its business model: finding exploits to sell to surveillance-minded governments around the world. Motherboard has a great look at how the company operates in Latin America, which while it might be "legal" in some countries certainly is raising a lot of eyebrows. IBM'S PAINFUL TRANSITION IS FAR FROM OVER IBM kicked off tech report card season with a typical performance of late: overall revenue was down slightly as the company sought to emphasize that revenue from "new" business lines was healthy. Quartz highlights the fact that while the hundred-year-old company is certainly not facing its first technology transition, this one could be difficult to execute. REMEMBERING BILL CAMPBELL Silicon Valley adores its technology visionaries, yet the death this week of Bill Campbell, former Intuit CEO and consigliore to some of the most significant tech entrepreneurs of the last two decades, made it clear how much the Valley knows it needs a human touch. Fortune's Adam Lashinsky had perhaps my favorite look back at the impact Campbell had on the tech industry (with props to one of his best accomplishments, saving the Old Pro sports bar in Palo Alto). INTEL TO CUT 12,000 JOBS AS PC DEMAND PLUMMETS Intel has figured out how to survive in the cloud era, as its datacenter group continues to grow, but the mobile era continues to be a huge problem for the venerable chip maker. The New York Times reports that 12,000 people (11 percent of Intel's workforce) will lose their jobs as Intel tries to make the same painful transition IBM is going through to a new era of computing in which it doesn't hold all the cards. THE INEVITABLE: MESOSPHERE OPEN SOURCES THE MESOS-BASED DATA CENTER OPERATING SYSTEM The rise of containers has created a ton of flexibility for application developers, but at the cost of increased complexity across data centers. Mesosphere believes it can help companies better address those complexities by open-sourcing its DC/OS product and giving developers one more reason to use it over other open-source container management products, according to The New Stack. WHAT MY THREE YEARS AT NETFLIX TAUGHT ME ABOUT SCALING A STARTUP We've often looked at Netflix's growth -- entirely on Amazon Web Services -- as a prime example of how to scale a modern consumer web startup. Writing in Fast Company, former Netflix engineer Ariel Tseitlin explains how Netflix made the transition to the cloud and some tips for success should you find yourself in a similar place.   BIG PICTURE Earlier this year, rumblings began that the tech sector was headed for a bit of a cooling-off period, as several cloud startups and public companies alike stumbled and venture capitalists put their wallets away for the first time in several years. Since then, the market has rebounded a bit and good companies have continued to get funded, but veteran Silicon Valley investor Bill Gurley fired a warning shot across the bow of any so-called "unicorns" who haven't figured out that business cycles have both an up and a down. It's a must-read for any founders, employees, investors, or observers of tech startups created in the last eight years. Gurley lays out a case for how a growth-at-all-costs mentality has hurt founders and investors alike, because now that the funding environment has changed, it's harder to justify burning cash without a real plan for profits. Those of us without a direct stake in many of these companies have been pointing this out for years, and I had to chuckle at the speed with which this post became gospel in just 24 hours; although to be fair, Gurley has been sounding this alarm for a long time. At some point in a business cycle, it no longer becomes cool to lose money while chasing growth: there are only so many companies that can win that race before running out of cash. And when big tech companies are scuffling a bit -- Intel's layoffs aside, both Google and Microsoft reported disappointing earnings results this week that hit both their stocks -- the exit path becomes a little trickier for startups that don't have the business model to go public. The easy money in this cycle appears to have come and gone, replaced by what Gurley calls "dirty" deals that protect late investors at the expense of founders and (especially) startup employees. Most startups in the Structure universe, by virtue of their enterprise computing bent, haven't been quite as susceptible to this grow-grow-grow culture because their customers demand stable suppliers. But Gurley's post is another reminder that 2016 might be the most difficult year for fund raising since 2008 or 2009, and if you're not getting busy preparing for that fact, get busy dying. Image courtesy Flickr user Philippe Teuwen       DISCOVER MORE   Click here to unsubscribe from this list. Our mailing address is: Structure 405 El Camino Real, #215 Menlo Park, CA 94025 Add us to your address book Copyright (C) 2016 Structure All rights reserved. Forward this email to a friend. Update your profile.