"Signs" of a Bubble in Silicon Valley?

Zynga Billboard in South San Francisco

Is there a technology bubble?   That is the question everyone is asking in Silicon Valley.   Those who believe that there is a bubble point to the billboard advertisements along Highway 101 to support their case.  Their argument is that the last time we saw billboard advertisements from technology companies was during The Bubble in 1999.

Well, they are right about one thing: the tech billboards are back!  And, even more noteworthy is that many of these billboards are not even promoting products or services.  Rather, they are there to recruit new employees! 

At 8.3% unemployment, is there anywhere else in the United States that has a glut of billboard advertisements to recruit employees?  Below are a few of the many recruiting billboards in Silicon Valley.

Gree Billboard on 80W in San Francisco

Salesforce.com Billboard in San Francisco

Successfactors Billboard on 101 in San Carlos

So, back to the question.  Do these billboards suggest that we are in a bubble?  I don't believe so.  I think they highlight what an incredible period of innovation we are experiencing and that the bottleneck for growth is engineering talent. 

Are we seeing some of the same characteristics as The Bubble of the late 1990s?  Definitely.  There are too many seed stage companies receiving funding and mid-late stage valuations are often difficult to rationalize.  I suspect we will see some of those seed companies struggle to raise their next round and I believe the mid-late stage deals will cool off a bit.  But, I do think there are fundamental drivers that support the pace of innovation in Silicon Valley right now.   So, you might ask, "How is it different this time"?   I think there are two key differences:

1) Multiple Platforms Emerging
In The Bubble of '99, the primary catalyst was the emergence of one new technology platform called the Internet.  Today, we have THREE massive platforms that are emerging:

• Mobile Ecosystem - With the meteoric adoption of smartphones & tablets (700M will ship in 2012 = 2x PCs) and the emergence of the application economy (25B apps downloaded on Apple alone), an entirely new computer ecosystem is exploding before our eyes.   
• Social Media - Nearly every business, whether direct-to-consumer or enterprise-focused, is being impacted by the fact that there are a billion people actively participating in online communities using their real identities.   
• Cloud Computing - A massive IT upgrade cycle is underway as enterprises shift their infrastructure from in-house to cloud-based deployments.  Virtually every layer of IT infrastructure is being rewritten for this new paradigm.

2) Real Businesses Are Being Built
The main difference between Today and The Bubble of '99 is that there is serious end-customer demand for the products and services being created and there are effective revenue models with which to build a business.  As a result, the successful startups today have real businesses with growing revenue and a path to profitability.  In short, the companies currently paying for billboard advertisements are not startups with zero revenue, but rather successful and growing businesses.

In order to build products and services on top of the emerging platforms and to support the growth of their underlying businesses, startups need engineers.  It is engineers that build new products and, unfortunately, we don't have sufficient talent to fill those roles.   This is especially true when so many young engineers are choosing to launch their own startups rather than joining established companies.  At many of the companies I'm involved with, management's biggest concern and request for help is recruiting.  Talent is the constrained resource.  Hence, the rationale for the recruiting billboards.  

What do you think the billboards say about the Tech economy?  

P.S. Credit for the photos goes to another fantastic TaskRabbit.