This story appears in the July 20, 2014 issue of Forbes. Subscribe
Venture capital in Silicon Valley got going around the same time. Kleiner Perkins Caufield & Byers began in 1972. It went on to fund
The technology/venture capital partnership has been pure gold. It has made Silicon Valley a champion in the global economy. The Valley has suffered busts--notably the 2000–02 dot-com crash--but mostly it's leaped from boom to boom, thanks to this powerful pairing.
So which technologies are Silicon Valley venture capitalists backing today? My FORBES colleague Bruce Upbin and I recently moderated a panel on funding trends with top Valley VCs.
--Enterprise IT will be radically transformed. Incumbents, such as IBM, HP, Cisco and Oracle, are going to face new competition from startups that will bring gamelike software to accounting, inventory management and logistics.
--Commercial banks will suffer a relative decline. Peer-to-peer lending models à la the Lending Club will snatch traditional banking's customers.
--Digital home networks that link everything from televisions and telephones to heating and air-conditioning systems will become common.
But there's a dark side. Digital home networks will be a hacker's paradise. Teenage pranksters won't call your home to ask if your refrigerator's running. They'll hack into your home network to turn off your refrigerator. Professional hackers will probe your home network for credit card and banking passwords. Therefore, home digital security will become a big business.
--The health insurance industry will be seriously disrupted by employers. Most companies with more than 500 employees will self-insure. They'll use technology networks to eliminate physician networks and payment systems. The future can be seen at Stanford Medicine, which contracts directly with many Silicon Valley companies.
--Tiny technology and big data will transform health diagnostics and treatment courses. Like in a scene out of the 1966 sci-fi thriller Fantastic Voyage, a patient will swallow or be injected with a tiny chip. The chip will relay huge amounts of microbiomics (the study of the interlocking systems of human cells and microbial life in our bodies) data. This will be analyzed by doctors and reviewed by analytics engines so that a diagnosis and treatment plan can be made.
--The "last-second economy" will continue to grow. An already successful example of this is Uber, the car-ride service that's reachable via a mobile phone app. More and more products and services--even physician services--will be priced based on the Internet's real-time auction price.
--Spot pricing for health care procedures will become the norm. Consider MRIs. The cost of a new MRI machine is around $2 million, yet it's typically used from 9 a.m. to 5 p.m. Why not create a market for discount MRIs scheduled during off-hours--for example, 50% off at 11 p.m. or 80% off at 3 a.m. This is coming, say the VCs.
--A woman entrepreneur (relatively rare in the Valley) will start a company with a $50 billion exit plan (either as an initial public offering or an acquisition). That would make it Facebook-size. But would this be a first? Cisco was started in 1984 by Sandra Lerner and Leonard Bosack, who at the time were married. It reached a market value of $555 billion in early 2000, so in a sense this has already happened.
--Smartphones will be slimmer, lighter. Credit cards will become smarter and have apps, just like cellphones. The war to dominate your wallet has started.
Silicon Valley venture capitalists are investing in these ideas today. That means the VCs expect these ideas to gain traction within five years and make money within ten. Stay tuned.
