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North America 2016: Bubbles, unicorns and the presidency

Despite the undisputable fact that the technology-supported economy is globalising, there’s no doubt that California and the broader US remains the world’s biggest magnet for the tech business.

All over the world, technology hubs are cropping up and often prospering. Sometimes they mimic the Silicon Valley ethos, offering low taxes and other carrots and encouraging a nexus between venture backers, the media, financial services and more. Others specialise in certain vertical industries or technologies. All these models are valid and in recent years we’ve seen the emergence of many powerful new locations for technology: in Europe, for example, you can point to Paris, Berlin, London and Amsterdam.

But California, and especially San Francisco and the Valley, remains the capital of technology in the same way that, further south, Hollywood remains the centre for movie making. In fact, if it can be said at all that Silicon Valley is losing its grip on the tech industry, it would be to nearby San Francisco and the Bay Area.

What will most exercise the US tech scene in 2016?

There will continue to be pressure applied on Government to relax visa rules to allow the best engineering and other talent to enter the country, even if the current geopolitical unrest leads to a groundswell against immigration from some countries. To paraphrase the awful TV show though, America Needs Talent, and some of her richest citizens form a powerful lobby to keep borders open.

Another scrutinised area will be the stock markets and the IPO market. Both have been sending out confusing signals in 2015 and, even if the concerns have been going on for years now, there remains a healthy scepticism about the true value of both pre-IPO and public companies.

In publicly traded stocks, the halving in value of Nimble Storage after its most recent financial quarter could be interpreted as a sign of market nerves, as could the subsequent value reduction in its competitor Pure Storage. These are disruptive companies that had been marked up on their chances of besting the old-guard companies such as EMC, IBM, HP, HDS and NetApp. But instead they are now being cut: is this because of concerns over their ability to manage their businesses - or something broader?

As this article was drafted in late November, the great American tech bellwether IBM was bumping along near its 52-week low, as was one of this year’s most watched B2B market debutants, Box. The respective splitting of both HP and Symantec shows the drastic measures large tech companies are taking to remain competitive, as does Dell’s taking itself private and subsequent agreement to acquire EMC and its broad federation of businesses.

Dell and EMC will remain in the news for some time yet if none of the many sensitive issues derail the combination. This is truly an audacious move and it’s sheer scale and the private status of Dell and complicated status of assets like VMware, will make it a conundrum. Stand by to hear lots about the ongoing status of the merger in 2016… but you might need to be a lawyer or accountant to understand it all.

If the stock price of IBM makes the market sound downbeat, then there are plenty of exceptions. Apple and Google (or Alphabet – another interesting development) continue to have stratospheric valuations, Salesforce.com remains the icon of the cloud applications generation and Microsoft under Satya Nadella has rebounded strongly, as has SAP. The notion that technology should only be invested in when the economic times are good is well and truly a thing of the past. It might be that this recognition sees less turbulence in tech stocks in future.

As for the much-vaunted ‘unicorns’ – pre-IPO companies valued at over $1bn – the US has more than its fair share and calendar 2016 might well be the year when these companies, like the beasts after which they are named, prove to be mythical or at least harder to find in the wild. However, the uber-trends of sharing, subscriptions, cloud, social, mobile, analytics and security provide a broad and strong platform for newcomers to come in and make splashes.

Also of abiding interest and rammed with ramifications is the vexed question of the US tech companies’ relationship with Washington DC: 2016 should be a very interesting year as both sides talk over encryption and Safe Harbor in particular. And of course if Donald Trump were to become President of the United States, pretty well everything might change, not least the low interest rates some see as perpetuating the so-called bubble…

As for Canada, its tech stars have dimmed recently with BlackBerry withered and Open Text often overlooked. But Waterloo, Ontario continues to foster fine startup prospects as do other parts, notably Vancouver and Montreal. The likes of e-commerce firm Shopify, founded in Canada and floated in 2015, are leading a charge but perhaps even more interesting are those seeking to make broader changes to the environment and society at large, including peer-to-peer giving for-profit ChangeHeroes, outdoor equipment rental outfit ShareShed and compostable coffee pods maker G-Kup.

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Martin Veitch

Martin Veitch is Contributing Editor for IDG Connect

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