Race for ‘next big thing’ in Silicon Valley

Silicon Valley’s annual coming-out season for tech start-ups is about to turn into a stampede.

In the next few weeks, the wraps will be removed from some 150 new companies and products at a handful of events in California competing to identify the tech industry’s Next Big Thing.

The race to find the Valley’s hottest new idea reflects growing investor interest triggered by the high prices paid for recent internet start-ups such as YouTube, as well as the increasingly fierce Darwinian struggle among the newcomers to get noticed.

The large number of companies formed around hot trends such as web search, social networking and online video has added spice to the importance of the autumn events, according to entrepreneurs and venture capitalists.

“At this stage of the frothiness, it’s extremely difficult to get attention,” says Munjal Shah, founder of Like.com, an image search engine.

“The capital cost of starting a business today is very low,” says Chris Shipley, producer of Demo, one of the first tech events. “We’re seeing a lot of ideas make it from the spare bedroom to a showcase or the marketplace very quickly.”

Like.com was the sole start-up featured two years ago at a party thrown by Mike Arrington, whose widely read TechCrunch blog has made him the Valley’s latest kingmaker.

For his first formal conference this month, Mr Arrington has just doubled the number of companies presenting to 40 because, according to his website, there are “just too many strong start-ups”.

Other events that hope to unveil hot companies and products in the coming weeks include the Web 2.0 conference, the event that gave its name to the latest wave of online innovation, and Demo, which has expanded to two events a year.

The scramble for attention is another symptom of Silicon Valley’s latest start-up boom. The amount of venture capital being invested in the US is at its highest level since 2001 and it has led to a rash of “me-too” companies.

The flood of copycat companies is a sign of the over-heated phase of the investment cycle, according to observers.

However, for most of those that make it to the big showcase events, the attention from being in the spotlight is likely to be fleeting.

Being named “the coolest, hottest thing” can produce a “drug-induced traffic high” as users rush to try out the latest websites.

Once that initial surge of interest falls off, the hard work of building a lasting business really begins.