When greed of investors overcomes the sustainability of business built on new technology.
“Start-up fratricide” – the lemminglike drive of the venture community to create copies of a ‘hit’ company.
Brook Byers, Kleiner Perkins Caufield & Byers
Start-up fratricide isn’t exclusive to biotech.
The same thing happened in the late 1970s around the disk drive company successes. Venture investors saw the incredible return on the first disk drive companies and used that enthusiam to invest in dis drives, and in all of the suppliers to the dis drive companies, and consequently each step in the chain got overdon.
Craig Taylor, General Partner – Allow Ventures
Below is the concluding paragraph from chapter 20 of the book From Alchemy to IPO by Cynthia Robbins-Roth.
This same build-die cycle happens in all successful new sectors – it struck with a vengeance in the late 1990s with Internet companies. The first few companies made a huge impact by providing a truly novel way to do business. But they were quickly followed by ‘me-too’ companies that didn’t offer the same exponential growth in value. “how many companies does it take to supply you with pet food?” says Taylor. “Then all of a sudden, nobody is interested in any Internet companies because they have lost their edge and the real concerns about revenue growth become more obvious.”