By Russ Britt, MarketWatch
Sarah Azad, a senior majoring in telecommunications at New York City College of Technology, meets with a recruiter at a job fair in April.
LOS ANGELES (MarketWatch) — If Wall Street is faltering as one of the nation’s critical wealth-building machines, where should the workers of tomorrow turn to find riches?
Venture capitalists would say the answer is simple: Go back to the future.
Information technology helped superheat the economy of the late 1990s, then seemed to fizzle out as a wealth builder when the dot-com bubble burst. But VCs say tech is resilient enough to make a comeback, and on less shaky ground.
Thousands of finance jobs in New York were destroyed in the recession.
Despite the upheaval, some are still seeking a career on Wall Street.
Changing of the guard
Which sectors are most likely to dazzle the next generation? MarketWatch
reports on where the most promise lies in a post-Wall Street world.
Commodities trading thrives as equities dive
Energy sector beckons entrepreneurs
Tech is the magic word for future jobs, VCs say
All signs are pointing a more mature technology industry as the next possible wealth builder in the U.S. If tomorrow’s college grads are looking for a Wall Street-style reward without the regulatory wrath, new job seekers may find hope in all those ones and zeros out there.
“I’ve had people say we’re in the early innings of an IT baseball game,” said Ray Rothrock, a partner in Palo Alto, Calif.-based Venrock and chairman of the National Venture Capital Association. “I think IT, broadly stated, is still the king of the hill [for growth].”
The examples are everywhere, VCs say. In the straightforward digital world, there’s the effort to transfer information to the “cloud,” an continuing struggle to digest increasingly massive volumes of digital data and the race to fill the ever-voracious appetite for smartphone apps and other forms of software.
But this is not your father’s dot-com nightmare, venture capitalists insist. VCs themselves have trimmed their ranks and now there are about half the firms there were at the height of the frenzy in the late 1990s. And the ever-widening tech universe learned its lesson from that era and continues to grow with the support of actual bottom-line performance — not just a promising business plan — to back it up this time.
Now when tech companies go public, they do so with healthy fundamentals, says Bill Gurley, general partner at Benchmark Capital in nearby Menlo Park, the Facebook Inc.
Wall Street: Where did the jobs go?
Columnist David Weidner says Wall Street lost its swagger after the 2008 crisis and takes a look at other sectors that have risen up to take financials’ place.
“With maybe one or two exceptions, a lot of these public companies are trading at 10 times EBITDA or 25 times earnings. They’re not wildly outside the market multiple any more than you’d expect,” Gurley said. “So we’re not seeing insanely crazy valuations across the board.”
When it comes to hot VC prospects that aren’t strictly tech, there still are numerous examples where Silicon Valley leaves its fingerprints. In health care, there’s a cottage industry forming to digitize hospitals and doctors’ offices. And as energy companies work to wean the U.S. off foreign oil, efficiencies are being found in extracting energy from the earth in a number of ways, courtesy of the digital revolution.
A check on all venture capital spending from Dow Jones VentureSource since 2008 shows that investment in various non-IT sectors dipped during the 2008-09 recession and rebounded by the end of 2011. Spending in most of those sectors, however, started to dip during 2012’s first quarter in a year-to-year comparison.
For information technology, spending trends were just the reverse. IT investment was off at the end of 2011 when compared with 2008. But IT was one of the few sectors to see spending go up in the first quarter of 2012 year-over-year.