Patterson Cycles in Technology:

I talk a great deal about startups, especially tech startups, entrepreneurs and entrepreneurial communities. As I talk I often speak of cycles in the tech startup world and technologies. When people ask about the cycle of tech startups and tech funding my answer is often confusing to them because they are unfamiliar with what I talk about. I like to mention the Patterson Cycle to them; this post seeks to address some issues with the Patterson Cycle.

Arthur Patterson postulated that the tech industry follows an approximate 14 year cycles - 8 years of growth and 6 years of "retrenchment". This pattern has held up since the 1960s. Most likely the current cycle began in 2000/2001 (6 retrenchment years) and will last until 2014. The best time for VC returns are supposedly at the end of the cycle (the next 3 years).

Every cycle has both a supply and demand cycle. In the case of this one, it is the supply side (availability of great new companies) which determines timing, despite the attention the demand side (investor money sloshing around chasing higher returns) gets. The underlying secular forces of creative destruction are at work at the bottom of the Information Technology stack -eg 30% per year productivity increases for semiconductors, fiber optics, software development methodologies, etc. Observably, these secular forces require about 14 years to obsolete the existing order and set the stage for most of the great companies (and IPOs) of the next generation. We'll see hundreds of these companies pace the "new bubble" for the next few years. Enjoy it and hope no macro events (the government) interrupt. -Arthur C. Patterson

http://www.accel.com/bio/arthurpatterson.php