MENLO PARK, CALIF.
Not so long ago, it seemed that the tech entrepreneurs who walked into Bill Ericson's office looking for money lacked one key piece of equipment. Along with their charts, graphs, and crisp folders, he suggests, they could well have used a combat helmet.
"It was like walking across a battlefield," says Mr. Ericson of Mohr, Davidow Ventures.
Indeed, Silicon Valley's story is, by now, a modern-day Homeric epic, writ across the austere friezes of Wall Street in diminishing red numbers. Once the engine of perhaps the greatest economic boom in American history, techies became the untouchable caste of the national economy, seemingly defined only by the unprecedented magnitude of its failure.
These days, however, Ericson is able to suppress a grin only with great effort. He cautions that he "isn't about to do handsprings," but then sets off on a verbal routine of gymnastic exuberance worthy of Kerri Strug. Good times may not yet be back, but optimism has returned to Silicon Valley.
No, the nascent tech rally in the stock market is not the second coming of million-dollar stock options and all-expense-paid business trips to Fiji - at least not yet, most here say. But it may well mean that the worst times are past, and that technology will no longer inhibit the national recovery.
Moreover, it is times like now, when scientists and entrepreneurs can fully turn their attentions toward a new generation of innovation, that the technological cornerstones for the next boom are laid. "Today, a lot of that noise [from the Internet boom] is gone," says Ericson. "It is an environment of stability ... where you can work toward building up a good idea." Adds fellow venture capitalist Allan Thygesen of the Carlyle Group in San Francisco: "It is no different from the first half of the 1990s."
In other words, maybe Dave Corbin can now leave the fatigues at home.
In the parlance of today's Silicon Valley, Mr. Corbin has a "real" company - one not built on sock puppets selling dog food over the web. He's working on a device that will better cool computer chips, allowing them to run hotter - and potentially three to four times as fast. Still, only a few months ago, he might as well have been asking for donations to the Saddam Hussein Relief Fund.
Today, by contrast, he is in high demand. Half of the 10 venture capitalists he went to for money said they were interested in his business, Cooligy. "The biggest difference is that when you call and say you've got this new idea, they say, 'Come in and let's talk,'" says Corbin. "A year ago, they were saying that they were not doing anything."
The change has come about so gradually that people are only now willing to talk about it. Everyone, after all, was seared by the Internet's spectacular immolation, and all go to great lengths to suggest that the beginnings of a turnaround do not mean a return to the excesses of the late 1990s.
A recent opinion poll found that only a modest 45 percent of respondents said business would be better in a year. But that was up from 35 percent in March, according to the poll by the Survey and Policy Research Institute at San Jose State University.
There are other positive signs as well. Top tech projects are increasingly getting bids from multiple venture firms, and the best are even going public. Meanwhile, the froth of the Internet boom has been skimmed away, and the companies that survived have become leaner, allowing them to turn a profit more easily - and improve their stock price.
Most important, though, American businesses have again begun to buy new technology.
At the deepest point of the tech collapse, the market for Steven Adams's new business software was almost nonexistent. No matter that it could lead to direct and significant savings by correctly calculating various taxes on any goods sold in any part of the world - eliminating chronic overpayments and underpayments. "Six or 12 months ago, you might have been able to show a return on investment, and it almost didn't matter," says Adams, chief executive of Sabrix Inc.. "[Today,] if you can go out and demonstrate a return on investment, you are able to sell it now."
For the foreseeable future, analysts say, tech's turnaround depends on this trend. Without a new "killer app" - a revolutionary technology that drives the market as the Internet did in the late 1990s - the technology industry will grow only when businesses expand their tech budgets again. "The single most influential thing will be when businesses start hiring again and need to buy new computers," says Martin Reynolds, an analyst at the Gartner Group in Stamford, Conn. "I expect to see the tech recovery after the rest of the economy."
After the endless plenty of the 1990s, that seems a dire forecast. To some, it has seemed a death knell. Larry Ellison of Oracle Corp. says he is trying to buy PeopleSoft Inc. because the Silicon Valley of old is gone. Technology is now a mature industry, he posits, and is no longer subject to booms and busts. Rather, the Silicon Valley of the future, he says, will be one of slow growth and consolidation - trends much more familiar to Dodge than Dell. Last year's merger between Hewlett-Packard and Compaq was a signal of the shift. Even Microsoft's recent decision to expense stock options was seen as an admission that it was a mature company that would no longer enjoy huge leaps in its stock price.
Drawing such conclusions out to the entire valley, though, strikes some as shortsighted. "Carly [Fiorina of Hewlett-Packard] and Larry [Ellison] are right in that the two segments they participate in are mature," says Steve Bird of Focus Ventures in Palo Alto, Calif., speaking of large business computer and software applications. "But there are a whole lot of things that can continue to grow."
Where that growth will come from is the question that fuels Silicon Valley. Some point to biotechnology. Others, like Mr. Bird, look toward advances in chemical and materials science. Or wireless networks. Regardless, though, most agree that it will look nothing like the Internet boom of the late 1990s. "We can't envision what's going to happen," says Bird.
Yet the fact that venture capitalists, after two years of triage, are again bending all their thought toward the next big thing, is a shift of national significance.
Perhaps as much as Madison Avenue or Wall Street, Sand Hill Road will shape the future of the economy. For decades, this Menlo Park thoroughfare has been the runway for the technology world, a strip of asphalt descending from the bald, maize-yellow knobs of the Coast Ranges, flanked by some of the most influential technology venture-capital firms.
Set back in a circle of beige brick buildings, framed by the pastel blue explosions of agapantha blooms and the sweet smell of star jasmine, sits the office of Mohr, Davidow Ventures. Ericson is not on the front lawn practicing his handsprings. But inside, he wins perfect scores for his enthusiasm.
Now, he says, Silicon Valley can return to what it has always done best: Innovation.
"[Recently] I have seen some of the most remarkable innovation since I've been alive," he says. "The people who are here are the people who want to be here, and it just feels a lot simpler."