Start-up nation has been one way to describe the entrepreneurialism raging across the U.S. Start-ups from social-media and health care applications to cloud computing produce technology enabling industry developments. I caught up with Max Levchin, who co-founded Pay-Pal and has invested in some of the hottest tech names, including restaurant guide company Yelp, where he's chairman. Yelp is one of the few names in social media that's soared since hitting the market. I asked him what's behind the rise at Yelp and whether the tech euphoria is hype or sustainable. Our interview, edited for clarity and length:
Q: Why has Yelp been one of the few successful social-media IPOs?
A: It's one of the few companies that executed really well on what's become a recently-in-favor strategy of going local and conquering market by market, locale by locale, bringing a great service to communities. It takes a long time to deliver that quality of service to each city and town in America, but they've built up a great brand and really strong voice for the consumers and have a fabulous business procuring content. People bring the reviews themselves. It's the Yellow Pages that writes itself, and the value to the consumer, especially as a shift to mobile is occurring, is tremendous. You live in a new city or a new neighborhood or just (want) a new place to eat or a plumber to hire, you can pull out your iPhone, and within seconds, you have (an) immediate kind of a spectrum of what the locals think to be the best value for the money
Q: The mobility part of this is important. Yelp has done a better job in mobility than others. For example, people are questioning whether Facebook will be able to get the advertising dollars from mobile.
A: The scenarios are obviously perfect for mobile phones. If you're walking down the street looking for a spontaneous dinner spot, you're not going to drive home, get on the desktop computer and start typing in Google queries. You're going to pull out your phone and try to use whatever is the most appropriate app on your iPhone or your Android device. Yelp saw that very early on. And when we launched the mobile product, we saw immediate growth, and we were stunned. I've been developing mobile for years before anybody else really thought it was that important.
Q: Is mobility driving the euphoria in tech?
A: Mobile is the perfect example of what is enabling economic growth in the technology sector. The shift from desktop to mobile is probably one of the biggest, most important trends that has been going on globally for a while. The emergence of smartphones, and the versatility and the creation of convenience that generates, is enormously powerful. Years ago, you bought clothes in a store, and then one day you said, "I'm going to buy that on my desktop because that's more convenient." The same thing is happening now, where you're saying, "I don't have to wait until I get to my desktop. I have my smartphone with me. I can just buy it on this phone right now while I'm waiting in line for a sandwich." There's a tremendous amount of spending shifting from off line and desktop onto phones.
Q: There are 5 billion cellphones vs. 1 billion PCs. Of the 5 billion, only 1 billion are smartphones.