NET RESULTS:There is a palpable sense of optimism as home sales strengthen and IPOs start up again

AFTER SPENDING a week back with family in Silicon Valley, I could feel the change in the air – things are getting decidedly upbeat.

It’s been comparatively gloomy in the region for a number of years, with the valley never quite regaining the momentum and excitement prevalent in the 1990s.

Following the dotcom bust, venture investment has been harder to find, and unprecedented job losses in the tech sector have sent many scurrying out of the region.

But there is a palpable sense of optimism right now.

For one, home sales and prices are strengthening in some parts of the valley. Recently, a house in the hilly Sharon Heights area near Stanford – “and not even one with a very nice view”, according to my ever-practical mother – lasted all of two days on the market before being snapped up, for cash, by (but of course) someone working for Google.

Once the domain of retirees, most of the homes in that area in the past decade have been sold to 30-something couples at management level in technology companies. They’ve brought young children back into quiet neighbourhoods that were also filled with families when I went to school in the region long before the dotcom era, when no one used the term “Silicon Valley”.

The big story in home purchases during the week I was there focused on Facebook founder and chief executive Mark Zuckerberg, who nabbed a $7 million house in Palo Alto.

Local media were thrilled with the idea that the 26-year-old had made the transition from renter to homeowner – a big moment for any first-time buyer. Most of us thankfully do not have to endure this kind of forensic picking over of our purchase details in public. Five bedrooms! A salt-water pool! A “music alcove”! And only a 10-minute drive from the enormous new Facebook HQ on the former Sun Microsystems campus!

Yes, the Zuckerberg purchase gave a little extra lift to local housing market news, but the general optimism in the region is really embedded more in the sense of expanding business prospects. In part, it’s because the valley loves the smell of IPOs (initial public offerings) in the morning. After a very long night, in which there has been only a modest number of technology company initial public offerings in recent years – and certainly nothing remotely like the dramatic years at the end of the 1990s when the word Nasdaq was an aphrodisiac – some significant companies are queuing up to make their public debut.

You’ve probably read that technology “most valuable player” list ad nauseam in the news in recent months: Facebook is of course the heavy hitter, and others include Zynga, Groupon, and LinkedIn.

LinkedIn is stepping up to the plate with a relatively modest share offering valued at 12 times current sales, which many are taking as a sign of caution just in case social media company valuations may be vastly overhyped.

For comparison, consider the shares of Chinese social media company Renren, which went public recently with shares offered at a whopping 78 times sales.

But LinkedIn’s multiple of 12 is hardly modest. As Reuters noted this week, giants such as Google and Yahoo are trading at four to five times sales.

As with web companies in the dotcom era, it’s difficult to get any real handle on what social media companies are truly worth. The valuations often cited in the media now, pre-IPO, are based on values of shares traded privately in frothy secondary markets.

Still, the fact that some of these companies are lining up for IPOs has generated a long missing sense of excitement in the valley, and the hope that these debuts will seed the market for further IPOs from smaller companies.

That might be misplaced optimism, though. The San Jose Mercury-News has noted that the share market has changed with the advent of home traders and new regulations, making the environment less conducive for small-company IPOs.

And an April report by visiting scholar at the University of California, Berkeley, Vivek Wadwha, may be even more worrying, indicating that many Chinese and Indian entrepreneurs in the valley are returning to their home countries to found companies, seeing more opportunity in those high-growth markets. That’s a worrying trend for a region in which more than half of companies in past decades were started by immigrants, mostly Indian and Chinese, according to an earlier study by Wadwha.

Given the special confluence of factors that make up the valley – which many countries (including Ireland) have tried and ultimately failed to duplicate – there’s probably no fear that the region will lose its pre-eminence in the tech sector anytime soon. But it may be the world has changed in ways that mean the boom days of the 1990s will never return.