What the hype cycle really means for investors is that if you get in early, you have to be prepared for a hard fall. Those who get into the cycle, don't fall in love with the space, and get out quickly, like Mark Cuban did with Broadcast.com in the 1990s, can come out billionaires. Those who don't, like David Weatherell of CMGI, now ModusLink ( MLNK), can lose billions. Since Gartner came up with its chart I've seen countless hype cycles. There was a broadband boom, there was hype around the Internet of Things, there was a health IT boom and one around open source. In each case there was something real, but nothing like what the hype promised. In some cases the hope has yet to be realized. All of which brings me to "the cloud."
Where the hype cycle really has an impact is on closing the door to new competitors, shutting off their financial oxygen. Piston Cloud, for instance, with its cloud stack you can load from a memory stick, or Nebula, with its $100,000 cloud box, may not get the prominence they might otherwise because they're just late to the party. They will have to prove themselves. The hype cycle has a purpose. It's designed to attract capital to places that need it. It can deliver spectacular returns to those who know how to ride the wave. But to ride it you have to time the market, getting out while the getting's good, or you have to be there for the long haul and wait for the cycle to crest before you invest a dime. At the time of publication, the author was long DDD, RHT and GOOG. Follow @DanaBlankenhorn This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.