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There Are Two VC Industries

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Re: There Are Two VC Industries

#11

Post by eru »

david927 wrote: post #9
Swizec wrote: post #5

Earlier quoted context omitted.

But isn't it also true that "crowd-sourced, micro-equity" can easily be understood as, you know, SELL SOMETHING to SOMEONE? No giving up equity and you still get the "funding". The thing is, that's called bootstrapping and the problem with bootstrapping is that it's just very damn slow. Sure you can do it, but you won't get the anorganic super fast growth you need to compete against the whole world. It works when you…

But isn't it also true that "crowd-sourced, micro-equity" can easily be understood as [bootstrapping]? No. I'm talking about something else. Micro-equity means giving up a small amount of equity for a small amount of money. Instead of an angel getting 100,000 shares for 200,000 dollars, you get lots of investments of 50 dollars for 25 shares. Take a look here: http://www.me-vc.com

Yes. Too bad the legal framework isn't ready, yet.

Re: There Are Two VC Industries

#12

Post by T_S_ »

david927 wrote: post #4
krschultz wrote: post #3

There have been a bunch of articles about VCs being replaced by Angels and Bootstrapping, but really those articles should just be saying that software businesses have matured to the point where VC funding might not be necessary at all. At what point can I walk into a bank and get a normal business loan for my web app company? I think we're approaching that point. In my mind you can bootstrap the average web app comp…

But if a restaurant goes under, you have all the capital right there (pizza ovens, tables). Software consumes its capital. Banks aren't the answer. If it fails, what are they going to get back? That year of your life? What we need is crowd-sourced, micro-equity. Anyone who thinks an idea is good to invest small amounts for small stakes of equity. The barriers have been regulatory legal issues, but those will be soon…

If a restaurant goes under, whoever provided funding takes a big hit. Losses = value destroyed. Liquidation values on fixtures and equipment are low.

BTW, here's a good rule of thumb for investing in restaurants as a non-controlling partner: Don't. I never heard of a good ending, even if it was good for a while.

Re: There Are Two VC Industries

#14

Post by mjfern »

This article raises an interesting point. However, I would argue that the startup costs have fallen across the board, whether you're a software startup or a startup in another field. First, it's much less expensive today for startups to obtain key services due to the prevalence and availability of offshoring. Second, new technology enables many startups to handle some services in-house, whereas before it required hiring an expensive service provider (e.g., Google AdWords). Third, there is a shift in mentality towards a leaner, smarter mode of starting up. Founders no longer feel the need to obtain overhead that (a) requires substantial investment and (b) creates little direct value for customers. If I remember correctly, a story from the dot com bust was when eToys used some of its funding to BUY a high-rise office building in Los Angeles.

Re: There Are Two VC Industries

#17

Post by greg_holsclaw »

tspare wrote: post #8
Swizec wrote: post #7

Earlier quoted context omitted.

Working on a web startup in Europe the big majority of advice I get is saying "Go to the Valley". The thing is, in Europe, nobody takes web startups seriously yet. The web is still seen as something that neighbour kid does perfectly well. Why start a company based on that when some kid can do it for a fraction of the price and just as well? In the Valley, I hear, the attitude is a lot different and if nothing else th…

Yes I can see the value of an open attitude towards web startup would help you hire or partner. And if you are trying to solve a technology problem, you also have an easier time to reach your target customer (other techies). But if your web startup is not tech focused (i.e e-commerce, b2c), does the valley really help you any more in getting traction by growing your user base?

User based growth, I would say no, the valley doesn't help grow that base is not tech focused. But word of mouth exposure, and the possibility of doing face to faces with potential experienced engineers/managers that you want to join,

If you already have all the pieces for partners, and your user base is dispersed, and you don't need capital for growth, then headquarter somewhere cheaper than the Valley (housing and office space can be half to a third the prices you pay here).

Just look at zappos.com. They moved away from the Valley, partly to be in a customer service hub in Las Vegas, and partly because is was just play cheaper.

Re: There Are Two VC Industries

#18

Post by blasdel »

krschultz wrote: post #3

There have been a bunch of articles about VCs being replaced by Angels and Bootstrapping, but really those articles should just be saying that software businesses have matured to the point where VC funding might not be necessary at all. At what point can I walk into a bank and get a normal business loan for my web app company? I think we're approaching that point. In my mind you can bootstrap the average web app comp…

My parents did this when they started their software company in the early 80s.

It only happened because a group of their friends was starting a bank -- they got a sweetheart deal that included a mortgage for the neighboring apartments in the co-op they lived and worked in (later combined into one 1700 sqft apartment). My mother worked out a sweet tax deal where the business paid them rent on the office portion of the apartment, including the 'executive washroom' (complete with kiddie pool).

At some point in the 90s the bank got merged and acquired a dizzying number of times. I'm pretty sure the business loans got paid off before that, but the sweetheart mortgage remained.

Re: There Are Two VC Industries

#19

Post by blasdel »

T_S_ wrote: post #12
david927 wrote: post #4

Earlier quoted context omitted.

But if a restaurant goes under, you have all the capital right there (pizza ovens, tables). Software consumes its capital. Banks aren't the answer. If it fails, what are they going to get back? That year of your life? What we need is crowd-sourced, micro-equity. Anyone who thinks an idea is good to invest small amounts for small stakes of equity. The barriers have been regulatory legal issues, but those will be soon…

If a restaurant goes under, whoever provided funding takes a big hit. Losses = value destroyed. Liquidation values on fixtures and equipment are low. BTW, here's a good rule of thumb for investing in restaurants as a non-controlling partner: Don't. I never heard of a good ending, even if it was good for a while.

That's why realistic restaurateurs buy all their initial fixtures and equipment used from liquidation auctions :)

Re: There Are Two VC Industries

#20

Post by Swizec »

greg_holsclaw wrote: post #17
tspare wrote: post #8

Earlier quoted context omitted.

Yes I can see the value of an open attitude towards web startup would help you hire or partner. And if you are trying to solve a technology problem, you also have an easier time to reach your target customer (other techies). But if your web startup is not tech focused (i.e e-commerce, b2c), does the valley really help you any more in getting traction by growing your user base?

User based growth, I would say no, the valley doesn't help grow that base is not tech focused. But word of mouth exposure, and the possibility of doing face to faces with potential experienced engineers/managers that you want to join, If you already have all the pieces for partners, and your user base is dispersed, and you don't need capital for growth, then headquarter somewhere cheaper than the Valley (housing and…

Thing is, the valley has a really lovely concentration of early adopters. While there are lots of early adopters around here too, it's still different.

Like for example, we're making an iPad app. Just because we're from Europe we were a few months behind people from The Valley simply by virtue of the iPad becoming available much later.

No matter how much we try to hide from this fact, the web happens in the valley and "far from the eyes, far from the heart" rings all too true.

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