Understand seed round dynamics in Silicon Valley
thevalley.substack.com
Understand seed round dynamics in Silicon Valley
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Re: Understand seed round dynamics in Silicon Valley
#2This is a good articulation of the modern view of SV captial, but it is somewhat problematic.
In a nutshell, 'Round A' is now a form of scaling money. Early, but essentially: you need to build a product that the market really loves, before you get any substantial money.
It would seem that VC is really de-risked themselves, obviously to their advantage. This is somewhat the natural equilibrium in a world where it's easy to start some kind of companies with little effort.
However, there are always going to be a lot of initiatives that require some capital to make it work. This is of course, very dangerous territory for VC to play in (i.e. before Product-Market-Fit) but then, they do have 'Venture' in their titles.
It's to the point wherein we could start to consider Round B and later firms merely a slightly different form of Private Equity.
Is anything really that important going to be 'productised' for $500K-1M i.e. on seed money?
And really, it's interesting in that, if a company does actually have good product market fit ... traditional VC terms might seem a little expensive.
Re: Understand seed round dynamics in Silicon Valley
#3This is a good articulation of the modern view of SV captial, but it is somewhat problematic. In a nutshell, 'Round A' is now a form of scaling money. Early, but essentially: you need to build a product that the market really loves, before you get any substantial money. It would seem that VC is really de-risked themselves, obviously to their advantage. This is somewhat the natural equilibrium in a world where it's ea…
That doesnt jive with the string of spectacular silicon valley blowups recently. Hype seems to be just as good a substitute as product market fit. And it seems that derisking unit economics to show you can be profitable doesnt matter at this point if you've got a bunch of "growth"
Re: Understand seed round dynamics in Silicon Valley
#4This is a good articulation of the modern view of SV captial, but it is somewhat problematic. In a nutshell, 'Round A' is now a form of scaling money. Early, but essentially: you need to build a product that the market really loves, before you get any substantial money. It would seem that VC is really de-risked themselves, obviously to their advantage. This is somewhat the natural equilibrium in a world where it's ea…
That doesnt jive with the string of spectacular silicon valley blowups recently. Hype seems to be just as good a substitute as product market fit. And it seems that derisking unit economics to show you can be profitable doesnt matter at this point if you've got a bunch of "growth"
For example?
Having massive customer traction and 'blow up growth' is a valid form of customer interest, what matters is the post-blow up economices.
Uber, WeWork etc. will all make money for investors in the long run.
The concern is that there is zero real R&D or product development spending.
Re: Understand seed round dynamics in Silicon Valley
#5Earlier quoted context omitted.
That doesnt jive with the string of spectacular silicon valley blowups recently. Hype seems to be just as good a substitute as product market fit. And it seems that derisking unit economics to show you can be profitable doesnt matter at this point if you've got a bunch of "growth"
For example? Having massive customer traction and 'blow up growth' is a valid form of customer interest, what matters is the post-blow up economices. Uber, WeWork etc. will all make money for investors in the long run. The concern is that there is zero real R&D or product development spending.
I work in early stage product startups.
What R&D do you need? CRUD is solved, hosting is solved, UX is solved, scaling is solved, marketing is solved ...
Everything to do with web and mobile is very solved at this point. Most problems come from tripping over ourselves and cobbling things together to fit new domains.
All real hard R&D happens inside faang these days. At least for web/mobile consumer stuff.
Re: Understand seed round dynamics in Silicon Valley
#6Earlier quoted context omitted.
For example? Having massive customer traction and 'blow up growth' is a valid form of customer interest, what matters is the post-blow up economices. Uber, WeWork etc. will all make money for investors in the long run. The concern is that there is zero real R&D or product development spending.
I work in early stage product startups. What R&D do you need? CRUD is solved, hosting is solved, UX is solved, scaling is solved, marketing is solved ... Everything to do with web and mobile is very solved at this point. Most problems come from tripping over ourselves and cobbling things together to fit new domains. All real hard R&D happens inside faang these days. At least for web/mobile consumer stuff.
>What R&D do you need? CRUD is solved, hosting is solved, UX is solved, scaling is solved, marketing is solved ...
If you don't need R&D, doesn't that mean your competitor also doesn't need R&D? Where's the moat?
Re: Understand seed round dynamics in Silicon Valley
#7Earlier quoted context omitted.
I work in early stage product startups. What R&D do you need? CRUD is solved, hosting is solved, UX is solved, scaling is solved, marketing is solved ... Everything to do with web and mobile is very solved at this point. Most problems come from tripping over ourselves and cobbling things together to fit new domains. All real hard R&D happens inside faang these days. At least for web/mobile consumer stuff.
>What R&D do you need? CRUD is solved, hosting is solved, UX is solved, scaling is solved, marketing is solved ... If you don't need R&D, doesn't that mean your competitor also doesn't need R&D? Where's the moat?
Moat is having unique insight into the problem/domain.
No moat anymore in terms of “We can build a webapp faster than you can”
Re: Understand seed round dynamics in Silicon Valley
#8Earlier quoted context omitted.
For example? Having massive customer traction and 'blow up growth' is a valid form of customer interest, what matters is the post-blow up economices. Uber, WeWork etc. will all make money for investors in the long run. The concern is that there is zero real R&D or product development spending.
I work in early stage product startups. What R&D do you need? CRUD is solved, hosting is solved, UX is solved, scaling is solved, marketing is solved ... Everything to do with web and mobile is very solved at this point. Most problems come from tripping over ourselves and cobbling things together to fit new domains. All real hard R&D happens inside faang these days. At least for web/mobile consumer stuff.
"Everything to do with web and mobile is very solved at this point."
"640K ought to be enough for anybody." - Bill Gates 1981 (or supposedly.
So there is a long way to go in all of these areas, and there is even a longer way to go in adjacent areas, and we're not even touching all the other things startups can do - you know - the other 95% of the economy?
Healthcare, biotech, materials, energy, construction, auto, food services. You know 'everything that's not your iPhone'.
If VC were structured differently I think we'd have a solution to hair loss and possibly sagging skin by now. Those two markets are worth 2x Google and Apple put together. People will pay for their 'youth' before they give 2 cents for a mobile phone. As the tip of the iceberg.
Re: Understand seed round dynamics in Silicon Valley
#9Earlier quoted context omitted.
I work in early stage product startups. What R&D do you need? CRUD is solved, hosting is solved, UX is solved, scaling is solved, marketing is solved ... Everything to do with web and mobile is very solved at this point. Most problems come from tripping over ourselves and cobbling things together to fit new domains. All real hard R&D happens inside faang these days. At least for web/mobile consumer stuff.
>What R&D do you need? CRUD is solved, hosting is solved, UX is solved, scaling is solved, marketing is solved ... If you don't need R&D, doesn't that mean your competitor also doesn't need R&D? Where's the moat?
There are many moats to businesses, often they are not dervied from tech. Most monopolies are operationally incumbent. Amazon (just the retail part) doesn't have any truly special tech, but reams of know how and operational competence with scale.
Re: Understand seed round dynamics in Silicon Valley
#10Earlier quoted context omitted.
For example? Having massive customer traction and 'blow up growth' is a valid form of customer interest, what matters is the post-blow up economices. Uber, WeWork etc. will all make money for investors in the long run. The concern is that there is zero real R&D or product development spending.
I work in early stage product startups. What R&D do you need? CRUD is solved, hosting is solved, UX is solved, scaling is solved, marketing is solved ... Everything to do with web and mobile is very solved at this point. Most problems come from tripping over ourselves and cobbling things together to fit new domains. All real hard R&D happens inside faang these days. At least for web/mobile consumer stuff.
Okay, so that's not all startups, as it turns out. Some of us are actually solving hard technical problems -- the FAANGs aren't actually solving all problems. Yes, it's different to raise a hard-tech seed, but let us please not pretend that just because you yourself don't do it, that those of us who do don't exist...