You've been unusually prolific lately.
Could VC be a Casualty of the Recession?
31–40 of 152 posts
Re: Could VC be a Casualty of the Recession?
#32two points:
1. investors are entering a period of risk aversion that is just starting, and will likely last a decade or longer.
2. the next market, energy tech, will require funding on levels very few if any VCs can deliver (billions per investment). this is why the govt is likely going to be more pivotal in funding energy work through the DOE etc
Re: Could VC be a Casualty of the Recession?
#33Would be possible to build a google/facebook/linked-in all the way to profit without significant cash up front? Any business relying on network effects is going to need upfront cash. Since these types of business tend to become the fund-making "homeruns", I think VCs will stick around, doing what they are best at - chasing the big hit.
I'm pretty sure facebook was __started__ without significant upfront cash. Obviously they got to a certain point where they needed more, but the key thing is to have lots of momentum when you get there.
See, for example, digg.com. ~ $15 k upfront, $50k angel funding 6 months in, VC around month 10.
Re: Could VC be a Casualty of the Recession?
#34This is an interesting perspective, but it seems to be (potentially) true of one class of startup, but there are many others, requiring much large amounts of money to start, that will still rely on VC funding. Software startups, specifically web startups, have been a favorite of VCs (for good reasons). If those startups no longer seek VC funding, will it trigger a renaissance in funding for other startup classes (e.g…
Biotech, greentech and embedded systems are a few areas that look poised to keep growing and need a more significant amount of capitalization to get off of the ground.
but greentech will require more funding per instance than any VC firm will be able or willing to put up. show me the VC firm that is going to put over $1 billion into any single investment...when it comes to nuclear or hydrogen, a billion might only bootstrap the company. these industries are going to need massive amounts of funding. only one entity can do it - uncle sam, DARPA and the DOE
Re: Could VC be a Casualty of the Recession?
#35I would like to believe Paul's thesis, but in the back of my mind, why do I get the feeling "He is trying to scare investors into putting money"?! Seriously, I think over-supply of start-ups will crash prices. Yes, there is no limit to wealth creation, but even so, it is easy to upper-bound wealth creation over, say, the next 5 years. We can say with confidence there won't be more than, say, $10 billion worth of web…
If I were motivated only by self-interest, I should want later stage investors to drop out. That would leave seed stage investors like YC as the only game in town. And incidentally, I don't see why it's easy to upper bound wealth creation over any time period. If everyone woke up tomorrow and started working twice as hard, what would limit their output?
If everyone woke up tomorrow and started working twice as hard, what would limit their output?
demand and supply, as always
it is trivial for some hypothetical foobar corp to spit out twice as many widgets as they do now. but why would they? without viable demand, they indeed show a loss for their effort-spurt. as you heard the CEO of ford say today, oversupply was a major problem for the automakers. working twice as hard will kill you if you don't have twice the demand
the better question is how currency growth can be employed to stimulate demand over a period of time. growth comes from healthy inflation (3-5%). inflation is always a monetary phenomenon. this is why you will often hear opponents of "secured" currencies (gold etc) tell you that you can't get growth in an economy in the mid term unless you have a fiat currency.
Re: Could VC be a Casualty of the Recession?
#36Earlier quoted context omitted.
Biotech, greentech and embedded systems are a few areas that look poised to keep growing and need a more significant amount of capitalization to get off of the ground.
but greentech will require more funding per instance than any VC firm will be able or willing to put up. show me the VC firm that is going to put over $1 billion into any single investment...when it comes to nuclear or hydrogen, a billion might only bootstrap the company. these industries are going to need massive amounts of funding. only one entity can do it - uncle sam, DARPA and the DOE
when it comes to nuclear or hydrogen, a billion might only bootstrap the company.
One of the only giant LBOs that isn't a disaster area is the buyout of TXU. I would expect VCs to hand it off to PE guys if they had an asset that generated a steady, regulated cash flow.
Re: Could VC be a Casualty of the Recession?
#37Earlier quoted context omitted.
Biotech, greentech and embedded systems are a few areas that look poised to keep growing and need a more significant amount of capitalization to get off of the ground.
but greentech will require more funding per instance than any VC firm will be able or willing to put up. show me the VC firm that is going to put over $1 billion into any single investment...when it comes to nuclear or hydrogen, a billion might only bootstrap the company. these industries are going to need massive amounts of funding. only one entity can do it - uncle sam, DARPA and the DOE
There's a lot more to Greentech than energy or hydrogen fueling. Also note that most people don't consider nuclear power green. (Arguments of cleanliness aside, it's just usually one of the thing that green campaigners disapprove of.) My co-founder tonight met with the founder of greenvironment.com and I know that they're certainly not working in the billion-dollar range.
Re: Could VC be a Casualty of the Recession?
#38I would like to believe Paul's thesis, but in the back of my mind, why do I get the feeling "He is trying to scare investors into putting money"?! Seriously, I think over-supply of start-ups will crash prices. Yes, there is no limit to wealth creation, but even so, it is easy to upper-bound wealth creation over, say, the next 5 years. We can say with confidence there won't be more than, say, $10 billion worth of web…
If there's any truth to pg's claim that the paradigm is shifting and that talented people are increasingly likely to start their own thing than go work for a boss (and personally, I believe there is), then one would expect just the opposite of what you assume: more wealth should be created this way in the next 5 years than in the previous 5, because more value will be. And the productivity delta between startups and…
If there's any truth to pg's claim that the paradigm is shifting and that talented people are increasingly likely to start their own thing than go work for a boss (and personally, I believe there is)
no there isn't. come back in five years, the top ten internet companies will control 95% of all traffic and 99% of all revenues. this market has almost zero friction...how is it that google has already sewn up over 80% of ad revenues on the web? where are all the mom-and-pop ad networks? they're on deaths door
by the same token anyone can build a PC...so what happened to the 10,000 little PC makers that used to be in every strip mall? today we have basically three pc makers....hp, dell, apple. so much for "low barrier to entry = high res"
Re: Could VC be a Casualty of the Recession?
#39Earlier quoted context omitted.
Biotech, greentech and embedded systems are a few areas that look poised to keep growing and need a more significant amount of capitalization to get off of the ground.
but greentech will require more funding per instance than any VC firm will be able or willing to put up. show me the VC firm that is going to put over $1 billion into any single investment...when it comes to nuclear or hydrogen, a billion might only bootstrap the company. these industries are going to need massive amounts of funding. only one entity can do it - uncle sam, DARPA and the DOE
Perhaps we could see co-investments or investment pools by several VCs.
Re: Could VC be a Casualty of the Recession?
#40pg won't be getting a job at 37signals.