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Could VC be a Casualty of the Recession?
41–50 of 152 posts
Re: Could VC be a Casualty of the Recession?
#42Earlier quoted context omitted.
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?
Why would you want later stage investors to drop out? You have early, cheap equity; don't later stage investors reset the valuation and give you a shot at cashing out if you want? (I really don't know, I'm actually asking).
The valuation goes up between us and a series A round, but in a successful startup it should go up much more afterward.
Re: Could VC be a Casualty of the Recession?
#43Earlier quoted context omitted.
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…
What limits demand for cars is that people can't afford them, not that they don't want them. But since by my assumption everyone is working twice as hard, including the buyers, there should be demand to match the supply.
Re: Could VC be a Casualty of the Recession?
#44I 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…
There might be a limit, but it's much bigger than $10B in 5 years. Just in 2007, I counted up $29B of publicly announced web startup acquisitions. That easily justifies thousands of startups trying for a piece of that pie.
A good list (including more than web) is at http://startup.partnerup.com/2008/01/02/2007-acquisitions-we...
Re: Could VC be a Casualty of the Recession?
#45The startup I work for just hit profitability and we're basically giving up on funding. The offers that we were getting weren't good enough. We'll grow slower, but we won't get dilution unless it's really worth it. What I'm curious about is that I thought the purpose of VC was not just to stay in business, but to grow fast . I'm pretty sure PG said in a previous essay or comment that if you skip out on VC and someone…
It's true that it can be dangerous not to take VC if your competition takes it. But it's not so dangerous if the reason you don't take it is that VCs are saying no to everyone, because that implies your competitors are also less likely to get it.
Re: Could VC be a Casualty of the Recession?
#46"we got a record number, up 40% from the same cycle a year before." I agreed with much of this article, but not that line. A lot more people have heard of YCombinator since a year ago, so all else equal, you'd expect applications to rise over that period. So comparing the number of apps with the corresponding value from a year ago isn't a fair comparison. Indeed, looking at http://siteanalytics.compete.com/ycombinato…
Perhaps I should have added that 40% was more than applications usually go up year to year.
I'm pretty sure, based on conversations with founders, that this spike in applications wasn't due to people learning of our existence for the first time. Most people we interviewed seemed to have known about us for a while.
I don't think application numbers are much correlated with News.YC traffic either. I think most people who come here are just looking for what people found at Reddit 3 years ago.
Re: Could VC be a Casualty of the Recession?
#47Earlier quoted context omitted.
Why are you focusing on acquisitions? There are profitable companies that remain private, like 37signals (plus ones you never hear about because there's no point in talking about how much money you make) and also IPO, which is rare but potentially huge. Google alone is worth $86B, at that IPO was only 4 years ago, so your "$10B in the past 5 years" number is clearly incomplete.
If your thesis is correct, then these are really the ones that need focusing on. If the world is about to be be bombarded with startups, they can't all be bought or go to IPO. The remaining startups will need to find a middle ground of some sort.
I don't think there's any limit to the number that could get bought. The upside that founders are willing to trade in exchange for safety is an opportunity that would call acquirers into being if they didn't already exist.
And why couldn't there be 100 or 1000 times as many public companies? Stranger things have happened in history.
Re: Could VC be a Casualty of the Recession?
#48Earlier quoted context omitted.
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…
What limits demand for cars is that people can't afford them, not that they don't want them. But since by my assumption everyone is working twice as hard, including the buyers, there should be demand to match the supply.
no, the demand does not manifest itself spontaneously. people just don't decide to wake up and work twice as hard, there has to be legit economic growth. there is a monetary role. its no coincidence that "healthy" economic growth conforms to healthy monetary growth. this directly addresses your point of people wanting cars but not being able to afford them. this demand could be trivially induced artificially by monetary means, but it would lead to unhealthy inflation
monetary cycles typically manifest over an eighteen month period. i.e. the increase or decrease in Fed policy would impact demand directly likely no less than a year. the only way to dramatically alter this...i.e. to actually get people to wake up and work twice as hard takes drastic currency action.
this is all undergrad economics
Re: Could VC be a Casualty of the Recession?
#49Earlier quoted context omitted.
If your thesis is correct, then these are really the ones that need focusing on. If the world is about to be be bombarded with startups, they can't all be bought or go to IPO. The remaining startups will need to find a middle ground of some sort.
I don't think there's any limit to the number that could get bought. The upside that founders are willing to trade in exchange for safety is an opportunity that would call acquirers into being if they didn't already exist. And why couldn't there be 100 or 1000 times as many public companies? Stranger things have happened in history.
"And why couldn't there be 100 or 1000 times as many public companies? Stranger things have happened in history."
They would need to be smaller or the economy would need to be bigger. Ties in with your other essay.
Re: Could VC be a Casualty of the Recession?
#50Earlier quoted context omitted.
If your thesis is correct, then these are really the ones that need focusing on. If the world is about to be be bombarded with startups, they can't all be bought or go to IPO. The remaining startups will need to find a middle ground of some sort.
I don't think there's any limit to the number that could get bought. The upside that founders are willing to trade in exchange for safety is an opportunity that would call acquirers into being if they didn't already exist. And why couldn't there be 100 or 1000 times as many public companies? Stranger things have happened in history.
There could be 100 times as many U.S. public companies while Sarbanes-Oxley remains in effect?