summary: bootstrapping is easy when you only weigh a few pounds.
Could VC be a Casualty of the Recession?
71–80 of 152 posts
Re: Could VC be a Casualty of the Recession?
#72Would 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.
TicketStumbler, like any other marketplace, definitely relies on network effects. And, Google arguably doesn't rely heavily on network effects. Google's value to me (in the short run) is unaffected by how many other people use it.
Sort of. We rely on how many providers we have, but even that has its limits once you have all the big ones (which we do). TicketStumbler is just as useful for one person as it is for 1,000.
You'd be right if you applied your statement to Stubhub or Ebay. We're more of an aggregator than a market place.
Re: Could VC be a Casualty of the Recession?
#73I notice the same attitude developing among myself becoming a recent founder
Re: Could VC be a Casualty of the Recession?
#74The 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…
I guess we'll see how that plays out. One of our competitors has taken $1 million in funding, the other has taken $10.5 million in VC funding.
Re: Could VC be a Casualty of the Recession?
#75Earlier 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.
Private companies can issue dividends too - it's what we plan on doing if we're fortunate enough to get that far (1). M&A is for suckers (2) and IPOs aren't worth the trouble anymore unless you desperately need liquidity (e.g. Google) or you're not profitable.
1 - Assuming the capital gains tax remains similar to what it is currently.
Re: Could VC be a Casualty of the Recession?
#76There is a big difference in capital required for an online internet, service or software company and most other types of start-up businesses. VC will absolutely play a major role because money is needed for equipment, teams of people and global operations. The effort required to raise $1M is way more than 1/10 of raising $10M - so raising small amounts of capital is probably very inefficient in general.
Re: Could VC be a Casualty of the Recession?
#77I 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 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."
But isn't the entire YC experience designed to get angels and VCs at demo day to make an investment in each company?
Re: Could VC be a Casualty of the Recession?
#78The 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.
Yes, but the question the essay is setting out to answer is: what happens when the VCs recover?
I think one of the last points I need to buy into the essay is that it isn't just the starting up costs which have gone down. The commoditization of computing in the cloud means that as long as you're profitable on a per-user basis the cost of scaling is also way down (although the amortized cost might be up).
The other danger is not being able to hire enough of the right people, but the number of people necessary does seem to be going down as the tools get better. The startup I'm working for has just decided to stop looking for funding and do our hiring more slowly over the next year, so I suppose we're a part of that trend.
Re: Could VC be a Casualty of the Recession?
#79[deleted]
Re: Could VC be a Casualty of the Recession?
#80"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 w…
While mid-October was well after the "crash" there would have been no impact on founder's and their dreams. The types of founders that YC encourages are recent college grads who have not learned anything about economic cycles. They do not look at what is happening to housing, the stock market, the bond market, and decide to hunker down and get a job or go on to grad school.
Drawing conclusions from a single data point, proposals received in October, is as faulty as deciding the world is careening into climatic disaster based on drops in temperature measured in fractions of a degree C over the last few years.