We always wondered what brings a VC besides money and pressure?
VC's require time too (5% of your time).
If a VC can bring leads, customers or users, then he brings additional value. If not the added value of a VC is just money.
Could VC be a Casualty of the Recession?
121–130 of 152 posts
Re: Could VC be a Casualty of the Recession?
#122"Imagine what it would do to the VC business if the next hot company didn't take VC at all." No need to imagine. Just look North -- this is reality. Neither RIM (makers of the blackberry) nor Cognos (now IBM) took VC funding. VC has imploded in Canada and startups are surviving as they have always.
RIM started in 1984 and Cognos in 1969 [!], so I'm not sure what conclusion you can draw from their early histories.
Also, RIM "was financed by Canadian institutional and venture capital investors in 1995" (http://en.wikipedia.org/wiki/Research_in_Motion).
Re: Could VC be a Casualty of the Recession?
#123Couldn't agree more. As a serial co-founder myself, I can't wait to be able to fully start businesses with no VC involvment. One thing is bogus in the article though: it's age-biased. $3000/m to cover living expenses for the founders? Yes, if you are talking about kids straight out of college living in a dorm. What about slightly less desirable older people, like say 30-year old (now, that's old :-). So a startup wit…
"So a startup with 3 founders would need closer to $15,000/month of revenue."
This depends on where you live. I'm just starting a project with one partner -- we are both entering forties and have two kids each -- and even with another employee we plan to live comfortably while burning under $10k.
Re: Could VC be a Casualty of the Recession?
#124Paul - Assume that 1) your thesis is correct, and, 2) that a good startup hub is created primarily though the availability of investors (as observed in the essay "The Hacker's Guide to Investors"), Don't these two things imply that Silicon Valley's prominence as a startup hub will wane?
No. First of all, SV doesn't depend only on investors. All the support for startups is here, from lawyers to graphic design to (probably most important) other founders. Second, not taking VC doesn't mean not taking investment. If startups downshift, the next lower gear is angels.
What if angels are few and far between, and those that are there lack any experience about angel investing?
Re: Could VC be a Casualty of the Recession?
#125Earlier 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?
Is it not the case that like a VC, a seed-stage investor maximizes his income when the startup he funds tries to hit a home-run? And are not home-runs much more likely if a VC invests in the startup?
Home-runs are more likely if VCs invest, but it is hard to say whether this is because VCs select the companies most likely to be big successes, or because their participation makes companies big successes. So it is very hard to predict what would happen if startups stopped taking VC.
Re: Could VC be a Casualty of the Recession?
#126Largely true, not controversial, I'd say. The VCs I talked to are not in denial; but still value cash they're getting from their management fees. That phase will be over soon.
Question for Paul: what alternative investment vehicles will arise in the years to come? How about some smaller-scale buyout businesses?
Re: Could VC be a Casualty of the Recession?
#127What a great post Paul, thanks for this. we are workin hard with a new funding business model & service for web start-ups, see www.growvc.com
"What do you get when you break the traditional vc funding model and then restructure it with some social media & web 2.0 glue?”
Re: Could VC be a Casualty of the Recession?
#128Earlier quoted context omitted.
Wasn't it also the first cycle where "Startup Ideas We'd Like to Fund" came into play? That seems like a giant roadmap for anyone who may have heard about YC and never seriously considered it before. I guess the test is: Were the pitches clustering more around those ideas?
I realized that might be a difficult question to answer. One more test I can think of: If, as expected, the recession is still bottoming at the Spring deadline then the numbers (gross or percent change) should be comparable if that craziness is driving folks, in swarms it seems, to the founder path. However, if it was "Startup Ideas...", then, as a singular event, the growth should be closer to a normal rate if not a…
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Re: Could VC be a Casualty of the Recession?
#129[deleted]
Re: Could VC be a Casualty of the Recession?
#130I never understood this one:
"Someone running a startup is always calculating in the back of their mind how much "runway" they have—how long they have till the money in the bank runs out and they either have to be profitable, raise more money, or go out of business."
Why go out of business? Okay, you're out of money and you're not profitable yet. Let people go and return back to square one. Two founders in the garage, but now you have a codebase, a beta version probably, a website and some connections in the industry. Yeah, tough times, but when I see people going out of business in such situation I always think that they were there for a VC-backed salary and some fun.