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What Have VCs Really Done for Innovation?

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Re: What Have VCs Really Done for Innovation?

#11

Post by adrianwaj »

fnid wrote: post #4

The venture capital market is crumbling. It used to cost a lot of money to build a company, but not anymore and VCs are no longer the gatekeepers to success. Their exits are puny and most of them fail. They are hunting needles in haystacks. The supply is greater than demand. Their 2+20 scheme is too expensive. The wealthy don't need the VCs anymore and the returns they are bringing in aren't worth the risk. This crap…

I hope you're right.

But syndicates of VCs are willing and able to invest large amounts of money in startups in emerging industries (eg CleanTech) and I liken them to promoters who hand out steroids, hoping for a win in the next Mr Universe. The steroids could mean ultimate success or ultimate failure. (edit: actually it is always a failure if you want to IPO or stay private but instead a buy-out offer comes in beforehand - eg Mint, and your investors are impatient for their 'exit event')

Also, the more corporate R & D decreases, the more startups will be in demand for corporates to take-in in order to stay ahead, either by integrating the startup or burning it if a threat.

Re: What Have VCs Really Done for Innovation?

#12

Post by lucifer »

The very fact of the continued existence of VCs for software technology businesses is a sad testament to the inability of the geekdom to capitalize on their knowledge. Perhaps we are unconsciously worried that we will suffer the fate of the Templars, but at least that last group of disruptive geeks managed to squeeze a few centuries on top of the Pyramid from their collective knowledge base.

Re: What Have VCs Really Done for Innovation?

#13

Post by ibsulon »

vaksel wrote: post #6
fnid wrote: post #4

The venture capital market is crumbling. It used to cost a lot of money to build a company, but not anymore and VCs are no longer the gatekeepers to success. Their exits are puny and most of them fail. They are hunting needles in haystacks. The supply is greater than demand. Their 2+20 scheme is too expensive. The wealthy don't need the VCs anymore and the returns they are bringing in aren't worth the risk. This crap…

this applies to internet companies, but any other business needs VCs. Sure you may code your startup in a few years on your own, but how are you going to open a factory without any outside investment?

Who isn't outsourcing to China anyway? :/

Re: What Have VCs Really Done for Innovation?

#14

Post by pg »

Maybe the NVCA statistics are somewhat bogus, but there is a pretty compelling way to answer the question empirically: how many tech companies have made it as far as an IPO without taking money from VC funds?

Maybe the world is changing. Maybe now that it's cheaper to start startups, some will start to make it all the way to IPOs without VC funding. Obviously I would love it if a company we funded could make it to an IPO without any further dilution. But that seems like insanely wishful thinking.

Re: What Have VCs Really Done for Innovation?

#16

Post by prakash »

pg wrote: post #14

Maybe the NVCA statistics are somewhat bogus, but there is a pretty compelling way to answer the question empirically: how many tech companies have made it as far as an IPO without taking money from VC funds? Maybe the world is changing. Maybe now that it's cheaper to start startups, some will start to make it all the way to IPOs without VC funding. Obviously I would love it if a company we funded could make it to an…

how many tech companies have made it as far as an IPO without taking money from VC funds?

Any particular reason you are looking at an IPO as a milestone? Somehow I see the YC companies more like SAS.

Re: What Have VCs Really Done for Innovation?

#17

Post by prat »

Venture capital is just the fuel that is required to keep an innovative enterprise running. Can oil industry take the credit for bringing industrial revolution? No.

Education, innovation and hardwork of entrepreneurs is what keeps the VCs alive. VCs depend on entrepreneurs not vice versa.

Re: What Have VCs Really Done for Innovation?

#18

Post by tomjen2 »

sachinag wrote: post #9
known wrote: post #7

I believe Angel Investors (not VCs) contributed a lot for innovation. http://paulgraham.com/angelinvesting.html

Angel investors are now, and always have been, the engines for innovation. Bankers - the old angels - funded Henry Ford. Back in the day, you could get a loan from a bank for a new venture. You can't any more; this, more than anything, is why new innovation is so concentrated in geographic areas. In the old days, New York banks would give money to an engineer in Detroit. Now, if you want angel money, you need to be p…

The banks properly can't legally loan money to something so dangerous as a new business. FDIC could never afford to cover _that_.

Re: What Have VCs Really Done for Innovation?

#19

Post by sachinag »

pg wrote: post #14

Maybe the NVCA statistics are somewhat bogus, but there is a pretty compelling way to answer the question empirically: how many tech companies have made it as far as an IPO without taking money from VC funds? Maybe the world is changing. Maybe now that it's cheaper to start startups, some will start to make it all the way to IPOs without VC funding. Obviously I would love it if a company we funded could make it to an…

The issue with IPOs as the marker of "success" is that public market investors are much more hostile to companies without the VC stamp of approval - they're relying on the implicit due diligence of the VC firms to make sure that there are no issues with the technology, the patent landscape, and other various hangups. (This applies much more to health care companies, where my VC experience was, but the mentality is the same as the public market investors are the same regardless of industry.)

Re: What Have VCs Really Done for Innovation?

#20

Post by kansando »

VCs are clearly exaggerating their contribution but it is easy to forget that they are the only long-term investors in the current financial system. Who else will commit to eight years of involvement with an unknown entity? Do they need to restructure - yes, but their disappearance will not be good for startups.
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