Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

What Have VCs Really Done for Innovation?

techcrunch.com

Post reply on HN
Print view View original

21–30 of 44 posts

Re: What Have VCs Really Done for Innovation?

#21

Post by sachinag »

tomjen2 wrote: post #18
sachinag wrote: post #9

Earlier quoted context omitted.

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_.

The FDIC insures deposits of depositors, not loans made by banks. Loans are where banks (traditionally) make their loans, and the banks themselves bear the risk (traditionally) of those loans.

(I hate having to add the "traditionally" thanks to the insane securitization practices of the last decade. shakes fist)

Re: What Have VCs Really Done for Innovation?

#22

Post by pg »

prakash wrote: post #16
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.

It's unequivocal. You could also use a revenue threshold.

Re: What Have VCs Really Done for Innovation?

#23

Post by TomOfTTB »

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?

The reason VCs are tied to technology is because a VC is generally formed to fund rapid growth companies. The whole point of being a VC is to get in early on something that's going to explode and hence make you a lot of money. It's hard to do that with a company dependent on physical assets.

In general companies that need physical assets to operate and grow get funding from private investors who are in for the long haul or banks who grant long term business loans.

Re: What Have VCs Really Done for Innovation?

#24

Post by prakash »

pg wrote: post #22
prakash wrote: post #16

Earlier quoted context omitted.

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.

It's unequivocal. You could also use a revenue threshold.

How about some combination of Revenue + Profitability?

Revenue alone doesn't help, I think Facebook crossed $300 MM but was not profitable at that point in time.

Current IPO's target revenue in the range of $50 MM (I think), pre-bubble IPO's required 4 straight quarters of revenue growth (something like that), this is a moving dynamic.

Re: What Have VCs Really Done for Innovation?

#25

Post by adrianwaj »

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…

I'm unsure of how you'd execute on it, but have you thought about rolling up many startups into 1? From there you could IPO, cross-own, etc.

I think the founders, especially the ones closest to an exit would need a good reason to change their path forward.

There'd be no shortage of talent, although acting as an organization mightn't be so attractive.

Check out Web Conglomerate if interested to learn more: http://tr.im/wgxn

Re: What Have VCs Really Done for Innovation?

#26

Post by wavesplash »

sachinag wrote: post #19
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 th…

Could you help clarify this? In my experience the only things that seem to matter are the offering bank and the financials.

Re: What Have VCs Really Done for Innovation?

#27

Post by sachinag »

wavesplash wrote: post #26
sachinag wrote: post #19

Earlier quoted context omitted.

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 th…

Could you help clarify this? In my experience the only things that seem to matter are the offering bank and the financials.

Having the "stamp of approval" is a bare minimum requirement to go public; you can't find enough buyers of the securities without it. The pricing, as you say, is affected by the financials and (I dispute this, but hey, it's not germane) the underwriters.

Re: What Have VCs Really Done for Innovation?

#28

Post by eru »

ibsulon wrote: post #13
vaksel wrote: post #6

Earlier quoted context omitted.

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? :/

People who are outsourcing to Vietnam or the US?

Re: What Have VCs Really Done for Innovation?

#29

Post by frisco »

There's this confusion that VCs exist primarily to help innovative startups get off the ground. This just isn't true; they really exist to generate returns for their investors. The complaint that entrepreneurs are so underserved by VCs misses the point: a VC only needs to make a couple investments a year to meet their goals for their LPs. VCs aren't, and have never been, the gatekeepers to success -- and that's not their intention.

Yes, there's a long tail of crappy VCs that don't make money and are generally wastes of space -- but that's more an argument for less venture capital in the valley, not more, at any price point, whether it's $200k or $2 million.

Re: What Have VCs Really Done for Innovation?

#30

Post by chaosprophet »

gruseom wrote: post #10
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…

Maybe when your tantrum dies down you can revisit the fun fact that the founders' visa isn't a VC idea at all . I was going to spell out the details, but they are so obvious that I felt embarrassed.

It is not a VC idea, I agree. However, in order for the founde visa to work, you would need to get atleast some VC's on board, which is what the OP is arguing against, I believe.
Post reply on HN