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U.S. Tech Funding – What’s Going On?
41–50 of 196 posts
Re: U.S. Tech Funding – What’s Going On?
#42When Andreesen talks about "tech funding", what do they mean by this? A lot of VC funding that used to go to "tech" companies is now going into much less profitable types of businesses that should not be considered "tech". Businesses that most VC's don't really have a lot of experience with. For example, their investments in Soylent, Walker and Co, Dollar Shave Club. It is REALLY hard to make money in these types of…
Bingo. A very large part of recent "tech" startup scene is just the good old "doing X but now with a smartphone" pattern. Or even worse "Sending a person with a smartphone to do X for you when you call them using your smartphone". I simply don't know how these businesses are supposed to be profitable at the scale they're supposed to grow to. Will Uber still be cool when it has a million quasi-employees? Will the governments around the world still allow the "quasi" part to stay intact at that scale - highly unlikely.
Re: U.S. Tech Funding – What’s Going On?
#43Earlier quoted context omitted.
I don't agree. Lots of startups don't have sales and marketing in the early stages. The grow through word of mouth or iterate/pivot to find something that becomes a hit. Somebody like Yahoo would need to buy and maintain a lot of servers to scale up but now with cloud computing, you can grow quite a bit with Amazon AWS until you implement your own infrastructure.
would love to hear examples of successful startups that did not do any marketing. especially ones that are tech/Internet startups. also - while AWS can make infrastructure convenient to scale up, rarely is it cheaper. It certainly can feel cheaper in the beginning as its pay-as-you-go, but averaged out over N years it's not. AWS also has reserved pricing to aid with this, but most startups are not in a position to co…
zenefits, zenpayroll, slack were basically word of mouth
Re: U.S. Tech Funding – What’s Going On?
#44"And the tech IPO is basically dead. The tech IPO market is at early 1980's volumes. For most of the 90's the majority of tech funding was public. This has reversed. It used to be routine to hit $20 million in revenues and go public. Not anymore." It's interesting how it seems that inequality is an unintended consequence of Sarbanes-Oxley. Before an engineer might vest after four or five years, just as the company is…
I think there's a lot of truth to that, but the one thing it leaves out of the analysis is the opportunity to exit via acquisition.
I don't have a sense of what proportion of companies that might previously have had an IPO would in recent times get acquired instead. I'd be surprised if it fully made up for the effect you describe. But I also imagine acquisition is more possible now than in the past since you now have a lot more big tech incumbents with cash to buy other companies with (e.g., who would have bought Instagram in 2000?).
Re: U.S. Tech Funding – What’s Going On?
#45Earlier quoted context omitted.
That's the way capitalism has always worked - it is up to you to make deals that increase your overall level of happiness, and it's up to your counterparties to ensure that those deals also increase their happiness. In past years, instead of "VCs" the villains have been hedge funds, private equity, corporate raiders, giant conglerates, corporations in general, investment trusts, robber barons, and colonial empires. I…
>In return In return for what? I've read your post several times now and it's unclear what you are referring to.
The Romans called it bread & circus. You get candy crush and an iPhone to let you work harder.
Re: U.S. Tech Funding – What’s Going On?
#46Earlier quoted context omitted.
Except that the valuations are meaningless without understanding all the other undisclosed terms granted to the VCs in the latter rounds (eg. liquidation preference, participating preferred, etc).
How important is a liquidation preference on a $500m round which values Uber at $40b? Not very. Moreover, most of the institutions doing these late stage rounds and secondaries are the same banks and asset management firms that float the IPOs. One of the unintended consequences from SOX is the creation of this public-private funding environment where huge private firms and high net worth individuals can invest, but s…
> How important is a liquidation preference on a $500m round which values Uber at $40b? Not very.
Why is that?
Re: U.S. Tech Funding – What’s Going On?
#47Why are IPOs no longer viable? Too much red tape? It seems that investors and their money have a better chance underground (private) where public stocks are either too slow to get a return or the return amount would be much less. Why does it seem all the money is in the US and not in Canada? More investors? More money? Taxes?
If you want to raise money and can't do so without going through the regulations of being a public company you would do so.
The only reason to IPO these days is to provide liquidity to existing shareholders (i.e. cash them out).
Re: U.S. Tech Funding – What’s Going On?
#48My takeaway- the VC's have leveraged the money from their successes to create a vortex that sucks in money from consumers, into privately owned companies, back into VC pockets, and back into more companies that get more people to spend more money. The tech vortex that is sucking away quality of life from the middle class and padding the billionaires (and large company) bank accounts. Throwing out a few bones on occas…
When you read "public returns" that doesn't mean the middle class. The "public market" the deck is referring just means that the trading happens on the open market (NASDAQ, S&P, etc.) rather than in private deals. Regardless, it is always the big players who make the big returns. The average investor wasn't the one making all the returns on Microsoft either. So you are right that the rich use these tools to get riche…
So, those 30% annual returns my dad made in the 90s were some sort of dream? The early players made more, but plenty of people rode Microsoft and Intel up through the 80s and 90s. We all missed the first decade of Dropbox.
Billionaires make wacky amounts of money in stock because we stopped taxing them.
Re: U.S. Tech Funding – What’s Going On?
#49Didn't see where the OP explained
why the tech IPO market is dead.
Re: U.S. Tech Funding – What’s Going On?
#50Earlier quoted context omitted.
would love to hear examples of successful startups that did not do any marketing. especially ones that are tech/Internet startups. also - while AWS can make infrastructure convenient to scale up, rarely is it cheaper. It certainly can feel cheaper in the beginning as its pay-as-you-go, but averaged out over N years it's not. AWS also has reserved pricing to aid with this, but most startups are not in a position to co…
zenefits, zenpayroll, slack were basically word of mouth
Zenefits and zenpayroll have easy to spot ads running on google right now.
Most startup's spend an enormous amount on marketing to get any traction. I'm sure there is more examples like Slack that did not use much marketing, but they are very rare.
If you build a startup and hope to iterate your way into being viral, this is bad planning in my opinion, no matter how awesome what your building is. Unfortunately, one that I had to learn the hard way.