Valley VCs Sit on Cash, Forcing Startups to Dial Back Ambition

> I don't even know the point of these articles any more.

How else will the people who have been here less than 6 years get jaded?

More usefully, it may be obvious that these things go in cycles, but knowing exactly where we are in the cycle is very valuable to anybody who is thinking about raising money, or who is working at a company that isn't yet self-sufficient.

Well as the saying goes, "It is always new to someone." :-) And that is largely true. Here in the second decade of the 21st century people are getting funded who were blissfully unaware children in the dot com crash, or the semi-conductor recession, or the great social is the new webvan pullback.

A publication can get a lot of clicks and buzz from folks for who it is new, and so they report it as new.

But the articles are all part of the system which trains and educates entrepreneurs. It provides examples and stories of people who bring to market real solutions, those who bring "fad" solutions, and those essentially bring "me too" type solutions. This system also trains investors, where each cycle has a few winners which spawns some additional limited partners (or general partners) in various VC firms who also look at how their money is spent and where its going.

As much as it would be great, there isn't really a course of study you can take that will teach you this stuff, you kind of have to live through a cycle or two, absorbing all the experience you can. If you want to be able to really internalize and understand the stuff that someone like Danielle Morrill is talking about you need context, and the context comes from experience both in the good times and the bad times.

So to answer your question about the point of these articles, it is the same reason they teach freshman Calculus or Composition. Everyone needs to know this stuff and every year there are new people trying to learn it. The message that value is always appreciated over hype is pretty timeless but sometimes it takes a couple of cycles to really understand and distinguish between the two.

> if a business can't at least survive without huge influxes of investments then is it really a business that they should be investing in in the first place

Many entrepreneurs have been trained to pursue growth over short-term sustainability. In a market defined by network effects, this makes sense. It also works where one has a shot at winning a significant majority of a research-driven industry's profits (e.g. Apple or SpaceX), thereby starving one's competition of R&D oxygen.

Not all markets look like that. Furthermore, the cost of (and risk of losing) financing have not been properly worked into teams' growth-versus-profitability calculi. The time and resources it takes to adapt will kill some and slow others. After all is said and done, we'll have a healthier Valley culture.

Here's the somewhat ironic "catch 22" to the whole thing:

If you're a startup and you don't take VC funding, then you have the luxury of simply enjoying organic growth and funding expansion by re-investing profits into the company. Well, as long as you can do that in the face of competitive pressure. Strictly speaking, unless it's a "network effect" situation like a social network, you probably don't need to grow fast.

Unless you take VC money. Then, the simple act of taking their money now means there is pressure to grow fast, but it comes from the investors and not from the market per-se. And this is because VC funds are time-boxed and, by definition, have to generate whatever return they're going to generate by a fixed point in time. And the older a fund is (eg, the nearer it is to the end of it's life) the greater the pressure.

This is something I think more entrepreneurs should think long and hard about. Don't raise VC money just for the sake of doing it. Even if you can. Do it IF and only if it's the only (or at least surest) way to reach your goals. And always remember that the VC's interests do not necessarily align with the founders (at least not 100% so).