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Startup tsunami in silicon valley

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Re: Startup tsunami in silicon valley

#11

Post by TheFullStack »

dquail wrote: post #7
TheFullStack wrote: post #2

I'm in New York, not in SV but there's a lot startups over here too. I am a contract developer and have worked with startups for about three years. I can honestly say there are founders that are getting a "free ride" on investor expense - taking long vacations over the summer, building product forever and not releasing (this gives founders an excuse not to be out talking to customers - after all, the product isn't re…

There's a perception that raising money is "easy" in the current climate. The reality though is that it's simply not that easy and that there most certainly isn't many founders coasting on beaches. I know a lot of entrepreneurs and founders here in SF/Bay, and every one of them is working much more than 9-5 5 days a week. And none of them got a "free ride" from an investor - but rather went through the slog of buildi…

@dquail - understood. I certainly did not mean to suggest that every startup or most startups operate like this. Only that I have personally seen at least one whose founders seemed to be out of town more often than in the office - especially over the summer. Of course, under the pretense of 'business' it's all well and good. For example, they simply had to attend a conference at SXSW but I'm sure enjoyed some of the extracurricular activities during their week-long stay. 1 week trip - for one conference.

Re: Startup tsunami in silicon valley

#12

Post by rubyalex »

TheFullStack wrote: post #2

I'm in New York, not in SV but there's a lot startups over here too. I am a contract developer and have worked with startups for about three years. I can honestly say there are founders that are getting a "free ride" on investor expense - taking long vacations over the summer, building product forever and not releasing (this gives founders an excuse not to be out talking to customers - after all, the product isn't re…

You can do this once, but rarely ever twice. The world is surprisingly small and word gets around quickly when you take that "free ride" at the expense of the people funding you. Besides, it's different from 1998 in the sense that VCs are placing more money on later-stage startups than seed/A-stage startups.

Re: Startup tsunami in silicon valley

#13

Post by michaelochurch »

The answer is that there's a lot of passive capital in the world in pension funds for teachers and police officers. Much of that passive capital is invested in bonds and equities, but some of it gets invested into private equity, of which VC is a subset.

Now, what happens is that a large proportion of the passive capital ends up in Northern California. It has to be invested somewhere. In VC, it has to chase ideas. The problem is: most ideas are lame, and most people don't have the ability to tell which ones are lame (and lame ideas can succeed in the short term: see Pets.com and Snapchat).

The passive capitalists are people like retired teachers in Ohio. If they voted, they wouldn't want all of that passive capital (and the job-creating power of it) going to a small geographic area. They'd rather have it spread out more: this would mean a greater number of jobs in Ohio, and it would take the rent/housing pressure off of the Valley. Of course, what passive capitalists care the most about is returns on investment. If VC were a successful investment vehicle, then passive capitalists would favor the California concentration, and what is happening would be the right thing. The problem, of course, is that it's not a successful investment vehicle. VC works for the careers of the venture capitalists, and the cronies they can place in high positions, but the passive capitalists whose funds are being invested in it get utterly screwed.

This may answer your question and, yes, many of the startups being funded right now are bogus. However, there are some that aren't. It's not all bullshit. I'd say that it's right to be skeptical, but there are companies with genuine products and strong cultures and plausible futures. It takes a lot of time to get a sense of which are which, though.

Re: Startup tsunami in silicon valley

#14

Post by ArekDymalski »

rubyalex wrote: post #12
TheFullStack wrote: post #2

I'm in New York, not in SV but there's a lot startups over here too. I am a contract developer and have worked with startups for about three years. I can honestly say there are founders that are getting a "free ride" on investor expense - taking long vacations over the summer, building product forever and not releasing (this gives founders an excuse not to be out talking to customers - after all, the product isn't re…

You can do this once, but rarely ever twice. The world is surprisingly small and word gets around quickly when you take that "free ride" at the expense of the people funding you. Besides, it's different from 1998 in the sense that VCs are placing more money on later-stage startups than seed/A-stage startups.

>You can do this once, but rarely ever twice

I wonder how does the career of Kevin Rose fit into this. Perhaps I don't know something, but I've got a feeling that despite he didn't create anything successful since Digg, he enjoys a nice career. I'm not suggesting that he is a free-rider, but his example suggests that SV decisions aren't that optimal.

Re: Startup tsunami in silicon valley

#15

Post by vonnik »

It can be a shock to come to SV/SF and realize how many startups there are here. It's probably unique on the planet. Sure, most startups fail. That's been said over and over. And in this economy, it's not really a problem. The risks for each individual tech worker are fairly low, because if your present employer fails, there are many others desperate for software engineers, designers, marketers, etc.

There are lots of good ideas and lots of bad ideas getting built here. Some founders are deluded, others are ambitious, and

Startups get founded in the Bay area because there's a lot of talent to draw on, a lot of experienced investors, and a lot of services that support young companies.

More generally, startups don't make money, they make promises. And the promise they make is that if VCs invest X amount of money, they will get back 5X in a few years. Or something like that.

Most startups end up not returning 5X, and a few return a 100X, and them's the breaks.

Re: Startup tsunami in silicon valley

#16

Post by cududa »

zpatel wrote: post #4
TheFullStack wrote: post #2

I'm in New York, not in SV but there's a lot startups over here too. I am a contract developer and have worked with startups for about three years. I can honestly say there are founders that are getting a "free ride" on investor expense - taking long vacations over the summer, building product forever and not releasing (this gives founders an excuse not to be out talking to customers - after all, the product isn't re…

How do these founders get funded without traction..Everyone i talk to in my network says I need to launch and get traction first, although they like the product so far.

Be very likable and have a clear vision, or have awesome metrics and your personality doesn't matter as much

Re: Startup tsunami in silicon valley

#17

Post by _metamorphosis_ »

Balgair wrote: post #10

This is called a bubble. Where a lot of these start-ups are getting their funds is from the Bank of Mom&Dad, regular old credit cards, or they are 'bootstrapping' out of their jobs at places like Starbucks. Not many investors are actually doing this, it just seems like it because most of the people are lying, trying their best not to lie per se , really good at saying their cousin is a big time investor because he ga…

> most of the people are lying, That's bit harsh. There was a report few days back on HN, where a company claimed that while typical VC are slowing down in investing, private hedge funds and such are pumping unprecedented amount of money in tech startups. Although, I might have to agree about SV being in 'bubble'. I live there and see shacks being listed for $1mn.

Re: Startup tsunami in silicon valley

#18

Post by _metamorphosis_ »

vonnik wrote: post #15

It can be a shock to come to SV/SF and realize how many startups there are here. It's probably unique on the planet. Sure, most startups fail. That's been said over and over. And in this economy, it's not really a problem. The risks for each individual tech worker are fairly low, because if your present employer fails, there are many others desperate for software engineers, designers, marketers, etc. There are lots o…

I have been in SV since 2008, so not shocked by startup culture. What shocks me is so many startups with very trivial product/service which could easily be just a feature in their competing product. May be I'm questioning their value and overhead involved in developing that 'feature'. But again, there are some really good startups, and totally worth trying whatever they are trying to build. It's just their number is still no better than it was in 1999 or earlier. I wonder if there are any hard numbers of startups - how many? how many employees? their average experience/age? rate of 'success'? etc.

Re: Startup tsunami in silicon valley

#19

Post by _metamorphosis_ »

dquail wrote: post #7
TheFullStack wrote: post #2

I'm in New York, not in SV but there's a lot startups over here too. I am a contract developer and have worked with startups for about three years. I can honestly say there are founders that are getting a "free ride" on investor expense - taking long vacations over the summer, building product forever and not releasing (this gives founders an excuse not to be out talking to customers - after all, the product isn't re…

There's a perception that raising money is "easy" in the current climate. The reality though is that it's simply not that easy and that there most certainly isn't many founders coasting on beaches. I know a lot of entrepreneurs and founders here in SF/Bay, and every one of them is working much more than 9-5 5 days a week. And none of them got a "free ride" from an investor - but rather went through the slog of buildi…

Frankly, given the number of startups, I too think it must be easy to raise money. May be not from A16Z, YC, LSV or other experienced ones but I see so many new VC firms now days.

Re: Startup tsunami in silicon valley

#20

Post by codeonfire »

Why does no one think it odd that there are several large tech companies with 100k+ employees each, but think something is wrong if there are thousands of small five person companies? Tech workers don't need the resources of large tech companies anymore and they certainly can't pay for huge management overhead.
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