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Could VC be a Casualty of the Recession?

paulgraham.com

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Re: Could VC be a Casualty of the Recession?

#101

Post by brlewis »

pg wrote: post #92
jgrahamc wrote: post #68

Earlier quoted context omitted.

Maybe we're just seeing a buffer being flushed. He may have worked on all this stuff earlier.

Partly. "High-Res" and "Artists Ship" were both things I started during the summer and didn't have time to work on again till after interviews. This last one I wrote a month ago and then had to sit on because it was supposed to appear in a print report. I actually forgot about "Artists Ship." Then a few days ago I was talking to Paul Buchheit and he mentioned how great it was to be able to release code instantly at F…

As a FriendFeed user I'll echo, it is great that Paul and others can release code quickly.

Re: Could VC be a Casualty of the Recession?

#102

Post by HealyJones »

This post reminds me of a post I made a while ago called Don't Raise Venture Capital. http://www.startable.com/2008/09/26/dont-raise-venture-capit... This may seem a bit odd, as I am a VC. My point was not 100% aligned with Paul's, as he's suggesting something a bit more extreme, but there is a similar point - these days you can build a good business without significant funding. And you are potentially better off not raising any venture capital. Although I hope the venture business hasn’t become totally obsolete, as I really enjoy spending time with entrepreneurs!!

Re: Could VC be a Casualty of the Recession?

#103

Post by lliiffee »

jimbokun wrote: post #83
pg wrote: post #43

Earlier quoted context omitted.

What limits demand for cars is that people can't afford them, not that they don't want them. But since by my assumption everyone is working twice as hard, including the buyers, there should be demand to match the supply.

"What limits demand for cars is that people can't afford them, not that they don't want them." Or that they already have them? In the U.S., isn't the ratio of eligible driving population to drivable autos approaching 1? So, twice as many cars would likely not find buyers and drive down prices a lot. Sorry if I'm missing the bigger picture stuck on this specific detail.

Maybe try the idea that everyone works twice as hard, but instead of building twice as much stuff, everyone just builds the same products better.

(Of course, if you think about this carefully enough, the distinction between "more" stuff and "better" stuff falls apart.)

Re: Could VC be a Casualty of the Recession?

#104

Post by kidehen »

Paul,

Great post, extremely poignant!

In a few years time, VCs may be pitching to Entrepreneurs (Dragon's Den Syle! [1]) :-)

Links:

1. http://www.youtube.com/watch?v=HDczbpIO85g - note these guys like most missed the Linked Data URI pitch with their DNA miscue

Kingsley Idehen http://www.openlinksw.com/blog/~kidehen

Re: Could VC be a Casualty of the Recession?

#105

Post by shafqat »

prakash wrote: post #56

The current generation of founders want to raise money from VCs, and Sequoia specifically, because Larry and Sergey took money from VCs, and Sequoia specifically. Excluding YC and the likes, I would have thought, by now, a lot of startups would want to raise money from angels that have formerly started startups -- there are tons of them around. That would be the #1 choice. #2 choice would be the Founders Fund, Union…

Agree 100%. Although we were talking to some of the VCs in your 2nd bucket, we ended up going with #1. Our seed round is entirely angel funded, with one institutional player (#3 type) making an exceptional angel investment.

Re: Could VC be a Casualty of the Recession?

#106

Post by iamelgringo »

JeffJenkins wrote: post #78
pg wrote: post #45

Earlier quoted context omitted.

It's true that it can be dangerous not to take VC if your competition takes it. But it's not so dangerous if the reason you don't take it is that VCs are saying no to everyone, because that implies your competitors are also less likely to get it.

Yes, but the question the essay is setting out to answer is: what happens when the VCs recover? I think one of the last points I need to buy into the essay is that it isn't just the starting up costs which have gone down. The commoditization of computing in the cloud means that as long as you're profitable on a per-user basis the cost of scaling is also way down (although the amortized cost might be up). The other da…

Yes, but the question the essay is setting out to answer is: what happens when the VCs recover?

I've been thinking about this a lot recently. I think that the answer is, that VC's aren't going to be able to fund web based software startups as much. We just don't need the money.

Who does need the money? Green Tech, Biotech, hardware/embeded, enterprise software. Those companies can use the capital and might actually be willing to jump through the hoops necessary to IPO. VC's only really get paid off when companies IPO or get acquired for huge sums of money.

I think that this is going to be a water shed in Silicon Valley culture. One of the reasons that there are so many software engineers in the Valley, is because there have been a lot of VC funded startups and jobs since the first bubble in the 90's.

VC money is going to start chasing different kinds of companies, which means more green tech, biotech and hardware/embeded, enterprise software jobs. That means more electrical, genetic and chemical engineers and less software engineers in the area.

Re: Could VC be a Casualty of the Recession?

#107

Post by comatose_kid »

Paul - Assume that

1) your thesis is correct, and,

2) that a good startup hub is created primarily though the availability of investors (as observed in the essay "The Hacker's Guide to Investors"),

Don't these two things imply that Silicon Valley's prominence as a startup hub will wane?

Re: Could VC be a Casualty of the Recession?

#108

Post by alain94040 »

Couldn't agree more. As a serial co-founder myself, I can't wait to be able to fully start businesses with no VC involvment.

One thing is bogus in the article though: it's age-biased. $3000/m to cover living expenses for the founders? Yes, if you are talking about kids straight out of college living in a dorm. What about slightly less desirable older people, like say 30-year old (now, that's old :-). So a startup with 3 founders would need closer to $15,000/month of revenue. Well, it's not so easy to generate that kind of revenue.

The better advice is to find co-founders who can work part-time (evenings and weekends). That can sustain itself for a long time, even if it feels like it takes forever to get anything done.

fairsoftware.net - where software developers share revenue from the apps they create

Re: Could VC be a Casualty of the Recession?

#109

Post by robg »

robg wrote: post #64
pg wrote: post #46

Earlier quoted context omitted.

Perhaps I should have added that 40% was more than applications usually go up year to year. I'm pretty sure, based on conversations with founders, that this spike in applications wasn't due to people learning of our existence for the first time. Most people we interviewed seemed to have known about us for a while. I don't think application numbers are much correlated with News.YC traffic either. I think most people w…

Wasn't it also the first cycle where "Startup Ideas We'd Like to Fund" came into play? That seems like a giant roadmap for anyone who may have heard about YC and never seriously considered it before. I guess the test is: Were the pitches clustering more around those ideas?

I realized that might be a difficult question to answer.

One more test I can think of: If, as expected, the recession is still bottoming at the Spring deadline then the numbers (gross or percent change) should be comparable if that craziness is driving folks, in swarms it seems, to the founder path. However, if it was "Startup Ideas...", then, as a singular event, the growth should be closer to a normal rate if not an overall decline in gross from the Winter.

Care to make a guess which way it will go?

Re: Could VC be a Casualty of the Recession?

#110

Post by timr »

gruseom wrote: post #84
timr wrote: post #66

Earlier quoted context omitted.

The problem is, "low cost of entry" is just another way of saying "commoditization". Your argument depends on the assumption that because it's cheaper to produce a website than (say) a motherboard, it's therefore going to be easier to create a valuable website. That's wrong. Ultimately, there's no strategic advantage to be gained by entering an industry where the barrier to entry is so low that everyone can do it. Wh…

You guys are comparing a single saturated market to the economy as a whole. That's a category error. New markets are always emerging.

No I'm not -- my comments are limited to saturated markets.

Obviously, one of the ways to get rich is to create a new market and exploit it. But that's probably not as easy as building the better Teriyaki restaurant, judging by how rarely lucrative new markets emerge.

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