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VCs are scared when they should be greedy

blog.aaronkharris.com

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Re: VCs are scared when they should be greedy

#111

Post by rileymat2 »

ceeplusplus wrote: post #105
roughly wrote: post #73

Earlier quoted context omitted.

> The total all-in cost of a Prius (depreciation, maintenance, gasoline, etc...) is about 30 cents per mile One thing to note about Uber drivers is they’re typically putting 50-75k+ miles per year on their cars. I’m curious what that does to those depreciation/etc figures.

If you assume 25k MSRP on a base model Prius, and that the car will sell for $5k after 150k miles (absolute garbage offer - an actual number would be something like $10k-12k in today's market), then you get a worst case depreciation of 13 cents/mile. Let's say a Prius gets 45 mpg, gas costs $5/gal which gives you 11 cents/mile. Factor in tires and oil/brake fluid changes and maybe you get another $2k all in costs ove…

You need to do the math on a deduction v credit.

If you are spending .30 and deducting .58, you need to multiply the .58 by your tax rate.

You can’t simply say .58 - .30 is .28 and that is a profit of .28. Deductions don’t work that way.

Re: VCs are scared when they should be greedy

#112

Post by powerhour »

blakesterz wrote: post #7
MegaButts wrote: post #3

> In contrast with the scenario in 2000, most of today’s tech companies are real businesses. How many of today's startups are just servicing each other with VC money? This isn't meant to be flippant - I'm genuinely curious (and while I bet it's a lot, I am skeptical it is overwhelming). I mean if we really look at some of the business models for these companies, they're clearly unsustainable. Uber is a prime example…

I was there in 2000, and we all thought those tech companies were real businesses! Most of today’s tech companies don't really look all that much different.

I was there too and I remember a distinct malaise about pointless tech companies that would make up for per customer losses with scale. There were a lot of companies whose only product was eyeballs for advertisers. (Ok, that part is the same.)

Re: VCs are scared when they should be greedy

#113

Post by Bubble_Pop_22 »

jacquesm wrote: post #110
Bubble_Pop_22 wrote: post #108

Earlier quoted context omitted.

There are LPs and LPs. The LPs which the user above refers to are the APGs, the PFZWs type.

Show me a contract where an LP gets to renege penalty free on their obligations to a VC and I'll be happy to believe you. I have been part of 222 VC/PE deals to date (that's not a typo, just a coincidence) and not once has an LP reneged on their obligation to honor a capital call without penalty. That's not saying it doesn't happen, it may well happen, or it may have happened and it was kept so quiet that nobody pick…

I understand all the above, but the general rules kinda supercede it all.The general rules are that when you are the best/biggest thing around the block, rules just don't apply to you.

Also in general when government is involved rules don't apply to it. 80% or more of the amount of money that LPs as a whole administer are either Govt. Pension Funds or SWFs.

So in the case of big LPs it's one of the rare cases where both the above rules are at play to give them carte blanche.

Re: VCs are scared when they should be greedy

#114

Post by gumby »

lurkervizzle wrote: post #101
gumby wrote: post #67

Earlier quoted context omitted.

> How many of today's startups are just servicing each other with VC money? IMHO this is mostly the a phenomenon of the SAAS/platform space. Those practices don’t really apply to more traditional businesses (including high tech ones). But you made me think of something else: this phenomenon was definitely booming in the 2000 crash, when net-related hardware companies were underwriting their own sales, which ended qui…

Specific anecdote - SaaS companies selling to other SaaS companies is going to cause a mini-winter in that sector. My company (which we thankfully sold last year :praise) had several (though not exclusively) high-growth tech companies as customers. Now, when I look at layoff announcements, I see a lot of our former customers. Additionally, with budget freezes (driven by VC RIP decks), these same companies aren't buyi…

> And many tools now are priced based on headcount.

Ah, live by the ARPU, die by the ARPU: you lack of control over the "U" means your company performance is coupled to the broad market!

Thanks for this example. It's obvious in retrospect but apparently not prospectively.

Re: VCs are scared when they should be greedy

#115

Post by vcfundedmylife »

moneywoes wrote: post #52
vcfundedmylife wrote: post #21

Earlier quoted context omitted.

I agree, crypto and fintech will be the first dominos to fall - they’re in free fall already. There’s a lot of copycat B2B startups that extremely dependent on crypto and fintech for their revenue. They will be the next domino to fall. After that, it would be infrastructure, security, and analytics vendors that will face a revenue crunch and will be unable to raise another round of funding. And then, all the startups…

What can we do to insulate ourselves from this? As a software engineer at a startup

If you work in crypto or fintech, run.

Otherwise, I don’t think there’s much you can do to insulate yourself. It’s never obvious how resilient your employer is relative to the rest of the industry.

Just reset your expectations on what working in tech will be like for the next few years. And prioritize learning and building your network - whether at work or outside - over trying to climb the career ladder. It will pay off in the long run and you’ll be happier.

Also, articles like this show that we’re nowhere near capitulation. When we actually get there, stay passionate about tech. There will be another boom.

Re: VCs are scared when they should be greedy

#116

Post by swyx »

twoodfin wrote: post #48
lpolovets wrote: post #22

(Context: I'm a VC) Some great points in the post, but I also see a few additional dynamics at play: 1) The last 10 years have been great for VCs and startups, but now VCs are thinking about how to make their funds last longer. Two reasons for this: first, time diversification matters. If you think markets might go down even more, you don't want to deploy the rest of your fund quickly, you want to spread it out over…

2) Most VCs (and founders) hate down rounds. So a lot of existing companies are stuck because they previously raised at $X valuation, and now the market price is $0.75X, and either the VC doesn't want to push for a down round or a founder won't accept it, or both. They discussed this phenomenon at length on a recent Odd Lots podcast, and I can’t understand it as anything but a market inefficiency that some smart VC f…

> Values (and thus prices) go up and down.

you might be underestimate the importance of narrative in a startup. a startup takes a tremendous amount of belief to will into existence, and a lot of belief depends on an unbroken narrative. to most outward folks, a startup generally wants to appears to be continuously crushing it - people understand that there are ups and downs, but generally have no patience for a "well we had a slow 3 years where we made a lot of mistakes" nuance.

if you doubt this, consider how you eval a startup when joining as an employee, much less as an investor.

Re: VCs are scared when they should be greedy

#117

Post by danuker »

bsaul wrote: post #84
oarsinsync wrote: post #57

Earlier quoted context omitted.

> i've been betting against btc from the beginning Not literally, I assume? Or you’ve got a tiny position and have been (relative to the size if your position) haemorrhaging money for ~13 years? Or successfully rode some down waves? (I’m super jelly if you did the latter)

of course not, i would be broke :)) I do have a bet with a friend regarding btc price going under 1k i made in 2019 but it's just for fun..

Bitcoin has seen several 80%+ crashes and bounced back.

It is all in the demand.

A lot of that 80% flucuation is made up of short term speculators.

But some people are hardcore holders, and others use it because their national currency is worse (Venezuela, Sri Lanka).

Couple that with the network effects (BTC is the largest still), and that's all it takes for the price not to go to zero.

Re: VCs are scared when they should be greedy

#118

Post by singron »

lpolovets wrote: post #76
twoodfin wrote: post #48

Earlier quoted context omitted.

2) Most VCs (and founders) hate down rounds. So a lot of existing companies are stuck because they previously raised at $X valuation, and now the market price is $0.75X, and either the VC doesn't want to push for a down round or a founder won't accept it, or both. They discussed this phenomenon at length on a recent Odd Lots podcast, and I can’t understand it as anything but a market inefficiency that some smart VC f…

I agree, I think this is an inefficiency. But it's a tough one to correct because startups are a repeated game, and everyone's worried about upsetting people they'll have to keep playing with. I think the logic is "I like this company, but if I offer a down round then will I piss off their existing investors? Will those investors stop sharing good investment opportunities with me? ... Ah screw it, I'll just skip this…

Down rounds are bad for employee morale too since it puts previously issued options below water. It's probably worth it to re-issue equity, but that's messy and a lot of companies don't do it.

Re: VCs are scared when they should be greedy

#119

Post by oldsecondhand »

lurkervizzle wrote: post #94
upupandup wrote: post #81

Earlier quoted context omitted.

Isn't this what YC does essentially? YC backed SaaS companies buy each others products, write favorable case studies and use that to convince other enterprises to buy in, and to IPO quickly they raise lot of money to have the market share that commands the multi billion valuations with insane revenue multiples? Seems like this model is beginning to fail, most YC backed IPOs are now trading in deep red. ex) coinbase e…

100% this - a good chunk of initial traction for YC companies is other YC companies - which is great in some ways to bootstrap initial growth/credibility, but the uncharitable view is that it's a Ponzi scheme in a way.

One way to look at it is ponzi scheme, but a more charitable interpretation is just eating your own dogfood.

Re: VCs are scared when they should be greedy

#120

Post by juve1996 »

PeterisP wrote: post #16
christkv wrote: post #13

Earlier quoted context omitted.

In a recession they provide a luxury good that might be down prioritized by customers to save money.

In a recession some people suddenly are eager for any job, no matter how bad, driving down Uber's "cost of goods sold" i.e. driver fees.. But in general economic downturns are tricky, as they affect different groups differently - are the people who would suffer in a recession the same people who are currently using Uber?

That's not true, really, in this case with inflation.

There will be no point in taking such low paying jobs. We're already seeing massive shortages at the low end of employment - working for that cheap simply doesn't make economic sense.

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