VCs are scared when they should be greedy • Hacker News Board

Re: VCs are scared when they should be greedy

#191

Post by peyton » Thu, Jul 21, 2022, 6:22 AM UTC

pedalpete wrote: post #153

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…

I've been trying to understand the medium-term implications of your first point for the market. My understanding is that if a VC raised a $1B fund, and the fund lasts for 10 years, the investments really need to be made in the first 5 years. If VCs are sitting on the sidelines now, AND making smaller investments, what happens in year 2 or 3 when they have to deploy those funds? Do you think deal sizes will get outrag…

Pro rata and follow-on I believe.

Re: VCs are scared when they should be greedy

#192

Post by throwawaytemp27 » Thu, Jul 21, 2022, 6:23 AM UTC

HWR_14 wrote: post #161

givemeethekeys wrote: post #71

Earlier quoted context omitted.

As much as VCs and founders hate down rounds - if the public market has dropped in value by 50% for mostly macroeconomic reasons - isn't it fair to then suggest that properties on the private market should be similarly worth less? We all hate for our homes to be worth 10% less in 2023 compared to 2022, but it is what it is, no?

> We all hate for our homes to be worth 10% less in 2023 compared to 2022 Speak for yourself. If all property drops, I'm ecstatic. I'm not moving or withdrawing money with a HELOC. So lower property values just mean less taxes for me. I mean, sure, it also means I may be underwater, but who cares? And if I decide to move, that just means the delta between my current place and a new place is smaller in absolute terms.…

Not sure where you live, but where I’m from, an increase/decrease in home value affects your proportion of the overall property taxes but not the absolute amount. If everyone’s home goes down by 20% then everyone gets same tax bill.

Re: VCs are scared when they should be greedy

#193

Post by lifeisstillgood » Thu, Jul 21, 2022, 6:34 AM UTC

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…

What amazes me is the seed round at 10s of millions. I was amazed to find the YC puts in 150k to each start up. I think it was 6k per founder back in the day.

Apart from companies wanting to build battery storage, what do people do with 20M of seed funding?

I mean surely it is time to pivot to finding dozens of companies wanting to just be profitable and return a dividend. Fund enough (but like YC) and one or two will become unicorns just because?

or am I dreaming

Re: VCs are scared when they should be greedy

#194

Post by blitzar » Thu, Jul 21, 2022, 6:39 AM UTC

kbuchanan wrote: post #50

This post reminded me a little of my real estate agent's newsletter: 2007: There's never been a better time to buy! 2008: There's never been a better time to buy! 2012: There's never been a better time to buy! 2020: There's never been a better time to buy! 2022: There's never been a better time to buy!

Only superseeded by hearing from friends "house prices never go down, there has never been a better time to buy"

Re: VCs are scared when they should be greedy

#195

Post by xmodem » Thu, Jul 21, 2022, 6:42 AM UTC

jacob_rezi wrote: post #190

foobiekr wrote: post #180

Earlier quoted context omitted.

What happened with a16z is truly amazing.

what happened?

They've gone in hard on crypto, investing in absolute trash-tier companies that are difficult to distinguish from outright scams.

Re: VCs are scared when they should be greedy

#196

Post by Zaheer » Thu, Jul 21, 2022, 6:43 AM UTC

lifeisstillgood wrote: post #193

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…

What amazes me is the seed round at 10s of millions. I was amazed to find the YC puts in 150k to each start up. I think it was 6k per founder back in the day. Apart from companies wanting to build battery storage, what do people do with 20M of seed funding? I mean surely it is time to pivot to finding dozens of companies wanting to just be profitable and return a dividend. Fund enough (but like YC) and one or two wil…

"$10m-$15m post" actually refers to the valuation of the company rather than the investment amount. The investment amount is typically 10-20%. So a valuation of $10-15m would mean an investment of $1-1.5m

Re: VCs are scared when they should be greedy

#197

Post by stingraycharles » Thu, Jul 21, 2022, 6:44 AM UTC

lifeisstillgood wrote: post #193

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…

What amazes me is the seed round at 10s of millions. I was amazed to find the YC puts in 150k to each start up. I think it was 6k per founder back in the day. Apart from companies wanting to build battery storage, what do people do with 20M of seed funding? I mean surely it is time to pivot to finding dozens of companies wanting to just be profitable and return a dividend. Fund enough (but like YC) and one or two wil…

I say this as someone who isn’t very familiar with this world, but have also noticed this. I think it’s a perception hack: there are some expectations about how a series A startup operates (demonstrated product/market fit, starts entering the growth stage, etc), and investors/founders still want to invest in companies that show great potential according to them, but just aren’t there yet, and it’s undesirable to oversell the company / raise expectations too high.

Hence the massive seed rounds, with equally massive bridge rounds, etc etc.

Re: VCs are scared when they should be greedy

#198

Post by kirse » Thu, Jul 21, 2022, 6:51 AM UTC

dinvlad wrote: post #164

chromaton wrote: post #109

Earlier quoted context omitted.

A lot of them were just early. pets.com => Chewy. Also PetSmart operates the pets.com domain now apparently. webvan => Amazon Fresh, Instacart kozmo => DoorDash, Uber Eats, etc.

Mind => blown. There are very few original ideas, it seems. Just slightly better execution maybe.

Mobile devices, ubiquitous 4G comms, GPS location-based services. Underlying tech is always what enables "too early" products to succeed later on, particularly comms bandwidth. The same fundamental products have been reinvented with every improvement in bandwidth since the beginning of the internet. Once you've seen these cycles happen over and over you just watch for the underlying tech improvements, pick an idea lane and re-execute. Keep an eye on 5G and Starlink, it's already happening.

Re: VCs are scared when they should be greedy

#199

Post by pedalpete » Thu, Jul 21, 2022, 6:52 AM UTC

peyton wrote: post #191

pedalpete wrote: post #153

Earlier quoted context omitted.

I've been trying to understand the medium-term implications of your first point for the market. My understanding is that if a VC raised a $1B fund, and the fund lasts for 10 years, the investments really need to be made in the first 5 years. If VCs are sitting on the sidelines now, AND making smaller investments, what happens in year 2 or 3 when they have to deploy those funds? Do you think deal sizes will get outrag…

Pro rata and follow-on I believe.

As in more $$ will go into follow-on companies rather than letting the bad bets die? Or we'll likely see more money going into follow-on rounds, inflating that end of the market?

You could be right.

Re: VCs are scared when they should be greedy

#200

Post by simonbarker87 » Thu, Jul 21, 2022, 6:56 AM UTC

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…

I’ve often heard the modern VC route described as a Ponzi scheme with the public market being the greatest of the fools, I don’t totally buy into the idea but your 3rd point really does highlight how close it all is to a Ponzi scheme.

So much value is absorbed in the VC pipe than by the time a company IPOs the chance of retail investors seeing returns is minimal to none.