in a recession it's better to be a cockroach than a unicorn
Indie.vc: Unicorns Are Out, Profits Are In
21–30 of 116 posts
Re: Indie.vc: Unicorns Are Out, Profits Are In
#22@Indie.vc ... you spent a ton of time writing this post only to have it paywalled by medium. I can't read it... Ditch medium as they aren't compatible with your business model :-P
I didn't expect to have this irritating Medium problem come up in a VC discussion, but it's relevant here, and I 100% agree that companies shouldn't post behind the paywall because it's counterproductive. Presumably, they want every single person to see their posts, and don't care about making $0.40 on a Medium post.
To the companies: make sure that when you post, distribution setting is OFF. This is a kind of dark pattern by Medium, which is why it's confusing, on purpose. What it really means is, distribution exclusively for paid Medium subscribers is off - meaning any person, anywhere, can view it.
Re: Indie.vc: Unicorns Are Out, Profits Are In
#23Earlier quoted context omitted.
VC without huge ROI expectations doesn't work. Like the actual economics don't work. I don't really understand the point of any of this. VCs need massive outsized returns because 99% of the companies they invest in will return $0 to the fund. You need that one company that returns the entire fund (ex: $500m) + some percentage. Also, from the article "And founders can even buy back the stakes (ranging between 10% and…
How do you figure this won't work? The article mentions the indie.vc "mortality rate" is 10% whereas for VC-backed ventures it's 44%. Granted, just because a company is alive doesn't mean it's making the investors much money. I imagine having more companies around for longer would ultimately mean a lot of little payoffs that cover their own investments rather than one big payoff that covers every other investment.
> five years, Indie.vc has backed 34 companies
That's hardly enough time or data to tell what the actual mortality rate is full cycle. A lot of startups will fail in year 6, 7 or 8 after years of pivots and trying to grow.
> On average, they’re growing 100% in the first year, and 300% the second year
Assuming $0 in rev on day 1, of course they grow 100% in Y1. These numbers don't mean anything.
Philosophically I agree with Indie.vc. I think there is untapped potential in smaller companies/markets that mostly is overlooked by traditional VC. But I don't think VC is the answer to that problem. There needs to be some other funding vehicle that can withstand smaller returns over longer periods of time (like a loan, which this seems to be closer to).
Re: Indie.vc: Unicorns Are Out, Profits Are In
#24Earlier quoted context omitted.
How do you figure this won't work? The article mentions the indie.vc "mortality rate" is 10% whereas for VC-backed ventures it's 44%. Granted, just because a company is alive doesn't mean it's making the investors much money. I imagine having more companies around for longer would ultimately mean a lot of little payoffs that cover their own investments rather than one big payoff that covers every other investment.
> five years, Indie.vc has backed 34 companies That's hardly enough time or data to tell what the actual mortality rate is full cycle. A lot of startups will fail in year 6, 7 or 8 after years of pivots and trying to grow. > On average, they’re growing 100% in the first year, and 300% the second year Assuming $0 in rev on day 1, of course they grow 100% in Y1. These numbers don't mean anything. Philosophically I agre…
I agree with you here wholeheartedly. The figures shown here are not really all that revealing. It sounds like someone who has some money to invest and is trying to drum up a bit of marketing for themselves by being contrarian.
Re: Indie.vc: Unicorns Are Out, Profits Are In
#25Re: Indie.vc: Unicorns Are Out, Profits Are In
#26So this is initial seed/angel venture capital without huge ROI expectations? Is that the idea? If so, how is it different from what VCs are doing now?
VC without huge ROI expectations doesn't work. Like the actual economics don't work. I don't really understand the point of any of this. VCs need massive outsized returns because 99% of the companies they invest in will return $0 to the fund. You need that one company that returns the entire fund (ex: $500m) + some percentage. Also, from the article "And founders can even buy back the stakes (ranging between 10% and…
Another part of VC economics to understand is to look at Uber. Total disaster, right? Softbank and retail investors got totally screwed by the IPO due to questionable economic assertions made by Uber. But the angel and early series investors, circa 2011? Still made out like bandits. An IPO price of $72, when you paid pennies per share, times several hundred thousand shares equals a cool $10mm, easy. Perhaps not as much as they would have liked, but that's still a pretty good payday considering later investors lost money.
WeWork entirely failed to IPO, so early investors not named Adam Neumann got screwed. Thus, on the spectrum of gregarious companies, with WeWork and one end and Uber at the other end, a company just needs to be on the Uber level of gregarious.
Re: Indie.vc: Unicorns Are Out, Profits Are In
#27In short: this author is endorsing a funding model focused on low initial investment and faster profitability. The benefits key benefits are that this funding model results in more women and minorities getting funding, as well as higher rate of companies surviving (10% vs. 44% [1]). The former is good, but probably isn't sufficient to motivate most investors. The latter doesn't necessarily translate into better retur…
"In short: this author is endorsing a funding model focused on low initial investment and faster profitability."
-> so basically, Canadian "venture" capital. They don't even want to talk to you unless profitability is there or within a few months. So, basically, it distills to a barely riskier than usual bank loan, except you pay the loan with equity.
Re: Indie.vc: Unicorns Are Out, Profits Are In
#28In short: this author is endorsing a funding model focused on low initial investment and faster profitability. The benefits key benefits are that this funding model results in more women and minorities getting funding, as well as higher rate of companies surviving (10% vs. 44% [1]). The former is good, but probably isn't sufficient to motivate most investors. The latter doesn't necessarily translate into better retur…
> A high-risk high-reward investment model may still produce higher rates of returns than a low-risk low-return model.
So, this isn’t really my area, but if the market is efficient shouldn’t these come up about the same over a long enough period? In other words if one or the other has dramatically better returns that just means the risk was mis-priced to begin with.
The immediate objection I can see to this (without expertise) is assuming that private markets are at all efficient. But that would point to a fundamental problem with pricing in private markets, not the merits of one strategy or another.
Re: Indie.vc: Unicorns Are Out, Profits Are In
#29This is probably silly but I have often wondered why you don't get straightforward loans in Software. If I were to open a restaurant I would hardly go for a VC.
Do banks have something against software businesses ? Are there software companies that have bootstrapped themselves with loans (not friend/family loans) as opposed to VC ?
Re: Indie.vc: Unicorns Are Out, Profits Are In
#30In short: this author is endorsing a funding model focused on low initial investment and faster profitability. The benefits key benefits are that this funding model results in more women and minorities getting funding, as well as higher rate of companies surviving (10% vs. 44% [1]). The former is good, but probably isn't sufficient to motivate most investors. The latter doesn't necessarily translate into better retur…
"In short: this author is endorsing a funding model focused on low initial investment and faster profitability." -> so basically, Canadian "venture" capital. They don't even want to talk to you unless profitability is there or within a few months. So, basically, it distills to a barely riskier than usual bank loan, except you pay the loan with equity.
A cause or symptom (I'm not sure about causality here) is that the Business Development Bank of Canada (BDC) directly funds most private Canadian VCs. VCs now have public money as part of their LP base, with some strings attached. Most of these strings (eg. don't waste taxpayer money doing anything unethical or overly negligent) will nudge VCs to be more conservative. Plus, the VCs are guaranteed 20%+ of their 2% carry from BDC taking up that much of every fund and don't need to swing for the fences to make a good income.