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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

#41

Post by drchopchop »

vcfundedmylife wrote: post #21
skippyboxedhero wrote: post #9

Earlier quoted context omitted.

> I think tech investors are unable to see their bias for just how awful most tech companies today are I agree. Ecomm broke first in other markets, and I am seeing profitable ecomm companies still having to raise capital. Uber is one of the worst ones (they took a business that is very profitable, and lost absolutely staggering amounts of money, they probably need to cut 50% of the workforce to start with, and then k…

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…

I'd disagree re: Figma and Notion. These are very sticky, best-in-class tools which have a lot of use outside of "VC-land". Figma is becoming the de-facto way to share designs across the internet. Notion has a good shot at becoming the internet's default business wiki, killing Confluence.

Re: VCs are scared when they should be greedy

#43

Post by jacquesm »

seibelj wrote: post #4
thdxr wrote: post #2

while I agree with the general premise (majority of VCs are not good investors) it's important to remember the money they raised isn't sitting in a bank account. It's likely still in the LPs stock portfolio, doing a capital call when everyone is down a lot can be tricky. You need to sell the investment more even though they agreed to give you the money when you asked

Yeah I was super confused by this. VCs generally don’t have all the money ready to invest. They may have raised a $300 mil fund but they don’t get that money until they call it in. If the LP says “no deals for 6 months” that’s how it is.

As an LP in a large fund: that's definitely not how it is.

As an LP you pre-commit to a certain level, and when the capital call comes you perform or you will be found to be in default when a whole pile of clauses kicks in that you really do not want to have to deal with. You will have to have an extremely good reason (such as being already bankrupt) to be able to avoid a capital call that you have committed to.

Re: VCs are scared when they should be greedy

#44

Post by [deleted] »

ilrwbwrkhv wrote: post #20

A lot of people became "VC"s during the bull run. They brought nothing to the table like YC did. Instead some previously reputable VCs like a16z became crypto grifters. So it's good the market clears a bunch of them so that the YCs and next generation of VCs who actually bring something new to the table come to the forefront.

[deleted]

Re: VCs are scared when they should be greedy

#45

Post by btown »

drchopchop wrote: post #41
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…

I'd disagree re: Figma and Notion. These are very sticky, best-in-class tools which have a lot of use outside of "VC-land". Figma is becoming the de-facto way to share designs across the internet. Notion has a good shot at becoming the internet's default business wiki, killing Confluence.

Figma's incredibly hard to replace because its tools are highly customized for specific design workflows. Notion, I'm not nearly as sure about.

With Google Workplace having pageless Google Docs now, and other shops having content centralized on Office 365, a lot of cost-cutting companies will ask "we just use Notion for a wiki anyways, can we migrate over to the system we're already paying for?" And sure, Notion is making the right move here, to move rapidly on becoming a hub for project planning and other structured content, which is harder to move into a plain collaborative document. But is enough of Notion's userbase using those table features to such a level that it would cause pain? I'm truly not sure.

Re: VCs are scared when they should be greedy

#46

Post by Supermancho »

lmeyerov wrote: post #24
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…

My bigger uneasy feeling here is the advertising/marketing world where ROI basics like attribution are highly questionable and bohemeths like Apple & Google are using their $T war chests & monopoly positions to cripple the sales/marketing ecosystems of their competitors. So risks a repeat of the dotcom bubble collapse when cpm/cpc collapsed. So much of saas is directly serving these questionable areas, and in turn, m…

> Apple & Google are using their $T war chests & monopoly positions to cripple the sales/marketing ecosystems of their competitors.

To be fair, they are doing so by forcing competitors to in-house their advertising efforts. Largely, AdTech in large companies is outsourced to 3rd parties and those existing workflows calcify into positive signal. There hasn't been much incentive to change. Recently, the belts are starting to tighten and network (public market) adtech companies, even with big accounts, are always in danger of disappearing overnight.

Many companies rather continue with the few winners in the network adtech space, than engage in the lengthy and risky in-house development. It's slow to see all of the parallel development efforts coming to fruition, when no company wants to make PR announcements that it's no longer sending customer data to a 3rd party, but still collecting it all the same for an internal platform. This migration is happening nonetheless. Amazon built out their platform in under 2 years and the ripple has pushed many others forward toward dogfooding their own adtech stacks.

Re: VCs are scared when they should be greedy

#47

Post by bsaul »

ilrwbwrkhv wrote: post #20

A lot of people became "VC"s during the bull run. They brought nothing to the table like YC did. Instead some previously reputable VCs like a16z became crypto grifters. So it's good the market clears a bunch of them so that the YCs and next generation of VCs who actually bring something new to the table come to the forefront.

i've been betting against btc from the beginning, however i truely believe there's something interesting in this field, that may end up getting some real applications sometimes.

Now what's still unknown is whether the funds that invested heavily on crypto in 2020s will have enough leftovers once this crisis is over to be a player when the crypto 2.0 era is coming.

Re: VCs are scared when they should be greedy

#48

Post by twoodfin »

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 firm will eventually exploit. Values (and thus prices) go up and down. Putting your head in the sand about it can’t be a winning investment strategy.

Re: VCs are scared when they should be greedy

#49

Post by skippyboxedhero »

drchopchop wrote: post #41
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…

I'd disagree re: Figma and Notion. These are very sticky, best-in-class tools which have a lot of use outside of "VC-land". Figma is becoming the de-facto way to share designs across the internet. Notion has a good shot at becoming the internet's default business wiki, killing Confluence.

But the problem isn't the product. That is the mistake that people make when they say it is nothing like 2000.

The problem is: way too many staff, not enough revenue, no route to profit. It doesn't matter if you have a "best-in-class" tool...where is the money coming from, how are you making payroll next month with no VCs.

The main problem with tech companies isn't the products, the products are fine. The issue is that they have taken a profitable product and built an economic model around that product that incinerates money.

Re: VCs are scared when they should be greedy

#50

Post by kbuchanan »

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!

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