Fred Wilson's response to "Paul Graham's Letter to YC Companies"

Fred Wilson's response to "Paul Graham's Letter to YC Companies"
avc.com

My unsolicited advice to all startups is to put your energy into the things which matter. Debating 3-6% more/less dilution with investors is not a good place to be investing your time and energy.

I suspect the companies who go into this bubble focusing on convertible notes and caps will be the companies who suffer most.

Facebook's IPO is not really a huge issue in and of itself, and as Wilson points out the numbers they have are staggering. Other IPOs, like GroupOn's, have had similar issues and FB will probably look pretty awful by the time they reach the end of their lock-up period too. But this stuff is largely all indicative of market sentiment, and that's the issue.

People aren't necessarily disappointed with the performance of any of these companies, but they are getting very twitchy as investors. When people stop investing, and sentiment becomes increasingly bearish, it's like the tide going out and inevitably some boats will end up getting beached.

I know from companies attempting to raise capital in London right now that things have been difficult for a while now, and look set to get even more difficult (not that London is necessarily the greatest place for doing this, or a good barometer) - so those companies that have done decent rounds recently (HailO, BagThat, etc) will probably need to baton down the hatches somewhat, and those who were expecting to raise later this year / early next are probably in for a shock - a nasty one, if they can't operate without a raise (I know at least a couple of companies in that exact position).

The key execs and advisors involved in IPO were not conservative with the valuation. Do not be surprised if those same biases influenced some of the pre-float numbers.

A cautious CFO may not always tell people what they want to hear short-term - but they will deliver a much stronger performance over the long.