Comments on: Where Have All the Bold VCs Gone? http://www.techcrunch.com/2008/04/15/where-have-all-the-bold-vcs-gone/ Startup and Technology News Tue, 10 Nov 2009 18:17:50 -0800 hourly 1 By: Quote « h2i institute http://www.techcrunch.com/2008/04/15/where-have-all-the-bold-vcs-gone/comment-page-1/#comment-2833243 Quote « h2i institute Thu, 02 Jul 2009 07:46:39 +0000 http://www.techcrunch.com/2008/04/15/where-have-all-the-bold-vcs-gone/#comment-2833243 [...] Read at TechCrunch [...] [...] Read at TechCrunch [...]

]]> By: To Revenue » Doom and Gloom Prophecies on the End of Venture Capital… http://www.techcrunch.com/2008/04/15/where-have-all-the-bold-vcs-gone/comment-page-1/#comment-2567629 To Revenue » Doom and Gloom Prophecies on the End of Venture Capital… Mon, 15 Dec 2008 15:14:30 +0000 http://www.techcrunch.com/2008/04/15/where-have-all-the-bold-vcs-gone/#comment-2567629 [...] Where Have All the Bold VCs Gone? [...] [...] Where Have All the Bold VCs Gone? [...]

]]> By: In the Nick of Time at diversity.net.nz http://www.techcrunch.com/2008/04/15/where-have-all-the-bold-vcs-gone/comment-page-1/#comment-2488496 In the Nick of Time at diversity.net.nz Wed, 01 Oct 2008 18:33:53 +0000 http://www.techcrunch.com/2008/04/15/where-have-all-the-bold-vcs-gone/#comment-2488496 [...] Where Have All the Bold VCs Gone? [...] [...] Where Have All the Bold VCs Gone? [...]

]]> By: notes, thoughts, ideas and responses » TechCrunch.com partners with WashingtonPost.com to link critical nodes http://www.techcrunch.com/2008/04/15/where-have-all-the-bold-vcs-gone/comment-page-1/#comment-2283651 notes, thoughts, ideas and responses » TechCrunch.com partners with WashingtonPost.com to link critical nodes Thu, 08 May 2008 17:23:46 +0000 http://www.techcrunch.com/2008/04/15/where-have-all-the-bold-vcs-gone/#comment-2283651 [...] closer to reading and learning about Web 2.0 startups. In turn, an underrepresented market with billions of dollars worth of investments annually will start to gain traction among the populations of people that matter most to their [...] [...] closer to reading and learning about Web 2.0 startups. In turn, an underrepresented market with billions of dollars worth of investments annually will start to gain traction among the populations of people that matter most to their [...]

]]> By: Founder’s Co-op: a New Twist on Angel Investing | After Beta http://www.techcrunch.com/2008/04/15/where-have-all-the-bold-vcs-gone/comment-page-1/#comment-2187882 Founder’s Co-op: a New Twist on Angel Investing | After Beta Thu, 17 Apr 2008 23:07:39 +0000 http://www.techcrunch.com/2008/04/15/where-have-all-the-bold-vcs-gone/#comment-2187882 [...] Where Have All the Bold VCs Gone? [via Zemanta] [...] [...] Where Have All the Bold VCs Gone? [via Zemanta] [...]

]]> By: On Funding: Where have all the good angels gone? http://www.techcrunch.com/2008/04/15/where-have-all-the-bold-vcs-gone/comment-page-1/#comment-2183422 On Funding: Where have all the good angels gone? Wed, 16 Apr 2008 16:24:10 +0000 http://www.techcrunch.com/2008/04/15/where-have-all-the-bold-vcs-gone/#comment-2183422 [...] was motivated to write this post in response to a TechCrunch post “Where have all the bold VCs gone?” that took an excerpt from Paul Graham’s post “Why aren’t there any more [...] [...] was motivated to write this post in response to a TechCrunch post “Where have all the bold VCs gone?” that took an excerpt from Paul Graham’s post “Why aren’t there any more [...]

]]> By: Matthew http://www.techcrunch.com/2008/04/15/where-have-all-the-bold-vcs-gone/comment-page-1/#comment-2183262 Matthew Wed, 16 Apr 2008 15:29:38 +0000 http://www.techcrunch.com/2008/04/15/where-have-all-the-bold-vcs-gone/#comment-2183262 Rick in post #7 nailed a big part of the VC problem. It's the mid-90s style of VC portfolio building that sets up the gap. When they build a portfolio predicated on a 1 in 10 success rate (or worse), every opportunity has to be a big one with a big potential market cap and consequently a big initial investment. Sprinkle in some rules of thumb that only apply to mid-90s hardware startups and you have the subsidy portfolio model that many VCs still use. Not only does it setup a gap but it supports the crazy idea of million dollar failures - namely smaller, very profitable companies that either get scuttled in the quest for knocking one out of the park or feel the pressure to overbuild their business to match the VC model and fail. I see it happen a lot when startups go to the VCs too early. Even some angels in their zeal to find the next big one setup this dynamic. And the founders get to take some of the blame too. Often they take way too much money because they can get it rather than taking the amount the need to build the business they have from the right sources. I'm always amazed how often startups violate the rule that customer cash > partner cash > investor cash. In the end the VC can't force the money in the founder's accounts - the founders make the choice. So I'm not sure that it's about how bold the VCs are. I believe many still are very bold, it's just that they have funding models that make no sense in 2008 and don't encourage wealth creation in any way. Rick in post #7 nailed a big part of the VC problem. It’s the mid-90s style of VC portfolio building that sets up the gap.

When they build a portfolio predicated on a 1 in 10 success rate (or worse), every opportunity has to be a big one with a big potential market cap and consequently a big initial investment. Sprinkle in some rules of thumb that only apply to mid-90s hardware startups and you have the subsidy portfolio model that many VCs still use.

Not only does it setup a gap but it supports the crazy idea of million dollar failures – namely smaller, very profitable companies that either get scuttled in the quest for knocking one out of the park or feel the pressure to overbuild their business to match the VC model and fail. I see it happen a lot when startups go to the VCs too early. Even some angels in their zeal to find the next big one setup this dynamic.

And the founders get to take some of the blame too. Often they take way too much money because they can get it rather than taking the amount the need to build the business they have from the right sources. I’m always amazed how often startups violate the rule that customer cash > partner cash > investor cash. In the end the VC can’t force the money in the founder’s accounts – the founders make the choice.

So I’m not sure that it’s about how bold the VCs are. I believe many still are very bold, it’s just that they have funding models that make no sense in 2008 and don’t encourage wealth creation in any way.

]]> By: jason goldberg http://www.techcrunch.com/2008/04/15/where-have-all-the-bold-vcs-gone/comment-page-1/#comment-2183174 jason goldberg Wed, 16 Apr 2008 15:02:52 +0000 http://www.techcrunch.com/2008/04/15/where-have-all-the-bold-vcs-gone/#comment-2183174 caught a typo in my comment #29. Should read: "That gap has created a venture gap. Venture firms raised these huge funds and need to invest them. The scaresest resource a VC has is his/her time. It’s challenging for a VC to spend his/her time chasing $250k deals when they need to invest a billion dollar fund. VC’s need to put money to work and they need to see a clear path to turn $5-10M in investment into $200M+ in gain 1/10 times." [instead of 9/10] caught a typo in my comment #29.

Should read:

“That gap has created a venture gap.
Venture firms raised these huge funds and need to invest them.
The scaresest resource a VC has is his/her time. It’s challenging for a VC to spend his/her time chasing $250k deals when they need to invest a billion dollar fund. VC’s need to put money to work and they need to see a clear path to turn $5-10M in investment into $200M+ in gain 1/10 times.” [instead of 9/10]

]]> By: chrisco http://www.techcrunch.com/2008/04/15/where-have-all-the-bold-vcs-gone/comment-page-1/#comment-2182146 chrisco Wed, 16 Apr 2008 08:16:11 +0000 http://www.techcrunch.com/2008/04/15/where-have-all-the-bold-vcs-gone/#comment-2182146 Paul G is right: "VCs are driven by consensus." The specific correct term is "Social Proof." From Wikipedia: "Also known as informational social influence, is a psychological phenomenon that occurs in ambiguous social situations when people are unable to determine the appropriate mode of behavior. Making the assumption that surrounding people possess more knowledge about the situation, they will deem the behavior of others as appropriate or better informed." http://en.wikipedia.org/wiki/Social_proof Paul G is right: “VCs are driven by consensus.”

The specific correct term is “Social Proof.” From Wikipedia: “Also known as informational social influence, is a psychological phenomenon that occurs in ambiguous social situations when people are unable to determine the appropriate mode of behavior. Making the assumption that surrounding people possess more knowledge about the situation, they will deem the behavior of others as appropriate or better informed.”

http://en.wikip...ki/Social_proof

]]> By: Silicon Moon http://www.techcrunch.com/2008/04/15/where-have-all-the-bold-vcs-gone/comment-page-1/#comment-2182093 Silicon Moon Wed, 16 Apr 2008 07:58:59 +0000 http://www.techcrunch.com/2008/04/15/where-have-all-the-bold-vcs-gone/#comment-2182093 <strong>Why Aren't There More Googles and Bold VCs?...</strong> Paul Graham wrote a good post initially commenting on Umair Haque's question on why there aren't more Googles and then examining the today's VC climate, which generated some buzz.... Why Aren’t There More Googles and Bold VCs?…

Paul Graham wrote a good post initially commenting on Umair Haque’s question on why there aren’t more Googles and then examining the today’s VC climate, which generated some buzz….

]]> By: Max http://www.techcrunch.com/2008/04/15/where-have-all-the-bold-vcs-gone/comment-page-1/#comment-2181983 Max Wed, 16 Apr 2008 07:07:50 +0000 http://www.techcrunch.com/2008/04/15/where-have-all-the-bold-vcs-gone/#comment-2181983 I couldn't agree more on the angel/VC funding gap. Most web based startups do indeed need something in the 500-700k. When we were looking for our first round we had the same problem. We did find some new thinkers in the space (like Rob Monster @ Monster Venture Partners or the guys from H-Farm.it ) that are positioning themselves "north of angels, south of VC). Rob posted some of his thoughts here: http://blog.monsterventure.com/?p=12 I couldn’t agree more on the angel/VC funding gap. Most web based startups do indeed need something in the 500-700k.

When we were looking for our first round we had the same problem. We did find some new thinkers in the space (like Rob Monster @ Monster Venture Partners or the guys from H-Farm.it ) that are positioning themselves “north of angels, south of VC). Rob posted some of his thoughts here: http://blog.mon...nture.com/?p=12

]]> By: TechCrunch Japanese アーカイブ » 勇気あるVCはどこへ行った http://www.techcrunch.com/2008/04/15/where-have-all-the-bold-vcs-gone/comment-page-1/#comment-2181475 TechCrunch Japanese アーカイブ » 勇気あるVCはどこへ行った Wed, 16 Apr 2008 02:45:10 +0000 http://www.techcrunch.com/2008/04/15/where-have-all-the-bold-vcs-gone/#comment-2181475 [...] [原文へ] [...] [...] [原文へ] [...]

]]> By: YDrive http://www.techcrunch.com/2008/04/15/where-have-all-the-bold-vcs-gone/comment-page-1/#comment-2181464 YDrive Wed, 16 Apr 2008 02:40:38 +0000 http://www.techcrunch.com/2008/04/15/where-have-all-the-bold-vcs-gone/#comment-2181464 To the Deadpool? To the Deadpool?

]]> By: Markz http://www.techcrunch.com/2008/04/15/where-have-all-the-bold-vcs-gone/comment-page-1/#comment-2181388 Markz Wed, 16 Apr 2008 02:00:35 +0000 http://www.techcrunch.com/2008/04/15/where-have-all-the-bold-vcs-gone/#comment-2181388 The most interesting idea by Graham is to have VCs apply a different approach towards investing <$1 million in a lot of startups - much like CRV's Quickstart program. From a portfolio standpoint, seems like a no-brainer - no/very limited GP time commitment, plus option value from the right to invest in future rounds. Then again, why should a VC take the risk if they can get maybe 5x consistently on proven companies? Maybe what it comes down to is the LPs that invest in VCs -- they probably need to put a few billion into this tier of the VC market. Since higher seed/early stage investment returns have been documented, it makes financial sense. Then again, why should an LP take the risk if they can get a good return consistently through proven investments? It would be great to see some LPs enter this market - just as they entered the VC market and saw tremendous gains in their portfolios from doing that. The most interesting idea by Graham is to have VCs apply a different approach towards investing <$1 million in a lot of startups – much like CRV’s Quickstart program.

From a portfolio standpoint, seems like a no-brainer – no/very limited GP time commitment, plus option value from the right to invest in future rounds.

Then again, why should a VC take the risk if they can get maybe 5x consistently on proven companies?

Maybe what it comes down to is the LPs that invest in VCs — they probably need to put a few billion into this tier of the VC market. Since higher seed/early stage investment returns have been documented, it makes financial sense.

Then again, why should an LP take the risk if they can get a good return consistently through proven investments?

It would be great to see some LPs enter this market – just as they entered the VC market and saw tremendous gains in their portfolios from doing that.

]]> By: EditorX http://www.techcrunch.com/2008/04/15/where-have-all-the-bold-vcs-gone/comment-page-1/#comment-2181298 EditorX Wed, 16 Apr 2008 01:14:40 +0000 http://www.techcrunch.com/2008/04/15/where-have-all-the-bold-vcs-gone/#comment-2181298 Some say there is not much interest in investing as compared to a few years ago? can anyone confirm this? Some say there is not much interest in investing as compared to a few years ago? can anyone confirm this?

]]> By: Alex Iskold http://www.techcrunch.com/2008/04/15/where-have-all-the-bold-vcs-gone/comment-page-1/#comment-2181282 Alex Iskold Wed, 16 Apr 2008 01:05:42 +0000 http://www.techcrunch.com/2008/04/15/where-have-all-the-bold-vcs-gone/#comment-2181282 Bulls eye! The problem is that it might not be worth people's while to do investments in between? Bulls eye!

The problem is that it might not be worth people’s while to do investments in between?

]]> By: jason goldberg http://www.techcrunch.com/2008/04/15/where-have-all-the-bold-vcs-gone/comment-page-1/#comment-2181258 jason goldberg Wed, 16 Apr 2008 00:53:45 +0000 http://www.techcrunch.com/2008/04/15/where-have-all-the-bold-vcs-gone/#comment-2181258 It costs less now to prove more. 5 years ago you needed a couple million dollars and usually at least a year to get a good product to market. Today, you can get to market on a few hundred thousand dollars and a few months. That gap has created a venture gap. Venture firms raised these huge funds and need to invest them. The scaresest resource a VC has is his/her time. It's challenging for a VC to spend his/her time chasing $250k deals when they need to invest a billion dollar fund. VC's need to put money to work and they need to see a clear path to turn $5-10M in investment into $200M+ in gain 9/10 times. This venture gap has provided an opening for angels to not only be the first money in, but to also be bigger players as their money lasts longer and takes companies further. I've heard from many savvy VC's over the past few months who recognize this venture gap and who are starting to get creative around how to get in first. The entrepreneur benefits from all this. Good money will always chase good ideas. A few years ago many an entrepreneur was beholden to their VC's from day 1 -- they had to be or they couldn't fund the business in the early days. Today though entrepreneurs can get further along with less money, enabling them to prove traction before raising VC if they so choose. Angel terms are typically less onerous than VC, another positive for the entrepreneur. That VC's are now starting to figure out how they too can play in the early early build it for cheap game -- also positive for the entrepreneur. It costs less now to prove more.

5 years ago you needed a couple million dollars and usually at least a year to get a good product to market.

Today, you can get to market on a few hundred thousand dollars and a few months.

That gap has created a venture gap.
Venture firms raised these huge funds and need to invest them.
The scaresest resource a VC has is his/her time. It’s challenging for a VC to spend his/her time chasing $250k deals when they need to invest a billion dollar fund. VC’s need to put money to work and they need to see a clear path to turn $5-10M in investment into $200M+ in gain 9/10 times.

This venture gap has provided an opening for angels to not only be the first money in, but to also be bigger players as their money lasts longer and takes companies further.

I’ve heard from many savvy VC’s over the past few months who recognize this venture gap and who are starting to get creative around how to get in first.

The entrepreneur benefits from all this. Good money will always chase good ideas. A few years ago many an entrepreneur was beholden to their VC’s from day 1 — they had to be or they couldn’t fund the business in the early days. Today though entrepreneurs can get further along with less money, enabling them to prove traction before raising VC if they so choose. Angel terms are typically less onerous than VC, another positive for the entrepreneur. That VC’s are now starting to figure out how they too can play in the early early build it for cheap game — also positive for the entrepreneur.

]]> By: Tony Stubblebine http://www.techcrunch.com/2008/04/15/where-have-all-the-bold-vcs-gone/comment-page-1/#comment-2181124 Tony Stubblebine Tue, 15 Apr 2008 23:32:14 +0000 http://www.techcrunch.com/2008/04/15/where-have-all-the-bold-vcs-gone/#comment-2181124 Maybe the bold VCs moved to an industry that actually needs capital. Do you know who can fill the $100k-$500k gap? Customers. If your software works, and by works I mean makes them money, then you shouldn't have problems finding business. I'd wager that your product has to be less outstanding to make $100k in revenue than it does to attract $100k in financing. Maybe the bold VCs moved to an industry that actually needs capital. Do you know who can fill the $100k-$500k gap? Customers. If your software works, and by works I mean makes them money, then you shouldn’t have problems finding business. I’d wager that your product has to be less outstanding to make $100k in revenue than it does to attract $100k in financing.

]]> By: befreenistan http://www.techcrunch.com/2008/04/15/where-have-all-the-bold-vcs-gone/comment-page-1/#comment-2181091 befreenistan Tue, 15 Apr 2008 23:14:50 +0000 http://www.techcrunch.com/2008/04/15/where-have-all-the-bold-vcs-gone/#comment-2181091 In all honesty, the returns in any type of venture investing, angel or institutional, is extremely low. The reality is that there are far too many entrepreneurs creating great products and apps, but the barriers are so low that success will remain elusive for all non-blockbusters. This part of the economy has rationalized itself to deliver $1 CPM to one and all. In all honesty, the returns in any type of venture investing, angel or institutional, is extremely low. The reality is that there are far too many entrepreneurs creating great products and apps, but the barriers are so low that success will remain elusive for all non-blockbusters. This part of the economy has rationalized itself to deliver $1 CPM to one and all.

]]> By: nemrut http://www.techcrunch.com/2008/04/15/where-have-all-the-bold-vcs-gone/comment-page-1/#comment-2181089 nemrut Tue, 15 Apr 2008 23:14:27 +0000 http://www.techcrunch.com/2008/04/15/where-have-all-the-bold-vcs-gone/#comment-2181089 I think one has to take into consideration the reputation/stereotypes and generational gap of your avg vc with your avg startup founder to understand why the former tend to be more conservative and less gung-ho... I think one has to take into consideration the reputation/stereotypes and generational gap of your avg vc with your avg startup founder to understand why the former tend to be more conservative and less gung-ho…

]]> By: t s http://www.techcrunch.com/2008/04/15/where-have-all-the-bold-vcs-gone/comment-page-1/#comment-2181076 t s Tue, 15 Apr 2008 23:11:41 +0000 http://www.techcrunch.com/2008/04/15/where-have-all-the-bold-vcs-gone/#comment-2181076 And TC says nothing interesting comes from Boston. Seems you guys are totally enthralled with anything YC, trolling YC news and basically reposting PG thoughts. Didn't see the value add from this post. Whats up? And TC says nothing interesting comes from Boston. Seems you guys are totally enthralled with anything YC, trolling YC news and basically reposting PG thoughts.
Didn’t see the value add from this post. Whats up?

]]> By: Q dub http://www.techcrunch.com/2008/04/15/where-have-all-the-bold-vcs-gone/comment-page-1/#comment-2181069 Q dub Tue, 15 Apr 2008 23:06:51 +0000 http://www.techcrunch.com/2008/04/15/where-have-all-the-bold-vcs-gone/#comment-2181069 The falling cost to develop websites and applications puts the pie back in the hands of entrepreneurs. The best financiers are now those who provide more council and soft-support than raw capital, which is exactly what Y Combinator does. The falling cost to develop websites and applications puts the pie back in the hands of entrepreneurs. The best financiers are now those who provide more council and soft-support than raw capital, which is exactly what Y Combinator does.

]]> By: Matt http://www.techcrunch.com/2008/04/15/where-have-all-the-bold-vcs-gone/comment-page-1/#comment-2181068 Matt Tue, 15 Apr 2008 23:06:41 +0000 http://www.techcrunch.com/2008/04/15/where-have-all-the-bold-vcs-gone/#comment-2181068 Your $26 billion angel figure has a broken link. I'd like to check out your source data. Your $26 billion angel figure has a broken link. I’d like to check out your source data.

]]> By: DaveS http://www.techcrunch.com/2008/04/15/where-have-all-the-bold-vcs-gone/comment-page-1/#comment-2181049 DaveS Tue, 15 Apr 2008 23:00:01 +0000 http://www.techcrunch.com/2008/04/15/where-have-all-the-bold-vcs-gone/#comment-2181049 TC should outsource all article writing to YC gang. You guys have now resorted to even covering YC news now! Aren't there actual STARTUPS worthy of covering?! TC should outsource all article writing to YC gang. You guys have now resorted to even covering YC news now!

Aren’t there actual STARTUPS worthy of covering?!

]]> By: Sean http://www.techcrunch.com/2008/04/15/where-have-all-the-bold-vcs-gone/comment-page-1/#comment-2181045 Sean Tue, 15 Apr 2008 22:57:47 +0000 http://www.techcrunch.com/2008/04/15/where-have-all-the-bold-vcs-gone/#comment-2181045 PS: I agree that there needs to be more investments in this range (100K-500K). Clicky was seeking 100K a while back but no one would take it. Either they wanted to give us pocket change, or millions of dollars. Neither one was what we wanted. Of course, it's kind of nice owning 100% of our company and not having to answer to anyone. And now that we're making good income on our own, we ain't taking anyone's money. Oh well - their loss! PS: I agree that there needs to be more investments in this range (100K-500K). Clicky was seeking 100K a while back but no one would take it. Either they wanted to give us pocket change, or millions of dollars. Neither one was what we wanted.

Of course, it’s kind of nice owning 100% of our company and not having to answer to anyone. And now that we’re making good income on our own, we ain’t taking anyone’s money. Oh well – their loss!

]]>