Category: VC
January 11, 2019 New York Times : More Start-Ups Have an Unfamiliar Message for Venture Capitalists: Get Lost
The event had been organized by Frank Denbow, 33, a fixture of New York’s tech scene and the founder of T-shirt start-up Inka.io, to bring together start-up founders who have begun to question the investment framework that has supercharged their field. By encouraging companies to expand too quickly, Mr. Denbow said, venture capital can make them “accelerate straight into the ground.” (read more…)
CATEGORY: growth, risk, valuation, VC
November 29, 2018 Pitchbook : Why this VC puts efficiency above unicorns
If you put too much money in too early, you're going to destroy the cap table and possibly see the team losing focus because they are not ready and don't know how to deploy it properly. You're also going to artificially inflate its valuation, which in the short term might make the entrepreneur happy because of the paper wealth, but what happens if they don't outperform an already-aggressive business plan? (read more…)
November 13, 2018 The Hustle : As funding rounds grow larger, fewer startups are able to raise money
Venture capital mega-funds have supercharged startup fundraising all the way down to the seed: Since 2013, the average seed round of funding has grown from $550k to more than $2m. But, as the size of rounds has increased, The Wall Street Journal writes, the number of companies receiving that funding has decreased by more than 40% (read more…)
CATEGORY: capital, growth, VC, winner take all
October 10, 2018 CNBC~ : Start-up economy is a ‘Ponzi scheme,’ says Chamath Palihapitiya
Chamath Palihapitiya, the outspoken Silicon Valley tech investor, called the start-up economy a charade on Wednesday, while also addressing the current the state of Social Capital, his embattled investment firm. "We are, make no mistake … in the middle of an enormous multivariate kind of Ponzi scheme," said Palihapitiya, at the Launch Scale conference in San Francisco. (read more…)
CATEGORY: risk, valuation, VC, winner take all
August 22, 2018 The Quantified VC : How to Win in Venture Capital: Focus on the Fat Tails
Since the track record of VCs is overwhelmingly skewed by a tiny handful of “unicorns,” entrepreneurs who try to assess the reputation of VCs by only looking at home-runs may get a skewed view. In good times, investors will be supportive. But how will they behave during bad times? Even great companies go through ups and downs. If your startup is not one of the big winners (which is likely, based on probabilities), how will your VCs behave? Will they abandon ship?—?or worse, will they turn negative or downright hostile? (read more…)
CATEGORY: risk, valuation, VC, winner take all
July 1, 2018 Harvard Business Review : The Other Diversity Dividend
Over the past several years one of us (Paul Gompers) has examined the decisions of thousands of venture capitalists and tens of thousands of investments, and the evidence is clear: Diversity significantly improves financial performance on measures such as profitable investments at the individual portfolio-company level and overall fund returns. And even though the desire to associate with similar people—a tendency academics call homophily—can bring social benefits to those who exhibit it, including a sense of shared culture and belonging, it can also lead investors and firms to leave a lot of money on the table. (read more…)
CATEGORY: resilience, VC
June 21, 2018 Collaborative Fund : Tails, You Win
Venture capital is a tail-driven business. You’ve likely heard that. Make 100 investments, and almost all of your return will come from five of them; most of your return from one or two. Correlation Ventures crunched the numbers. Out of 21,000 venture financings from 2004 to 2014, 65% lost money. Two and a half percent of investments made 10x-20x. One percent made more than 20x return. Half a percent – about 100 companies – earned 50x or more. That’s where the majority of the industry’s returns come from. It skews even more as you drill down. There’s been $482 billion of VC funding in the last ten years. The combined value of the ten largest venture-backed companies is $213 billion. So ten venture-backed companies are valued at half the industry’s deployed capital. (read more…)
CATEGORY: VC, winner take all
June 20, 2018 Ilya Strebulaev via Stanford GSB : Inside the Secret World of Venture Capital
If you think talking a venture capital firm into funding your startup is hard, try getting one to share its secrets with you. That’s the challenge Stanford Graduate School of Business finance professor Ilya Strebulaev took on when he founded the Stanford Venture Capital Initiative, which has been steadily amassing a deep and unprecedented database designed to figure out how the VC world really works (read more…)
June 13, 2018 Red Wilson : The Valuation Obsession
There is an obsession with the values that are being placed on companies when they finance. There has always been one but it is worse than ever. Every day, without fail, I read a headline that so and so company has raised, will raise, or is trying to raise capital at some eye popping valuation. (read more…)
CATEGORY: capital, valuation, VC
June 10, 2018 Carl Fritjofsson via Hacker Noon : Do VCs really add value??—?Founders say sometimes.
As venture capitalists, we pride ourselves on being “value-added investors”. We not only provide financial means to scale a company, but it is often accompanied by advice, connections and professional services of various kinds. I always aspire to be the most trusted and helpful investor and advisor to any company I get involved with. But in all honesty, I’m fairly certain that VCs tend to oversell the impact we have at a company and the actual value-add we bring. (read more…)
CATEGORY: leadership, VC