January 4, 2018 Dave Hersh via Medium : Why Buying a Stalled Startup is Better than Starting From Scratch (Now)
After several years, I learned that the companies are out there, but the stars have to align to make a deal work. Ideally…
- You have a personal connection to the business, including founders and investors.
- The board is ready for a move like this.
- The core R&D team is excited about this move.
- You know and love the category.
- The business stalled due to go-to-market failure, not lack of demand.
- It’s not a competitive M&A process.
- You can move quickly.
- You’re ready to roll up your sleeves and run the business.
CATEGORY: alternative financing, leadership, profitability
December 26, 2017 Fred Wilson : The Second Quartile
The best four to five investments per fund will usually produce greater than 80% of the total returns of a fund (the top quartile). This is where you might imagine that we spend all of our time, but the truth is that these investments generally go well and while we certainly do everything we can to help these companies, they often do not demand a lot of our time. When they do require a lot of our time, it tends to be situational. (read more…)
CATEGORY: leadership, resilience, winner take all
December 22, 2017 Bryce Roberts via Medium : Where There’s Smoke There’s Fire
The largest VCs have made their bets early, so funding slows for fast followers. Timelines for user growth take longer than anticipated. Revenue comes harder and less profitably than planned. New competition continues to get funded, albeit from less well known funding sources. Then, the category starts to feel and look and actually be overfunded. Enter the next shiny thing. (read more…)
CATEGORY: resilience, VC, winner take all
December 20, 2017 Luke Kanies via Medium : Venture Capital Is Built on Serendipity
Venture investing is fundamentally uncertain. You’re making big bets on people, ideas, and markets that might never work out, and there are more ways to fail than succeed. As a result, investing has to take into account the likely failure of many efforts. If your financial model assumes each of your investments will be a success, you will have a short career indeed. (read more…)
CATEGORY: risk, VC, winner take all
December 7, 2017 Luke Kanies via Medium : Unicorns Distract Us from a Graveyard
I’m convinced that a firm that directly invested in reducing its failure rate would have as many unicorns, but it would also have more positive returns throughout its portfolio, and in the midst of building more companies and making more money, it just might do a little good at the same time. That would be a nice change. (read more…)
CATEGORY: risk, VC, winner take all
December 6, 2017 First Round Capital : State of Startups 2017
Before we do, though, we want to acknowledge the significance of two ongoing conversations in our industry — both of which are heavily represented in the results we chose to feature. The first is about diversity and inclusion, which we incorporated into last year's survey to get founders' perspectives on root causes and possible solutions. And the second is about sexual harassment. We included a number of questions about this issue in 2017, and the results were stark. At First Round, whenever we ask founders what data they most want and need, they almost always say the same thing: they want to know what other entrepreneurs are thinking and doing (and whether what they're doing is normal or in line with their peers). To answer these questions, we're pleased to publish the industry's largest set of data specific to the founder and startup experience — we hope you find it informative and insightful. (read more…)
CATEGORY: growth, leadership, resilience
December 3, 2017 Jerry Neumann : Power Laws in Venture Portfolio Construction
Every person in venture, when pushed on why either so many companies don’t succeed or on why any young company deserves to be valued at $1 billion or more, says that it’s because venture-backed companies follow a power law. But when they think about portfolio construction, they treat outcomes as some other sort of distribution, one that’s easier to reason about. This post will take the hard road and try to reason about power law distributions. That means math, and code. (read more…)
November 29, 2017 Hunter Walk : For VCs, “What Could Go Right” Is More Important Than “What Could Go Wrong”
VCs are in the business of backing companies that have a substantial chance of failing and the earlier you invest, the more likely you are to see a zero return on your capital. What offsets this is that the successes tend to be outsized, returning 20x, 50x, or even 100x+. The notion that tremendous value is created by a very small percentage of startups, and the financiers behind this businesses are counting on a few of these companies to make up for all the nonperforming investments is called a power law distribution. (read more…)
CATEGORY: risk, VC, winner take all
November 28, 2017 Pitchbook : Why unicorns are overvalued (and the industry knows it)
The rise of private market unicorns is well known—rising from 40 in the US when the term was coined four years ago to more than 120 now. The cumulative unrealized value of current US unicorns is approaching $600 billion, per PitchBook data. Exit times are lengthening, giving rise to a dynamic I've dubbed the "zombiecorn" as VC-backed companies stay private for far longer than has been seen historically. But what if it's all built on a lie? (read more…)
CATEGORY: risk, valuation, VC
November 27, 2017 Pitchbook : 16 charts showing current trends in US venture capital
As of the end of the third quarter, this year is set to reach a decade-high in terms of total VC investment—but deal activity is on pace to decline sharply for the second year in a row (read more…)
CATEGORY: risk, VC, winner take all