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Venture Outlook 2016

37 points by rcarrigan87 11y ago

an4rchy 11y ago
I feel like it's always going to be a cycle as with the markets. As long as there is demand and money available the prices go up and when some other economic factors lead to a downturn people want their money and as money is pulled out prices go down. If the VCs are willing to pay the price, they're willing to accept the risks.
- rcarrigan87 11y ago
  What'll be interesting this time around is most of the money is tied up in the illiquid private markets rather than the public market IPO frenzy in 2000.
osullivj 11y ago
The market can stay irrational longer than you can stay solvent. Someone once said...
goodcjw2 11y ago
I am wondering what will happen once private funding source diminishes. When it becomes way harder to raise money in private market, then over valued yet-not-profitable startups will have two choices: 1) go dead, or 2) try desperate hard to go public. Then, we can really start talking about the crush. Guess 2016 could be 1999 all over again? Smart founders may already see this. They might already have started to control burn rate, working hard on get real profits. At the end of the day, the survivors will shine.
birken 11y ago
> And why not? The platforms often get paid fees. The platforms often get free carry. And what many people don’t realize is that most syndicates get what is known as “deal-by-deal” carry This is really such a huge point. A popular syndicate on AngelList might invest 25k of their money and get another 300k going along with them. So in this example they are essentially getting 70k worth of upside (25k + (15% carry * 300k)) for 25k. On top of that, they might be investing 25k of their funds money (IE, other people's money they get a small carry from) but getting the AngelList carry for themselves. If you had a deal like this, why not pump every company you can imagine? It is just transferring money from your followers to yourself in a roundabout way. Of course, what if the deals are good and everybody makes money? Well, that is certainly possible, but economically speaking "deal-by-deal" carry doesn't encourage that behavior. The biggest incentive lies in the syndicate leader making as many deals as possible in hopes of finding a winner, because losers barely hurt them at all. Your incentives are not aligned if you invest in every deal. And if you are just picking and choosing your deals, then you are essentially giving away 20% carry even though you are doing all the filtering. Also speaking for YC companies, none of the "hot" companies coming out of demo day raised money on AngelList, because they didn't need to. So there is also a selection bias where the "hot" companies wont ever go on AngelList. Now, the "hot" companies may or may not be the companies with the best return, but based on their valuations the market thinks they are. Now not to be too negative to AngelList, because I think as a platform to allow investors to invest directly in companies it is great. But the syndicate stuff is a little hairy. Of course you never hear anything negative about it because it is a great way for SV "influencers" to turn their followers into money.

37 points by rcarrigan87 11y ago

I feel like it's always going to be a cycle as with the markets. As long as there is demand and money available the prices go up and when some other economic factors lead to a downturn people want their money and as money is pulled out prices go down. If the VCs are willing to pay the price, they're willing to accept the risks.

rcarrigan87 11y ago
What'll be interesting this time around is most of the money is tied up in the illiquid private markets rather than the public market IPO frenzy in 2000.

osullivj 11y ago

The market can stay irrational longer than you can stay solvent. Someone once said...

goodcjw2 11y ago

I am wondering what will happen once private funding source diminishes. When it becomes way harder to raise money in private market, then over valued yet-not-profitable startups will have two choices: 1) go dead, or 2) try desperate hard to go public. Then, we can really start talking about the crush. Guess 2016 could be 1999 all over again? Smart founders may already see this. They might already have started to control burn rate, working hard on get real profits. At the end of the day, the survivors will shine.

birken 11y ago

> And why not? The platforms often get paid fees. The platforms often get free carry. And what many people don’t realize is that most syndicates get what is known as “deal-by-deal” carry This is really such a huge point. A popular syndicate on AngelList might invest 25k of their money and get another 300k going along with them. So in this example they are essentially getting 70k worth of upside (25k + (15% carry * 300k)) for 25k. On top of that, they might be investing 25k of their funds money (IE, other people's money they get a small carry from) but getting the AngelList carry for themselves. If you had a deal like this, why not pump every company you can imagine? It is just transferring money from your followers to yourself in a roundabout way. Of course, what if the deals are good and everybody makes money? Well, that is certainly possible, but economically speaking "deal-by-deal" carry doesn't encourage that behavior. The biggest incentive lies in the syndicate leader making as many deals as possible in hopes of finding a winner, because losers barely hurt them at all. Your incentives are not aligned if you invest in every deal. And if you are just picking and choosing your deals, then you are essentially giving away 20% carry even though you are doing all the filtering. Also speaking for YC companies, none of the "hot" companies coming out of demo day raised money on AngelList, because they didn't need to. So there is also a selection bias where the "hot" companies wont ever go on AngelList. Now, the "hot" companies may or may not be the companies with the best return, but based on their valuations the market thinks they are. Now not to be too negative to AngelList, because I think as a platform to allow investors to invest directly in companies it is great. But the syndicate stuff is a little hairy. Of course you never hear anything negative about it because it is a great way for SV "influencers" to turn their followers into money.