8 ms·

SoftBank has too much capital for something like YCombinator. It simply doesn't scale. Even the VC industry is a drop in the bucket compared to the broader PE

by IBM 9y ago

SoftBank has too much capital for something like YCombinator. It simply doesn't scale. Even the VC industry is a drop in the bucket compared to the broader PE industry.

noodle 9y ago
While your statements aren't wrong, there are other large companies that are doing this type of thing. AT&T for example is running incubators and is on the order of magnitude of size as SoftBank.
- IBM 9y ago
  Lots of companies have corporate VC arms. The difference is they aren't investing anywhere near the amount SoftBank is. Their $100 billion tech fund is too big for the kind of deals that the typical VC invests in. It's pretty clear this is going to have various strategies. Lots of small investments in startups, buyouts like they did with ARM, and these minority stakes in public markets.
  - mljoe 9y ago
    Right $100 billion dumped all at once into VC would basically destroy the whole ecosystem. The saying is VC can't work when there is too much gasoline (capital) and not enough fire (talent/innovation). Despite the headline successes, most VC firms fail.
aianus 9y ago
Honestly curious, has anyone ever tried giving $1 million to 4,000 moderately vetted wannabe entrepreneurs? Say, the entire graduating classes of Stanford, Berkeley, or MIT. How do we know it doesn't work?
- chrischen 9y ago
  I'd say most Stanford, Berkeley, or MIT grads can easily land a few hundred thousand dollars (which is honestly more than enough to produce something or test an idea) with any half-decent idea or half-decent ability to bull-shit. Most who fail do so because they didn't pass the passion bar to bull shit or push something out.
- IBM 9y ago
  The limiting factor is the bandwidth of the people making the investment decisions. There's no way to manage a portfolio of that size and dedicate the amount of time you'd want to any one of them. Also, why give $1 million to 4000 startups when you can put more wood behind the arrow of your best ideas? The point of active management is to generate alpha, doing so requires superior analysis or some other "edge".
  - AnimalMuppet 9y ago
    How do you know what your "best ideas" are? And, are they better than the average of those 4000 startups? Are they better than the top 1% of those 4000 startups? It's not clear to me that, starting from here, NVidia is going to be a fast-growth company - especially not compared to a group of startups.
    - outside1234 9y ago
      its possible they are using NVidia as a proxy for a bet on Machine Learning.
    - clarky07 9y ago
      This is a bet on AI and machine learning. Not video games. NVidia is currently the publicly traded company that best fits that narrative. If you think it will get big, this is the company you buy.
  - chii 9y ago
    > the bandwidth of the people making the investment decisions why do they need to make any decision at all - if it's like lottery, why not invest in all 4000, let it run wild? The survivors after their money runs out are the good ones.
    - noway421 9y ago
      Presumably bad ROI
      - 9y ago
- Xeoncross 9y ago
  I assume you mean $1 billion ($1,000,000,000 / 4000 = $250,000) ? $1 million to 4,000 people is only $250 each. I would also assume the risk would be lower to give 2000 people $500,000 so they could hire people ($250,000 is only good for two-four person teams for maybe 2 years? Excludes hardware/travel if they are building something other than software products.)
  - whiskers 9y ago
    I think he means take the $4bn invested by Softbank and split that into 4,000 separate $1m investments!
  - stanmancan 9y ago
    I believe he meant $1,000,000 x 4,000 = $4 billion
  - deleted 9y ago
    [deleted]
- ciaranm 9y ago
  When I was at Goldman (I left years back), they were pretty proud of the 10k small businesses scheme. They ran it in both the US and UK. Not sure how much capital each got, but I guess it's similar to what you were thinking. http://www.goldmansachs.com/citizenship/10000-small-businesses/US/index.html http://www.goldmansachs.com/citizenship/10000-small-business...
- paulsutter 9y ago
  Dave McClure at 500 startups is about the closest model to that
- bisRepetita 9y ago
  If they do that on Monday, I am opening 100 startups on Tuesday... even if I think most of them may go down...

by IBM 9y ago

SoftBank has too much capital for something like YCombinator. It simply doesn't scale. Even the VC industry is a drop in the bucket compared to the broader PE industry.

noodle 9y ago

While your statements aren't wrong, there are other large companies that are doing this type of thing. AT&T for example is running incubators and is on the order of magnitude of size as SoftBank.

IBM 9y ago
Lots of companies have corporate VC arms. The difference is they aren't investing anywhere near the amount SoftBank is. Their $100 billion tech fund is too big for the kind of deals that the typical VC invests in. It's pretty clear this is going to have various strategies. Lots of small investments in startups, buyouts like they did with ARM, and these minority stakes in public markets.
- mljoe 9y ago
  Right $100 billion dumped all at once into VC would basically destroy the whole ecosystem. The saying is VC can't work when there is too much gasoline (capital) and not enough fire (talent/innovation). Despite the headline successes, most VC firms fail.

aianus 9y ago

Honestly curious, has anyone ever tried giving $1 million to 4,000 moderately vetted wannabe entrepreneurs? Say, the entire graduating classes of Stanford, Berkeley, or MIT. How do we know it doesn't work?

chrischen 9y ago
I'd say most Stanford, Berkeley, or MIT grads can easily land a few hundred thousand dollars (which is honestly more than enough to produce something or test an idea) with any half-decent idea or half-decent ability to bull-shit. Most who fail do so because they didn't pass the passion bar to bull shit or push something out.
IBM 9y ago
The limiting factor is the bandwidth of the people making the investment decisions. There's no way to manage a portfolio of that size and dedicate the amount of time you'd want to any one of them. Also, why give $1 million to 4000 startups when you can put more wood behind the arrow of your best ideas? The point of active management is to generate alpha, doing so requires superior analysis or some other "edge".
- AnimalMuppet 9y ago
  How do you know what your "best ideas" are? And, are they better than the average of those 4000 startups? Are they better than the top 1% of those 4000 startups? It's not clear to me that, starting from here, NVidia is going to be a fast-growth company - especially not compared to a group of startups.
  - outside1234 9y ago
    its possible they are using NVidia as a proxy for a bet on Machine Learning.
  - clarky07 9y ago
    This is a bet on AI and machine learning. Not video games. NVidia is currently the publicly traded company that best fits that narrative. If you think it will get big, this is the company you buy.
- chii 9y ago
  > the bandwidth of the people making the investment decisions why do they need to make any decision at all - if it's like lottery, why not invest in all 4000, let it run wild? The survivors after their money runs out are the good ones.
  - noway421 9y ago
    Presumably bad ROI
    - 9y ago
Xeoncross 9y ago
I assume you mean $1 billion ($1,000,000,000 / 4000 = $250,000) ? $1 million to 4,000 people is only $250 each. I would also assume the risk would be lower to give 2000 people $500,000 so they could hire people ($250,000 is only good for two-four person teams for maybe 2 years? Excludes hardware/travel if they are building something other than software products.)
- whiskers 9y ago
  I think he means take the $4bn invested by Softbank and split that into 4,000 separate $1m investments!
- stanmancan 9y ago
  I believe he meant $1,000,000 x 4,000 = $4 billion
- deleted 9y ago
  [deleted]
ciaranm 9y ago
When I was at Goldman (I left years back), they were pretty proud of the 10k small businesses scheme. They ran it in both the US and UK. Not sure how much capital each got, but I guess it's similar to what you were thinking. http://www.goldmansachs.com/citizenship/10000-small-businesses/US/index.html http://www.goldmansachs.com/citizenship/10000-small-business...
paulsutter 9y ago
Dave McClure at 500 startups is about the closest model to that
bisRepetita 9y ago
If they do that on Monday, I am opening 100 startups on Tuesday... even if I think most of them may go down...