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So many of these startups seem to have fragile, non-strategic products to get these valuations. I don't understand how they get funded in the first place. Hopef

So many of these startups seem to have fragile, non-strategic products to get these valuations. I don't understand how they get funded in the first place. Hopefully my first jaded thought is further from the truth than I suspect it is, which is some college grad whose dad is plugged in gets his weak idea funded. Or maybe the far uglier truth is that venture actually has that much money to flat out waste.

CryoLogic 9y ago
I agree with this sentiment. I have found that with a little big of economics I've been able to pick out successes much easier than large VC firms. It almost seems as if many of these firms are throwing money away without even thinking over the 101 level business requirements: expenses, revenues, growth rate, 2nd derivative growth rate, market size, profit per employee etc.
- anitil 9y ago
  Could you point me in the direction of how to learn these things?
- marcinzm 9y ago
  Why do you assume that VCs don't know this rather than assume that the market creates forces which make them not care? I'd guess there is more money floating around than there are startups which meet all the metrics. Thus there's investment in riskier ventures (remember it doesn't matter if any startup succeeds as long as the fund comes out on top as a whole). Moreover startups which do have all these metrics may have many competing VCs which in turn lowers the return for the VC.
  - eight_ender 9y ago
    This plus FOMO will continue to be a big factor until more and more of these bad ideas implode.
nostrademons 9y ago
I think your second truth is closer to the real one. There's a lot of capital floating around out there. Most of it is actually foreign, either OPEC sovereign wealth funds (like how Saudi Arabia put $3.5B into Uber) or wealthy Chinese businessmen. All that capital is seeking a productive return: it has to go do something, if it sits in a bank account it'll just shrink because of inflation. Right now, tech is basically the only sector of the economy that has noticeable growth. Hence, anything vaguely connected to tech gets plenty of funding, regardless of how ill-considered the idea is. The fundraising climate has tightened fairly significantly since 2015 - that's why all these companies are going out of business. But around 2012-2013, the way you got funded was you went out, painted a picture of how everyone in the world would be using your technology-enabled product, and asked lots of people for money. There were so many people with money to invest that you'd be bound to find somebody.
- robtaylor 9y ago
  anyone got any contact details for said wealthy Chinese businessmen (and women!) ?
  - samstave 9y ago
    Seriously, I watched the startupschool video on "how to raise money" and they literally gave zero advice on how to raise money. They just said "you'll need money" So how does one find Saudi or Chinese money that needs to do _something_
    - bagels 9y ago
      I know this is kind of circular, but you need to cultivate a network of CEOs and VC people before needing to raise. Then you'll know who to raise from or be able to get introduced to others.
      - robtaylor 9y ago
        Time + Money = More Money
deleted 9y ago
[deleted]
bartread 9y ago
Quite. Luxe: that is some bullshit right there. It's exactly the kind of nonsense company that gives startup culture and "disruption" a bad name. Whilst it's possible to make money off the back of entitlement, that one certainly feels like at least several bridges too far.
- hkmurakami 9y ago
  Idk. I personally feel like grocery delivery is in the same bucket as valet service.
  - thisone 9y ago
    don't know about the states, but in the UK grocery delivery is incredibly popular. Most people I know use it with an 'unlimited' subscription and feel the money they save, by knowing exactly what they will be spending and by not having impulse buys, plus the time saved makes it worth it.
    - bartread 9y ago
      Worth pointing out that here in the UK much, in fact I suspect most, grocery delivery is done by existing supermarkets rather than companies that were originally independent startups. Ocado might be seen as an exception but even that was started out as a partnership between Waitrose and another company (I forget which). I'm also discounting more niche services, such as Graze, btw.
  - NiklasMort 9y ago
    Grocery Delivery is great. Usually only costs <5 Eur and it saves you a lot of time and hassle. Besides I can put together a list in peace at home and not rush through the store. Personally I'd say its the most useful modern thing there is
  - CalRobert 9y ago
    I desperately want grocery delivery because I _hate_ grocery shopping, at least for normal sundries. Stores move the stuff I'm looking for every few months. It's crowded. You're being hit with ads constantly. I have to laboriously read ingredient labels when a simple online filter (or, at least, cmd-f) would do the trick. Self-checkout systems tacitly accuse you of theft because you brought a backpack and want to put groceries in it, but it weighs more than 2 oz. It's just effing boring and takes forever. High end grocery stores are nicer, but not where I go for the week's eggs. Delivery is nice too, but the picking is what I really hate. Showing up, picking up a box, and leaving would be fine too. However, if delivery is the main option, I'll take it. The fact that I strongly dislike Tesco and STILL just set up an account for grocery delivery so I can pay them to pick groceries and bring them to me, because I hate going shopping so much, suggests that this service is needed by at least some people. I also wanted to use buymie.eu, but I have an aversion to services that would work perfectly well as websites but insist on an app instead.
jtraffic 9y ago
I see hindsight bias lurking. Now we see it as a "waste," but I dare you to make and publicly post predictions about a bunch of startups, and prove you are more accurate than VCs.
- jksmith 9y ago
  Happy to take on the challenge. Two recent investments involve a "Mindfulness" app and an even better coffee machine. Guess who made those investments, while I wouldn't have touched them with a 10 foot pole? They're sophomoric ideas that offer little in the way of fundamentals. Where's the compelling drive to grow an industry? Where's the compelling argument for making money with a real capitalizeable asset? How do these projects fundamentally grow an area of the economy, put people to work, so they will want to buy these things. make life better and make investors more money? This kid is what we should be investing in: https://qz.com/909614/a-cameroonian-17-year-old-won-the-google-code-in-after-the-internet-was-shut-down-in-his-hometown-of-bamenda/ https://qz.com/909614/a-cameroonian-17-year-old-won-the-goog... Putting this kid to work is what we should be doing, not goofing around with some stupid ass Mindfulness app in SF. This is exactly the plan I'm working on. If somebody doesn't scoop this kid up, I will at some point. Africa and South America each represent 6% of the world's app revenue. You want to make some money? Help these continents compete. Help the governments involved learn how to manage their information and build out their IT infrastructure. Help bright kids like the one I linked to use their talents to help you make money and grow their local economies at the same time. That's what I'm interested in. If vc's in the US have been reduced to investing in yet another goddam coffee machine to sell to the US market, then I'd suggest silicon valley has exhausted their strategic thinking, and have been reduced to daddy and friends giving college grad something to do. It's a waste of money that could be so much more strategically spent.
  - otterley 9y ago
    Which African countries have both great untapped talent and aren't hopelessly mired in corruption or violence and have a strong western-style legal framework? Those will be the ones that VCs feel safest investing in. Until they are identified, I don't think VCs will put their money at risk. (They may already exist; I'm pleading ignorance here.)

CryoLogic 9y ago

I agree with this sentiment. I have found that with a little big of economics I've been able to pick out successes much easier than large VC firms. It almost seems as if many of these firms are throwing money away without even thinking over the 101 level business requirements: expenses, revenues, growth rate, 2nd derivative growth rate, market size, profit per employee etc.

anitil 9y ago
Could you point me in the direction of how to learn these things?
marcinzm 9y ago
Why do you assume that VCs don't know this rather than assume that the market creates forces which make them not care? I'd guess there is more money floating around than there are startups which meet all the metrics. Thus there's investment in riskier ventures (remember it doesn't matter if any startup succeeds as long as the fund comes out on top as a whole). Moreover startups which do have all these metrics may have many competing VCs which in turn lowers the return for the VC.
- eight_ender 9y ago
  This plus FOMO will continue to be a big factor until more and more of these bad ideas implode.

nostrademons 9y ago

I think your second truth is closer to the real one. There's a lot of capital floating around out there. Most of it is actually foreign, either OPEC sovereign wealth funds (like how Saudi Arabia put $3.5B into Uber) or wealthy Chinese businessmen. All that capital is seeking a productive return: it has to go do something, if it sits in a bank account it'll just shrink because of inflation. Right now, tech is basically the only sector of the economy that has noticeable growth. Hence, anything vaguely connected to tech gets plenty of funding, regardless of how ill-considered the idea is. The fundraising climate has tightened fairly significantly since 2015 - that's why all these companies are going out of business. But around 2012-2013, the way you got funded was you went out, painted a picture of how everyone in the world would be using your technology-enabled product, and asked lots of people for money. There were so many people with money to invest that you'd be bound to find somebody.

robtaylor 9y ago
anyone got any contact details for said wealthy Chinese businessmen (and women!) ?
- samstave 9y ago
  Seriously, I watched the startupschool video on "how to raise money" and they literally gave zero advice on how to raise money. They just said "you'll need money" So how does one find Saudi or Chinese money that needs to do _something_
  - bagels 9y ago
    I know this is kind of circular, but you need to cultivate a network of CEOs and VC people before needing to raise. Then you'll know who to raise from or be able to get introduced to others.
    - robtaylor 9y ago
      Time + Money = More Money

deleted 9y ago

[deleted]

bartread 9y ago

Quite. Luxe: that is some bullshit right there. It's exactly the kind of nonsense company that gives startup culture and "disruption" a bad name. Whilst it's possible to make money off the back of entitlement, that one certainly feels like at least several bridges too far.

hkmurakami 9y ago
Idk. I personally feel like grocery delivery is in the same bucket as valet service.
- thisone 9y ago
  don't know about the states, but in the UK grocery delivery is incredibly popular. Most people I know use it with an 'unlimited' subscription and feel the money they save, by knowing exactly what they will be spending and by not having impulse buys, plus the time saved makes it worth it.
  - bartread 9y ago
    Worth pointing out that here in the UK much, in fact I suspect most, grocery delivery is done by existing supermarkets rather than companies that were originally independent startups. Ocado might be seen as an exception but even that was started out as a partnership between Waitrose and another company (I forget which). I'm also discounting more niche services, such as Graze, btw.
- NiklasMort 9y ago
  Grocery Delivery is great. Usually only costs <5 Eur and it saves you a lot of time and hassle. Besides I can put together a list in peace at home and not rush through the store. Personally I'd say its the most useful modern thing there is
- CalRobert 9y ago
  I desperately want grocery delivery because I _hate_ grocery shopping, at least for normal sundries. Stores move the stuff I'm looking for every few months. It's crowded. You're being hit with ads constantly. I have to laboriously read ingredient labels when a simple online filter (or, at least, cmd-f) would do the trick. Self-checkout systems tacitly accuse you of theft because you brought a backpack and want to put groceries in it, but it weighs more than 2 oz. It's just effing boring and takes forever. High end grocery stores are nicer, but not where I go for the week's eggs. Delivery is nice too, but the picking is what I really hate. Showing up, picking up a box, and leaving would be fine too. However, if delivery is the main option, I'll take it. The fact that I strongly dislike Tesco and STILL just set up an account for grocery delivery so I can pay them to pick groceries and bring them to me, because I hate going shopping so much, suggests that this service is needed by at least some people. I also wanted to use buymie.eu, but I have an aversion to services that would work perfectly well as websites but insist on an app instead.

jtraffic 9y ago

I see hindsight bias lurking. Now we see it as a "waste," but I dare you to make and publicly post predictions about a bunch of startups, and prove you are more accurate than VCs.

jksmith 9y ago
Happy to take on the challenge. Two recent investments involve a "Mindfulness" app and an even better coffee machine. Guess who made those investments, while I wouldn't have touched them with a 10 foot pole? They're sophomoric ideas that offer little in the way of fundamentals. Where's the compelling drive to grow an industry? Where's the compelling argument for making money with a real capitalizeable asset? How do these projects fundamentally grow an area of the economy, put people to work, so they will want to buy these things. make life better and make investors more money? This kid is what we should be investing in: https://qz.com/909614/a-cameroonian-17-year-old-won-the-google-code-in-after-the-internet-was-shut-down-in-his-hometown-of-bamenda/ https://qz.com/909614/a-cameroonian-17-year-old-won-the-goog... Putting this kid to work is what we should be doing, not goofing around with some stupid ass Mindfulness app in SF. This is exactly the plan I'm working on. If somebody doesn't scoop this kid up, I will at some point. Africa and South America each represent 6% of the world's app revenue. You want to make some money? Help these continents compete. Help the governments involved learn how to manage their information and build out their IT infrastructure. Help bright kids like the one I linked to use their talents to help you make money and grow their local economies at the same time. That's what I'm interested in. If vc's in the US have been reduced to investing in yet another goddam coffee machine to sell to the US market, then I'd suggest silicon valley has exhausted their strategic thinking, and have been reduced to daddy and friends giving college grad something to do. It's a waste of money that could be so much more strategically spent.
- otterley 9y ago
  Which African countries have both great untapped talent and aren't hopelessly mired in corruption or violence and have a strong western-style legal framework? Those will be the ones that VCs feel safest investing in. Until they are identified, I don't think VCs will put their money at risk. (They may already exist; I'm pleading ignorance here.)