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Big and risky business has always been paid for by big money. Trading voyages were big business and were limited in the number available. There were not million

Big and risky business has always been paid for by big money. Trading voyages were big business and were limited in the number available. There were not millions of ships setting sail everyday. The risk and cost factor in websites is rapidly reducing. As the risk reduces, so will the need to go to people dedicated towards giving money. It will be easier to raise money locally and in your environment, as has been done for a long time. In human society, it's my observation that there are two types of capital being raised: -- Risky and big money: These is the type of money that gets raised from venture capitalists nowadays and from rich dudes back in the shipping days -- Less risky and smaller money: This type of money is raised from savings, bank loans and borrowed from family. Websites and many of these simple technology things are rapidly moving out of the first category and into the second category. Cost is dropping and risk is dropping. Things like robots or electric cars are now in the first category.

garply 16y ago
Actually, what you're saying seems true according to PG's own "meta-trend" of founders of web startups becoming more powerful. Founders would be most powerful when they only need to raise money from friends and family - as it continues to become cheaper to start such a startup, why shouldn't the angel industry contract just as the VC industry is doing now?
- pg 16y ago
  There's a lower bound on the cheapness: the living expenses of the founders and the people they hire. Few families could risk that amount of money on something as risky as a startup.
byrneseyeview 16y ago
It doesn't cost much to run a website, but it can still cost a lot to grow a business. Look at all the companies in the local space. Their limiting factor is how many sales reps they can hire; the company that raises $10 million beats the company that raises $1 million. The same holds true for long-tail content generation. If you want to build a better Demand Media, you need to spend like they spend. As transaction costs in general decline, it will make less and less sense to rely on friends and family, the way I don't rely on friends and family to make my shoes, even though shoes are (adjusted for inflation), much cheaper than they have been in the past. Your "Two types of capital" division is arbitrary, both because you're turning a continuum into a binary decision, and because that's just one way to divide things. I could divide capital-raising businesses into those with limited scale and those with unlimited scale. There are more and more businesses with unlimited scale, and the optimal way to run such a business is to maximize risk, and to use someone else's capital to place bigger bets.
pg 16y ago
The volume of shipping varied at different times, but it was always a huge component of European economies. There were points in the preindustrial period when several percent of English workers were on ships at any given time. The percentage would have been higher in the Netherlands. And investing in shipping was definitely not limited to the high and mighty; ships were rarely owned outright, but were divided into shares, and I've read of shares as small as 1/64 of a ship.
- netcan 16y ago
  That makes sense. The first companies issuing tradable stock were shipping/trading companies. 1/64th shares seems to be about the size that would start to require some more sophistication.

garply 16y ago

Actually, what you're saying seems true according to PG's own "meta-trend" of founders of web startups becoming more powerful. Founders would be most powerful when they only need to raise money from friends and family - as it continues to become cheaper to start such a startup, why shouldn't the angel industry contract just as the VC industry is doing now?

pg 16y ago
There's a lower bound on the cheapness: the living expenses of the founders and the people they hire. Few families could risk that amount of money on something as risky as a startup.

byrneseyeview 16y ago

It doesn't cost much to run a website, but it can still cost a lot to grow a business. Look at all the companies in the local space. Their limiting factor is how many sales reps they can hire; the company that raises $10 million beats the company that raises $1 million. The same holds true for long-tail content generation. If you want to build a better Demand Media, you need to spend like they spend. As transaction costs in general decline, it will make less and less sense to rely on friends and family, the way I don't rely on friends and family to make my shoes, even though shoes are (adjusted for inflation), much cheaper than they have been in the past. Your "Two types of capital" division is arbitrary, both because you're turning a continuum into a binary decision, and because that's just one way to divide things. I could divide capital-raising businesses into those with limited scale and those with unlimited scale. There are more and more businesses with unlimited scale, and the optimal way to run such a business is to maximize risk, and to use someone else's capital to place bigger bets.

pg 16y ago

The volume of shipping varied at different times, but it was always a huge component of European economies. There were points in the preindustrial period when several percent of English workers were on ships at any given time. The percentage would have been higher in the Netherlands. And investing in shipping was definitely not limited to the high and mighty; ships were rarely owned outright, but were divided into shares, and I've read of shares as small as 1/64 of a ship.

netcan 16y ago
That makes sense. The first companies issuing tradable stock were shipping/trading companies. 1/64th shares seems to be about the size that would start to require some more sophistication.