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I am surprised that the NYTimes doesn’t see it as a positive sign: the structures around start-up (accelerators, investors, hosting, third party tools, etc.) ha

by bertil 8y ago

I am surprised that the NYTimes doesn’t see it as a positive sign: the structures around start-up (accelerators, investors, hosting, third party tools, etc.) have grown in maturity and relevance quite considerably. I certainly expect people familiar with YCombinator to agree. More funding like that means more companies trusted to spend that money into creating something profitable. If this goes into people who have grown companies into a unicorn a couple of times; scaling faster local operations lead by managers with relevant experience; AWS, GCP, Twilio & Square bills, it’s certainly expensive but overall sensical. I don’t know of an investor who, since 2000 has said: “This is silly, I can’t invest anymore.” and left, so I don’t think the game got non-sensical overall. Real-estate in SF certainly has, but high valuations proved when they made sense and gave investors confidence. There certainly has been cases where the value wasn’t justified, but very few at that level of money raised. Certainly less in proportion than the rounds with crazy valuations in 2000

timr 8y ago
"More funding like that means more companies trusted to spend that money into creating something profitable. If this goes into people who have grown companies into a unicorn a couple of times; scaling faster local operations lead by managers with relevant experience; AWS, GCP, Twilio & Square bills, it’s certainly expensive but overall sensical." Who are these founders who have grown "a couple" of unicorns? There are huge numbers of them walking around now? More importantly: who are these mythical founders who have experience growing/managing a company by hundreds of percent in a single year? They're pretty thin on the ground. This money is going to inexperienced people. Save for (maybe) a few founders who lived through the late 90s, nobody has experience with this. It's new territory. Also, Let's not kid ourselves: this money isn't going to AWS and Twilio. It's going to salaries, and it's going to marketing. And that's why it's risky. When you have to hire insanely quickly and buy revenue with marketing spend, it's essentially impossible to manage the growth. Overfunding is a real thing, and unless you've seen it firsthand, it's hard to internalize the perverse incentives it creates.
- mbesto 8y ago
  > It's going to salaries, and it's going to marketing. And that's why it's risky. Risky to who though? S&M salaries are expendable. If you can achieve 90% gross margins, you can basically flip the switch, turn S&M off, and you're profitable. > Overfunding is a real thing Overfunding has only real two business-centric downsides: undue dilution and chaotic operations. As they say though, revenue solves everything.
- bertil 8y ago
  Google has 88k employees today, almost 20 years of existence, and an average tenure of about two years. I would estimate that people who have worked at Google and learned valuable lessons, and able to secure director-level roles in start-ups to be in the thousands; many have gone to Facebook (25k employees, 14 years, similar retention). There are hundreds of people who similarly left Facebook for Uber, Lyft, AirBnB, Booking, Coinbase, etc. I personally know at least a dozen who made that move before their new employer raised more money, and can name three friends who went from Google to Facebook and to a third now-10B$ company, moving to pre-IPO company each time. And I don’t even live in the US. If you include probably several dozen people from PayPal (not just the six founders but the people who reported to them); hundreds of YCombinator alumni, who learned from their own failed company but leveraged the success of the friends they made in YC, and probably ended up working with; if you include people who have done their four years at DropBox, Zynga, SurveyMonkey, Twilio, etc. overall, yes, I expect to find several people with relevant experience at key positions in hundreds of companies. Some might have gone to investing full time, but they are if anything more likely to trust and advise appropriately their former colleagues. A lot of them are “anonymous” in the sense that TechCrunch wouldn’t name-drop them, but they would be familiar with, say, SQLite, AirFlow, or know from experience whether RedShift is the right solution at scale; they would know how to setup a Salesforce cluster; who to ask about address format in South-East Asia; they know about bugs in Samsung’s Android video codecs; they would have coordinated a launch in Arab-speaking countries before, know that React works well with Big5, or know that VAT is processed differently in Islamic finance. I expect those people to be asking for, and justifying convincingly compensations several times higher than what people could justify in 2000. You are certainly right about marketing: I should have mentioned far better targeting and control tools. CPA probably went up overall, but more importantly: the ability to measure it, to optimise campaign, interrupt ridiculous PR stunts before they cost too much, leverage them, etc. all that has become better. Analysts measure LTV with less ridiculous estimations now. That justifies trusting people with more money because when you hit the product-market fit, you know that this money will make more.

by bertil 8y ago

timr 8y ago

"More funding like that means more companies trusted to spend that money into creating something profitable. If this goes into people who have grown companies into a unicorn a couple of times; scaling faster local operations lead by managers with relevant experience; AWS, GCP, Twilio & Square bills, it’s certainly expensive but overall sensical." Who are these founders who have grown "a couple" of unicorns? There are huge numbers of them walking around now? More importantly: who are these mythical founders who have experience growing/managing a company by hundreds of percent in a single year? They're pretty thin on the ground. This money is going to inexperienced people. Save for (maybe) a few founders who lived through the late 90s, nobody has experience with this. It's new territory. Also, Let's not kid ourselves: this money isn't going to AWS and Twilio. It's going to salaries, and it's going to marketing. And that's why it's risky. When you have to hire insanely quickly and buy revenue with marketing spend, it's essentially impossible to manage the growth. Overfunding is a real thing, and unless you've seen it firsthand, it's hard to internalize the perverse incentives it creates.

mbesto 8y ago
> It's going to salaries, and it's going to marketing. And that's why it's risky. Risky to who though? S&M salaries are expendable. If you can achieve 90% gross margins, you can basically flip the switch, turn S&M off, and you're profitable. > Overfunding is a real thing Overfunding has only real two business-centric downsides: undue dilution and chaotic operations. As they say though, revenue solves everything.
bertil 8y ago
Google has 88k employees today, almost 20 years of existence, and an average tenure of about two years. I would estimate that people who have worked at Google and learned valuable lessons, and able to secure director-level roles in start-ups to be in the thousands; many have gone to Facebook (25k employees, 14 years, similar retention). There are hundreds of people who similarly left Facebook for Uber, Lyft, AirBnB, Booking, Coinbase, etc. I personally know at least a dozen who made that move before their new employer raised more money, and can name three friends who went from Google to Facebook and to a third now-10B$ company, moving to pre-IPO company each time. And I don’t even live in the US. If you include probably several dozen people from PayPal (not just the six founders but the people who reported to them); hundreds of YCombinator alumni, who learned from their own failed company but leveraged the success of the friends they made in YC, and probably ended up working with; if you include people who have done their four years at DropBox, Zynga, SurveyMonkey, Twilio, etc. overall, yes, I expect to find several people with relevant experience at key positions in hundreds of companies. Some might have gone to investing full time, but they are if anything more likely to trust and advise appropriately their former colleagues. A lot of them are “anonymous” in the sense that TechCrunch wouldn’t name-drop them, but they would be familiar with, say, SQLite, AirFlow, or know from experience whether RedShift is the right solution at scale; they would know how to setup a Salesforce cluster; who to ask about address format in South-East Asia; they know about bugs in Samsung’s Android video codecs; they would have coordinated a launch in Arab-speaking countries before, know that React works well with Big5, or know that VAT is processed differently in Islamic finance. I expect those people to be asking for, and justifying convincingly compensations several times higher than what people could justify in 2000. You are certainly right about marketing: I should have mentioned far better targeting and control tools. CPA probably went up overall, but more importantly: the ability to measure it, to optimise campaign, interrupt ridiculous PR stunts before they cost too much, leverage them, etc. all that has become better. Analysts measure LTV with less ridiculous estimations now. That justifies trusting people with more money because when you hit the product-market fit, you know that this money will make more.