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This is a good articulation of the modern view of SV captial, but it is somewhat problematic. In a nutshell, 'Round A' is now a form of scaling money. Early, b
by jariel 6y ago
This is a good articulation of the modern view of SV captial, but it is somewhat problematic.
In a nutshell, 'Round A' is now a form of scaling money. Early, but essentially: you need to build a product that the market really loves, before you get any substantial money.
It would seem that VC is really de-risked themselves, obviously to their advantage. This is somewhat the natural equilibrium in a world where it's easy to start some kind of companies with little effort.
However, there are always going to be a lot of initiatives that require some capital to make it work. This is of course, very dangerous territory for VC to play in (i.e. before Product-Market-Fit) but then, they do have 'Venture' in their titles.
It's to the point wherein we could start to consider Round B and later firms merely a slightly different form of Private Equity.
Is anything really that important going to be 'productised' for $500K-1M i.e. on seed money?
And really, it's interesting in that, if a company does actually have good product market fit ... traditional VC terms might seem a little expensive.
- vikramkr 6y agoThat doesnt jive with the string of spectacular silicon valley blowups recently. Hype seems to be just as good a substitute as product market fit. And it seems that derisking unit economics to show you can be profitable doesnt matter at this point if you've got a bunch of "growth"
- jariel 6y agoFor example? Having massive customer traction and 'blow up growth' is a valid form of customer interest, what matters is the post-blow up economices. Uber, WeWork etc. will all make money for investors in the long run. The concern is that there is zero real R&D or product development spending.
- Swizec 6y agoI work in early stage product startups. What R&D do you need? CRUD is solved, hosting is solved, UX is solved, scaling is solved, marketing is solved ... Everything to do with web and mobile is very solved at this point. Most problems come from tripping over ourselves and cobbling things together to fit new domains. All real hard R&D happens inside faang these days. At least for web/mobile consumer stuff.
- willcipriano 6y ago>What R&D do you need? CRUD is solved, hosting is solved, UX is solved, scaling is solved, marketing is solved ... If you don't need R&D, doesn't that mean your competitor also doesn't need R&D? Where's the moat?
- Swizec 6y agoMoat is having unique insight into the problem/domain. No moat anymore in terms of “We can build a webapp faster than you can”
- jariel 6y agoThere are many moats to businesses, often they are not dervied from tech. Most monopolies are operationally incumbent. Amazon (just the retail part) doesn't have any truly special tech, but reams of know how and operational competence with scale.
- jariel 6y ago"Everything to do with web and mobile is very solved at this point." "640K ought to be enough for anybody." - Bill Gates 1981 (or supposedly. So there is a long way to go in all of these areas, and there is even a longer way to go in adjacent areas, and we're not even touching all the other things startups can do - you know - the other 95% of the economy? Healthcare, biotech, materials, energy, construction, auto, food services. You know 'everything that's not your iPhone'. If VC were structured differently I think we'd have a solution to hair loss and possibly sagging skin by now. Those two markets are worth 2x Google and Apple put together. People will pay for their 'youth' before they give 2 cents for a mobile phone. As the tip of the iceberg.
- realtalk_sp 6y agoHair loss is on the precipice of being effectively solved (infinite transplants via stem cells) and the price will likely go down over the next 5 to 10 years as the technology to produce hair follicles and perform robotic transplantations matures. Skin is also a largely solved problem: use moisturizer/sunscreen/Vitamin C/Retin A, avoid the sun as much as possible, wear sunglasses, drink lots of water, eat healthy + high antioxidants, sleep well, get minor amounts of Botox occasionally for some parts of the face, microneedling occasionally, maybe a face lift (these days a more or less perfected procedure with low risk) somewhere in your 40s/50s. That plan will basically take you into your 60s looking really good. Even if you can't stick to that plan, the various restorative dermatological options will still give you a fantastic result. But most people are some combination of too apathetic, too lazy, too financially-constrained, or too afraid of more invasive techniques.
- ccortes 6y agoI don't think it is that hard to get traction (even massive traction) if you are giving more value than what you are charging.