6 ms·

The Changing Venture Landscape

43 points by kvee 5y ago

qPM9l3XJrF 5y ago
>Today you have funders focused exclusively on “Day 0” startups or ones that aren’t even created yet. They might be ideas they hatch internally (via a Foundry) or a founder who just left SpaceX and raises money to search for an idea. The legends of Silicon Valley — two founders in a garage — (HP Style) are dead. The most connected and high-potential founders start with wads of cash. And they need it because nobody senior at Stripe, Discord, Coinbase or for that matter Facebook, Google or Snap is leaving without a ton of incentives to do so. Supposing I just left spacex, what funders would I reach out to who would give me money to "search for an idea"?
- im_down_w_otp 5y ago
  One can't help but wonder if the arrow is pointing the wrong way in part of that quote. Perhaps those founders end up being "high potential" because they were a cohort of people given wads of cash and institutional support that only expect a 5%-10% success-rate?
- User23 5y ago
  Anyone at senior or higher who worked at one of the FAANG's for at least the past five years is either terrible with equity or has more than enough money to self fund a startup.
AndrewKemendo 5y ago
I really like Mark and think he does a service to the community with these posts. I recently did a Due Diligence call on a company that was trying to raise a $1M pre-seed round, and had previously taken 250k with basically nothing to show for it. I thought this was silly, for both the amount and the name (esp for first time founders). Apparently though according to this, a "pre-seed" at $1-3M is actually a thing. This seems insane to me because at least from when I started being involved in startups around 2011, traction was king before you found a cent outside of friends and family or Angels if you were well connected, or had a previous exit. This whole post though does reflect what we are seeing as a venture fund (I'm an LP in a tiny fund) with people asking for a LOT of money for basically no market proof and there being no real way to win if you're investing at the $3-10M level. I think that is kind of crazy to be honest but I assume if I were raising money again I might be tempted to do that. I think what is different in my mind from 2011 is that there used to be hope that someone could unseat Google, MSFT, Amazon, WalMart etc... the same way Apple, Amazon and Google did to IBM, DEC and Sun. I don't think anyone truly believes there's a startup that is hatching today that will unseat Amazon in the next 30 years. ------------- Side note. Mark has apparently lost a ton of weight and become very fit since when I was following him more closely back in 2015. Congrats to him! [0]https://bothsidesofthetable.com/how-i-lost-65-pounds-in-18-months-without-any-fad-diets-or-gimmicks-72a262f29f9c https://bothsidesofthetable.com/how-i-lost-65-pounds-in-18-m...
- pedalpete 5y ago
  $1m pre-seed without an MVP and first-time founders? I'd be curious to hear if they manage to get a round closed. I also think this may be a US phenomena, due to the number of VCs chasing deals. I'm based in Australia, and VCs here still "like" to see traction. the other difference here, as I understand it, is that VCs are taking a smaller equity percentage in seed stage (12%-20%). I have to disagree with your comment re: [what] startup that is hatchig today that will unseat Amazon in the next 30 years"? My take, Apple, Amazon, and Google didn't "unseat" DEC and Sun. They created entirely new categories that didn't exist before. Just because IBM, DEC, and Sun were well placed and "should" have owned these categories doesn't mean the were unseated by them. Some people are still looking for the "next facebook/youtube/etc", but the real opportunity isn't in challenging incumbents, but in creating markets where incumbents don't exist.
  - AndrewKemendo 5y ago
    This is actually a distinction without difference What you describe is HOW Goog etc... unseated the majors. Namely that those other companies couldn't adjust fast enough to absorb those new and fast growing markets. While we could argue whether or not FAAMG is great at executing on attempts to follow emerging markets, I think it's indisputable that they have the resources and nibleness to either absorb via acquisition, take significant positions in (via venture funds) or kill any emerging markets that would actually replace their market positions. I argue that there exist no emerging markets where the top players couldn't collectively come in and replace/kill the new entrants.
    - bpodgursky 5y ago
      > I think it's indisputable that they have the resources and nibleness to either absorb via acquisition, take significant positions in (via venture funds) or kill any emerging markets that would actually replace their market positions. If the answer is (1) acquisition, that's a good reason to invest in the companies attempting to disrupt the space -- you're making the incumbents pay for that monopoly status. Even if they aren't disrupted, you're profiting from their anti-competitive behavior.

43 points by kvee 5y ago

>Today you have funders focused exclusively on “Day 0” startups or ones that aren’t even created yet. They might be ideas they hatch internally (via a Foundry) or a founder who just left SpaceX and raises money to search for an idea. The legends of Silicon Valley — two founders in a garage — (HP Style) are dead. The most connected and high-potential founders start with wads of cash. And they need it because nobody senior at Stripe, Discord, Coinbase or for that matter Facebook, Google or Snap is leaving without a ton of incentives to do so. Supposing I just left spacex, what funders would I reach out to who would give me money to "search for an idea"?

im_down_w_otp 5y ago
One can't help but wonder if the arrow is pointing the wrong way in part of that quote. Perhaps those founders end up being "high potential" because they were a cohort of people given wads of cash and institutional support that only expect a 5%-10% success-rate?
User23 5y ago
Anyone at senior or higher who worked at one of the FAANG's for at least the past five years is either terrible with equity or has more than enough money to self fund a startup.

AndrewKemendo 5y ago

I really like Mark and think he does a service to the community with these posts. I recently did a Due Diligence call on a company that was trying to raise a $1M pre-seed round, and had previously taken 250k with basically nothing to show for it. I thought this was silly, for both the amount and the name (esp for first time founders). Apparently though according to this, a "pre-seed" at $1-3M is actually a thing. This seems insane to me because at least from when I started being involved in startups around 2011, traction was king before you found a cent outside of friends and family or Angels if you were well connected, or had a previous exit. This whole post though does reflect what we are seeing as a venture fund (I'm an LP in a tiny fund) with people asking for a LOT of money for basically no market proof and there being no real way to win if you're investing at the $3-10M level. I think that is kind of crazy to be honest but I assume if I were raising money again I might be tempted to do that. I think what is different in my mind from 2011 is that there used to be hope that someone could unseat Google, MSFT, Amazon, WalMart etc... the same way Apple, Amazon and Google did to IBM, DEC and Sun. I don't think anyone truly believes there's a startup that is hatching today that will unseat Amazon in the next 30 years. ------------- Side note. Mark has apparently lost a ton of weight and become very fit since when I was following him more closely back in 2015. Congrats to him! [0]https://bothsidesofthetable.com/how-i-lost-65-pounds-in-18-months-without-any-fad-diets-or-gimmicks-72a262f29f9c https://bothsidesofthetable.com/how-i-lost-65-pounds-in-18-m...

pedalpete 5y ago
$1m pre-seed without an MVP and first-time founders? I'd be curious to hear if they manage to get a round closed. I also think this may be a US phenomena, due to the number of VCs chasing deals. I'm based in Australia, and VCs here still "like" to see traction. the other difference here, as I understand it, is that VCs are taking a smaller equity percentage in seed stage (12%-20%). I have to disagree with your comment re: [what] startup that is hatchig today that will unseat Amazon in the next 30 years"? My take, Apple, Amazon, and Google didn't "unseat" DEC and Sun. They created entirely new categories that didn't exist before. Just because IBM, DEC, and Sun were well placed and "should" have owned these categories doesn't mean the were unseated by them. Some people are still looking for the "next facebook/youtube/etc", but the real opportunity isn't in challenging incumbents, but in creating markets where incumbents don't exist.
- AndrewKemendo 5y ago
  This is actually a distinction without difference What you describe is HOW Goog etc... unseated the majors. Namely that those other companies couldn't adjust fast enough to absorb those new and fast growing markets. While we could argue whether or not FAAMG is great at executing on attempts to follow emerging markets, I think it's indisputable that they have the resources and nibleness to either absorb via acquisition, take significant positions in (via venture funds) or kill any emerging markets that would actually replace their market positions. I argue that there exist no emerging markets where the top players couldn't collectively come in and replace/kill the new entrants.
  - bpodgursky 5y ago
    > I think it's indisputable that they have the resources and nibleness to either absorb via acquisition, take significant positions in (via venture funds) or kill any emerging markets that would actually replace their market positions. If the answer is (1) acquisition, that's a good reason to invest in the companies attempting to disrupt the space -- you're making the incumbents pay for that monopoly status. Even if they aren't disrupted, you're profiting from their anti-competitive behavior.