3 ms·

+1, lest we forget the original premise behind VC returns was that seed checks had huge returns because most people weren't willing to take on the risk, timelin

+1, lest we forget the original premise behind VC returns was that seed checks had huge returns because most people weren't willing to take on the risk, timeline or probability distribution of funding startups. Now everyone is willing to, so that arb is gone.

searchableguy 4y ago
Are VCs taking risk though? At least in India, most of the venture capital startups are copies of existing products but with discounts and rewards attached through VC investments. The timeframe for return on investments is too low for any risky bets. You aren't going to end up cashing out deep tech in few years.
- cmrdporcupine 4y ago
  Related, maybe tangentially; I'm seeing lots and lots of startups whose basis seems to be "we build X <tool/SDK/API> technology as a service." Data management or transformation stuff. Packages for doing X in the cloud. Analytical libraries. Not products, but infrastructure. On one level I'm very pleased to see this stuff funded, because it wasn't really 10-15 years ago. On the other hand, what worries me here is that this stuff is entirely secondary and subservient to other services, its potential revenue completely depends on the success of businesses further up the food chain. And if things start to really slow down, I worry these will be the first to suffer and a lot of these startups (which seem to be hiring for a lot of the interesting work) will shutdown.
  - blip54321 4y ago
    Personally, I feel like there are too many dollars and startups in this space now. I feel like the risk profile is such that I'd never buy most of the products being built. I don't want core business infrastructure sitting in the cloud of a startup which might not exist tomorrow due to missing a VC round or an agile pivot. I also don't want an integration of 50 different cloud services. I'm glad to use established open-source technologies. I'll also use AWS or similar big players if open source doesn't exist. However, most of the niche proprietary startups just don't make much sense here to me. I'd invest a lot of money and take on a lot of risk. I do feel like there is big money in value-adds: hosting open-source solutions, consulting, etc. A lot of non-tech companies are struggling with data, ML, and visualizations. There's a feedback loop here. Once these startups start shutting down, the above problem will be recognized, cascading their collapse.
    - cmrdporcupine 4y ago
      Yeah I think there's wisdom to what you're saying. I do think there was a deficit before that this wave of stuff is working to remedy. In the mid-2000s, companies like Google and Amazon had a competitive advantage because they had the inhouse talent and $$ to build e.g. Bigtable, MapReduce, Dremel, Borg, etc. before anybody else had those tools. Then there was an awkward few years (early - mid 2010s) where everyone and their dog was trying to clone those in the open source space. And now we're in a situation where there's startups whose whole business model is structured around providing "big data" or "data transformation" etc. tools etc. They look like compelling places to work, on account of the interesting work they do, but I worry about their viability.
      - contingencies 4y ago
        Enterprise SaaS has peaked.
        blip54321 4y ago
        I wouldn't quite go so far, but I don't think piecewise enterprise SaaS makes sense. The whole model of having dozens of interacting SaaS pieces, any of which make change APIs, have a bug, or go under any day has peaked. I'm okay relying on AWS. I'm not okay having one company handle email, another columnar database, another tabular database, another map-reduce, another streaming / logging, and so on. I understand why each of those might be better than their AWS counterpart, but for business continuity or for security, it's a train wreck. I'm usually okay relying on hosted versions of open source platforms, since if something goes very bad, I can move over to hosting them myself. Even there, I hesitate with things really central to continuing operations. But for the 95% of other stuff, I find something like hosted postgresql or redis to be most robust. A company specializing in redis will beat my IT staff. On the other hand, it's low-risk. A lot of companies disappear in a few weeks, but it's rare that they disappear overnight.

searchableguy 4y ago

Are VCs taking risk though? At least in India, most of the venture capital startups are copies of existing products but with discounts and rewards attached through VC investments. The timeframe for return on investments is too low for any risky bets. You aren't going to end up cashing out deep tech in few years.

cmrdporcupine 4y ago
Related, maybe tangentially; I'm seeing lots and lots of startups whose basis seems to be "we build X <tool/SDK/API> technology as a service." Data management or transformation stuff. Packages for doing X in the cloud. Analytical libraries. Not products, but infrastructure. On one level I'm very pleased to see this stuff funded, because it wasn't really 10-15 years ago. On the other hand, what worries me here is that this stuff is entirely secondary and subservient to other services, its potential revenue completely depends on the success of businesses further up the food chain. And if things start to really slow down, I worry these will be the first to suffer and a lot of these startups (which seem to be hiring for a lot of the interesting work) will shutdown.
- blip54321 4y ago
  Personally, I feel like there are too many dollars and startups in this space now. I feel like the risk profile is such that I'd never buy most of the products being built. I don't want core business infrastructure sitting in the cloud of a startup which might not exist tomorrow due to missing a VC round or an agile pivot. I also don't want an integration of 50 different cloud services. I'm glad to use established open-source technologies. I'll also use AWS or similar big players if open source doesn't exist. However, most of the niche proprietary startups just don't make much sense here to me. I'd invest a lot of money and take on a lot of risk. I do feel like there is big money in value-adds: hosting open-source solutions, consulting, etc. A lot of non-tech companies are struggling with data, ML, and visualizations. There's a feedback loop here. Once these startups start shutting down, the above problem will be recognized, cascading their collapse.
  - cmrdporcupine 4y ago
    Yeah I think there's wisdom to what you're saying. I do think there was a deficit before that this wave of stuff is working to remedy. In the mid-2000s, companies like Google and Amazon had a competitive advantage because they had the inhouse talent and $$ to build e.g. Bigtable, MapReduce, Dremel, Borg, etc. before anybody else had those tools. Then there was an awkward few years (early - mid 2010s) where everyone and their dog was trying to clone those in the open source space. And now we're in a situation where there's startups whose whole business model is structured around providing "big data" or "data transformation" etc. tools etc. They look like compelling places to work, on account of the interesting work they do, but I worry about their viability.
    - contingencies 4y ago
      Enterprise SaaS has peaked.
      - blip54321 4y ago
        I wouldn't quite go so far, but I don't think piecewise enterprise SaaS makes sense. The whole model of having dozens of interacting SaaS pieces, any of which make change APIs, have a bug, or go under any day has peaked. I'm okay relying on AWS. I'm not okay having one company handle email, another columnar database, another tabular database, another map-reduce, another streaming / logging, and so on. I understand why each of those might be better than their AWS counterpart, but for business continuity or for security, it's a train wreck. I'm usually okay relying on hosted versions of open source platforms, since if something goes very bad, I can move over to hosting them myself. Even there, I hesitate with things really central to continuing operations. But for the 95% of other stuff, I find something like hosted postgresql or redis to be most robust. A company specializing in redis will beat my IT staff. On the other hand, it's low-risk. A lot of companies disappear in a few weeks, but it's rare that they disappear overnight.