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So we went from "DOOOM!" in 2008 to funding grilled cheese and daily deals in 2011 and now back to "DOOOM!" in 2012, bouncing between the throttle and the brake

So we went from "DOOOM!" in 2008 to funding grilled cheese and daily deals in 2011 and now back to "DOOOM!" in 2012, bouncing between the throttle and the brakes faster than most startups can even prove out their thesis? This seems like an opportunity for a contrarian VC betting against the others, dodging the irrational exuberance but getting better terms when founders need the money badly.

ahoyhere 15y ago
It's a pendulum cycle. Boom & bust cycles always are. What happens is a couple people strike it rich, then a bunch of followers try to do the same thing, it may work for a little while but not for long, and when the stupidest, most inefficient people have got in on the act, there's no money left for them AND they do things that end up looking terribly ridiculous. After all that, even the smart players have thrown in lots of money and/or time, they look at how much they spent and go "hmmmm, that's a lot, better calm down." Then there's a bust. By "smart" and "dumb" I am referring to: investors, buyers, and founders. The labels apply to them all. VCs don't have infinite money. The two or three companies who do the most acquisitions also do not have an unlimited appetite or money, and they also tend to shut down or wreck most of what they buy. So at that critical point, everybody lays low for a little while. Then they forget, and start all over again. Nobody remembers that this is exactly what happened the last time.
knowsnothing613 15y ago
It's part of the built to flip mentality of the VC world. Look @ Groupon for godsake. The sustainability of its business model is dubious, but they still rushed the IPO, so they could flip it to ma & pa. But ma & pa aren't buying, so Investment Bank clients that got in during the roadshow are unloading en mass, and has sunk the share price below the IPO price, despite the low float. web VCs fund companies they believe they can flip. It's also why they are biased towards late stage funding, since they have a higher chance of flipping over their positions.

ahoyhere 15y ago

It's a pendulum cycle. Boom & bust cycles always are. What happens is a couple people strike it rich, then a bunch of followers try to do the same thing, it may work for a little while but not for long, and when the stupidest, most inefficient people have got in on the act, there's no money left for them AND they do things that end up looking terribly ridiculous. After all that, even the smart players have thrown in lots of money and/or time, they look at how much they spent and go "hmmmm, that's a lot, better calm down." Then there's a bust. By "smart" and "dumb" I am referring to: investors, buyers, and founders. The labels apply to them all. VCs don't have infinite money. The two or three companies who do the most acquisitions also do not have an unlimited appetite or money, and they also tend to shut down or wreck most of what they buy. So at that critical point, everybody lays low for a little while. Then they forget, and start all over again. Nobody remembers that this is exactly what happened the last time.

knowsnothing613 15y ago

It's part of the built to flip mentality of the VC world. Look @ Groupon for godsake. The sustainability of its business model is dubious, but they still rushed the IPO, so they could flip it to ma & pa. But ma & pa aren't buying, so Investment Bank clients that got in during the roadshow are unloading en mass, and has sunk the share price below the IPO price, despite the low float. web VCs fund companies they believe they can flip. It's also why they are biased towards late stage funding, since they have a higher chance of flipping over their positions.