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I've wondered along these lines too. There is clearly something else going on in the VC business beyond strictly evaluating company value based on ability to ge

I've wondered along these lines too. There is clearly something else going on in the VC business beyond strictly evaluating company value based on ability to generate it directly. One factor I'll project (since I can't tell where you're based) is that companies with proven engineering staff in the Bay Area get a boost in inherent value just from acquihire potential. Bonus points for famous and connected founders, as Quora has. Bay Area VC activity looks a lot like Wall Street to me, with the same disconnect between price and value happening.

hitchhiker999 13y ago
I'm nowhere near the 'bay area' or any US state, nor even in Europe. I'm British, but living abroad, have never known anyone else in the IT industry. HN is my only contact :) When I hear and see the things people in SV say and do - I honestly wonder what the hell is going on out there. It seems people who can put a bit of html + css together are getting paid 10 million these days. -- good luck to them and everything - but it's a bit mental (imho).
- pbreit 13y ago
  That sentiment could not be further from the truth. You could prove it to yourself simply by doing what you describe and seeing how far you get. Breaking through the noise and building a large, attractive user base is incredibly difficult. Sure, just building the web site isn't that hard (actually it is).
  - fidotron 13y ago
    I think you're right, but it's definitely the outside perception that something is odd about SV in this respect, and relatively trivial products can get blown out of all proportion there. For me it was Cover, that Android launcher, that caused the confusion. The value of that is not in being able to develop it, because that aspect of it was trivial, but having the idea to do it, the vision to see it's possible, and the connections to get PR to get visibility for that in SV seems much more valuable than "just" the ability to execute. I think the surprising factor is just how valuable those intangibles can be judged to be. (Not saying they're not valuable, as they clearly are, but it's interesting just how much the VC market thinks they're worth, amplified by the effect if you happen to be in SV).
- hack_edu 13y ago
  Software is made by teams, and teams that can ship quality products and code consistently are invaluable. Few companies actually know how to ship product or complete projects, let alone succeed. Early-stage companies are purchased/funded because their teams and not the checklist of experience on the team-members resumes. Successful, or even good products often take second-seat to this. Surprisingly enough, people pay boatloads for functional teams.
Retric 13y ago
Most VC'S take ~20% of the money invested at the time of the investment. They also get a cut of the returns but there better off investing in crappy company's than sitting on the money. Sure, they do have to have some justification and can't say donate it to charity but as long as the fit is reasonable and there are no good options there going to pick something. This is also on of the reasons they do separate funds. If 9/10 funds lose 50% of the money and one get's 500% returns they take a bug cut of that return despite only breaking even on average. It also explains why they don't care about small returns if a fund does not break even they don't care if it loses 1% or 99% they already have there cut and are not making any extra cash.
pbreit 13y ago
Not sure how you define value but Quora is creating quite a lot of it.
- wankerrific 13y ago
  Yup. By answering the important questions of our day, like: http://www.quora.com/Interracial-Dating-and-Relationships/Why-do-some-Asian-girls-like-white-guys http://www.quora.com/Interracial-Dating-and-Relationships/Wh... and http://www.quora.com/Dating-and-Relationships-1/How-do-Asian-guys-feel-about-Asian-girls-dating-white-guys http://www.quora.com/Dating-and-Relationships-1/How-do-Asian... and http://www.quora.com/What-is-the-worst-experience-youve-had-with-a-girl-dating-or-not http://www.quora.com/What-is-the-worst-experience-youve-had-... That right there is a whole lotta value.
- jonathansizz 13y ago
  Well, the experts they somehow get to donate their time, effort and knowledge for free are certainly creating value for the Quora execs.
- wankerrific 13y ago
  Oh look more value: http://www.quora.com/Family/I-caught-my-younger-brother-watching-me-bathing-How-do-I-deal-with-it http://www.quora.com/Family/I-caught-my-younger-brother-watc... http://www.quora.com/How-does-a-sixteen-year-old-get-a-girlfriend http://www.quora.com/How-does-a-sixteen-year-old-get-a-girlf... Look - I don't care if Quora wants to spam my inbox with link bait in order to generate AU and page views, but they could at least not try to take the high road and pretend to be anything more than the lowest common denominator, no-business-model, spam factory that they are.

hitchhiker999 13y ago

I'm nowhere near the 'bay area' or any US state, nor even in Europe. I'm British, but living abroad, have never known anyone else in the IT industry. HN is my only contact :) When I hear and see the things people in SV say and do - I honestly wonder what the hell is going on out there. It seems people who can put a bit of html + css together are getting paid 10 million these days. -- good luck to them and everything - but it's a bit mental (imho).

pbreit 13y ago
That sentiment could not be further from the truth. You could prove it to yourself simply by doing what you describe and seeing how far you get. Breaking through the noise and building a large, attractive user base is incredibly difficult. Sure, just building the web site isn't that hard (actually it is).
- fidotron 13y ago
  I think you're right, but it's definitely the outside perception that something is odd about SV in this respect, and relatively trivial products can get blown out of all proportion there. For me it was Cover, that Android launcher, that caused the confusion. The value of that is not in being able to develop it, because that aspect of it was trivial, but having the idea to do it, the vision to see it's possible, and the connections to get PR to get visibility for that in SV seems much more valuable than "just" the ability to execute. I think the surprising factor is just how valuable those intangibles can be judged to be. (Not saying they're not valuable, as they clearly are, but it's interesting just how much the VC market thinks they're worth, amplified by the effect if you happen to be in SV).
hack_edu 13y ago
Software is made by teams, and teams that can ship quality products and code consistently are invaluable. Few companies actually know how to ship product or complete projects, let alone succeed. Early-stage companies are purchased/funded because their teams and not the checklist of experience on the team-members resumes. Successful, or even good products often take second-seat to this. Surprisingly enough, people pay boatloads for functional teams.

Retric 13y ago

Most VC'S take ~20% of the money invested at the time of the investment. They also get a cut of the returns but there better off investing in crappy company's than sitting on the money. Sure, they do have to have some justification and can't say donate it to charity but as long as the fit is reasonable and there are no good options there going to pick something. This is also on of the reasons they do separate funds. If 9/10 funds lose 50% of the money and one get's 500% returns they take a bug cut of that return despite only breaking even on average. It also explains why they don't care about small returns if a fund does not break even they don't care if it loses 1% or 99% they already have there cut and are not making any extra cash.

pbreit 13y ago

Not sure how you define value but Quora is creating quite a lot of it.

wankerrific 13y ago
Yup. By answering the important questions of our day, like: http://www.quora.com/Interracial-Dating-and-Relationships/Why-do-some-Asian-girls-like-white-guys http://www.quora.com/Interracial-Dating-and-Relationships/Wh... and http://www.quora.com/Dating-and-Relationships-1/How-do-Asian-guys-feel-about-Asian-girls-dating-white-guys http://www.quora.com/Dating-and-Relationships-1/How-do-Asian... and http://www.quora.com/What-is-the-worst-experience-youve-had-with-a-girl-dating-or-not http://www.quora.com/What-is-the-worst-experience-youve-had-... That right there is a whole lotta value.
jonathansizz 13y ago
Well, the experts they somehow get to donate their time, effort and knowledge for free are certainly creating value for the Quora execs.
wankerrific 13y ago
Oh look more value: http://www.quora.com/Family/I-caught-my-younger-brother-watching-me-bathing-How-do-I-deal-with-it http://www.quora.com/Family/I-caught-my-younger-brother-watc... http://www.quora.com/How-does-a-sixteen-year-old-get-a-girlfriend http://www.quora.com/How-does-a-sixteen-year-old-get-a-girlf... Look - I don't care if Quora wants to spam my inbox with link bait in order to generate AU and page views, but they could at least not try to take the high road and pretend to be anything more than the lowest common denominator, no-business-model, spam factory that they are.