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There are lots of tech companies that are real companies that generate revenue, cash flow, etc who've not taken outside capital. They're just not in TechCrunch

by asanwal 12y ago

There are lots of tech companies that are real companies that generate revenue, cash flow, etc who've not taken outside capital. They're just not in TechCrunch. But for these tech companies, traditional banks are not good funding sources. They don't understand these cos (no hard assets) The Venture Industrial Complex as I've heard some describe it makes you think that tech companies require outside capital and are either 10x or bust. That's b.s. The company I co-founded is 25 strong (growing to 50 this year) and is a real company. It's possible. Don't believe the hype. BTW, I think this Indie.vc experiment is an indication of where the world of tech investment is going.

prostoalex 12y ago
> The Venture Industrial Complex as I've heard some describe it makes you think that tech companies require outside capital and are either 10x or bust. That's just what LPs expect of this asset class. If they need to allocate capital for illiquid equity with some cashflow kicked back and solid (but not spectacular) IRR a few years down the road, why not just invest in real estate?
- asanwal 12y ago
  LP expectations are set by VCs. Reality is most VCs don't generate spectacular IRR (or any IRR at all) outside of the top 5%. Revenue-based financing to tech companies is one model that is quite interesting.
  - prostoalex 12y ago
    > LP expectations are set by VCs. Right, which is why a VC selling such product (low return but same as before high risk of failure) would have a tough time. They are essentially selling the ROI similar to that of real estate (or some similar asset class), but with higher risk of failure, lower resale value in case of a bust, and lower probability of being able to wait a crisis out by sitting on assets and not selling during a market downturn - what a deal. > Reality is most VCs don't generate spectacular IRR (or any IRR at all) outside of the top 5%. I don't think it matters for large LPs, as they diversify across a bunch of VCs anyways, and even those VCs have a collection of funds with wildly different returns (the KPCB fund that did an early investment in Google, e.g., did great, the KPCB cleantech fund was a bust, you ask two different KPCP investors and you'll get two very different opinions depending on their exposure).
    - deleted 12y ago
      [deleted]
    - kak9 12y ago
      Not disagreeing with any of your points, but there were probably very few LPs who were in one KPCB fund but not the other.
      - marcamillion 12y ago
        Which I think validates his point - i.e. it is all a wash, because the Google fund produced ginormous returns but the cleantech fund was bust. Especially considering that, if memory serves me correctly, Google was the only winner in that fund.

by asanwal 12y ago

prostoalex 12y ago

> The Venture Industrial Complex as I've heard some describe it makes you think that tech companies require outside capital and are either 10x or bust. That's just what LPs expect of this asset class. If they need to allocate capital for illiquid equity with some cashflow kicked back and solid (but not spectacular) IRR a few years down the road, why not just invest in real estate?

asanwal 12y ago
LP expectations are set by VCs. Reality is most VCs don't generate spectacular IRR (or any IRR at all) outside of the top 5%. Revenue-based financing to tech companies is one model that is quite interesting.
- prostoalex 12y ago
  > LP expectations are set by VCs. Right, which is why a VC selling such product (low return but same as before high risk of failure) would have a tough time. They are essentially selling the ROI similar to that of real estate (or some similar asset class), but with higher risk of failure, lower resale value in case of a bust, and lower probability of being able to wait a crisis out by sitting on assets and not selling during a market downturn - what a deal. > Reality is most VCs don't generate spectacular IRR (or any IRR at all) outside of the top 5%. I don't think it matters for large LPs, as they diversify across a bunch of VCs anyways, and even those VCs have a collection of funds with wildly different returns (the KPCB fund that did an early investment in Google, e.g., did great, the KPCB cleantech fund was a bust, you ask two different KPCP investors and you'll get two very different opinions depending on their exposure).
  - deleted 12y ago
    [deleted]
  - kak9 12y ago
    Not disagreeing with any of your points, but there were probably very few LPs who were in one KPCB fund but not the other.
    - marcamillion 12y ago
      Which I think validates his point - i.e. it is all a wash, because the Google fund produced ginormous returns but the cleantech fund was bust. Especially considering that, if memory serves me correctly, Google was the only winner in that fund.