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It seems to me that VC's take heat for investing too early, too late, too much and too little. Being too conservative or too risky. They're an easy punching bag

It seems to me that VC's take heat for investing too early, too late, too much and too little. Being too conservative or too risky. They're an easy punching bag.

timr 11y ago
I don't ordinarily care what VC's do with their money (i.e. mostly lose it), but it's disingenuous to suggest that there aren't clear trends: it's very difficult to raise a series A, but if you're the hype-driven flavor-of-the-moment, you can close a round with little to no diligence, few metrics and none of the proof traditionally required of a series A investment. We're still seeing money get shoved at companies who had a moment in the sun on ProductHunt or Reddit, with zero validation of the underlying business prospects (or even much in the way of critical thinking). So yeah, VC's do take heat for investing too early, too late, too much and too little. It isn't a contradiction -- it's what people do when they act as a herd.
- nostrademons 11y ago
  Because the best validation is people using your product. Or technically, the best validation is people paying for your product, but if they're doing that in amounts great enough for a VC to notice then you don't need to raise VC. The herd behavior comes from everyone having more-or-less the same metrics for what constitutes success: people using your product. If that metric isn't evident, you fall back on the fundraising strategy for people who don't have traction: try lots of VCs and hope that one buys into your vision enough to invest. If the next better metric - lots of revenue - is evident, then it's too late and chances are that someone else has already invested, or they don't need investment.
  - timr 11y ago
    Ehhh. Traction is a necessary, but insufficient condition for getting a series A. There's a "hotness" component here that's contributing to the overreaction. You can't explain things like (for example) Meerkat raising a big round and cratering the very next week without considering the importance of hype. Meerkat and Color and Secret are walking out the door with big checks while lots of other entrepreneurs with great metrics are waiting for their fifteenth meeting...because they're not in the tech gossip rags. Say what they will in public, I'll bet you that Meerkat's investors are wishing they'd sat on that term sheet for a couple of days.

It seems to me that VC's take heat for investing too early, too late, too much and too little. Being too conservative or too risky. They're an easy punching bag.

timr 11y ago

I don't ordinarily care what VC's do with their money (i.e. mostly lose it), but it's disingenuous to suggest that there aren't clear trends: it's very difficult to raise a series A, but if you're the hype-driven flavor-of-the-moment, you can close a round with little to no diligence, few metrics and none of the proof traditionally required of a series A investment. We're still seeing money get shoved at companies who had a moment in the sun on ProductHunt or Reddit, with zero validation of the underlying business prospects (or even much in the way of critical thinking). So yeah, VC's do take heat for investing too early, too late, too much and too little. It isn't a contradiction -- it's what people do when they act as a herd.

nostrademons 11y ago
Because the best validation is people using your product. Or technically, the best validation is people paying for your product, but if they're doing that in amounts great enough for a VC to notice then you don't need to raise VC. The herd behavior comes from everyone having more-or-less the same metrics for what constitutes success: people using your product. If that metric isn't evident, you fall back on the fundraising strategy for people who don't have traction: try lots of VCs and hope that one buys into your vision enough to invest. If the next better metric - lots of revenue - is evident, then it's too late and chances are that someone else has already invested, or they don't need investment.
- timr 11y ago
  Ehhh. Traction is a necessary, but insufficient condition for getting a series A. There's a "hotness" component here that's contributing to the overreaction. You can't explain things like (for example) Meerkat raising a big round and cratering the very next week without considering the importance of hype. Meerkat and Color and Secret are walking out the door with big checks while lots of other entrepreneurs with great metrics are waiting for their fifteenth meeting...because they're not in the tech gossip rags. Say what they will in public, I'll bet you that Meerkat's investors are wishing they'd sat on that term sheet for a couple of days.