Mark to Market: Venture Capital’s Brink of Destruction
Babette@BakeSpace
· 1 year ago
Hi Mark - WOW.. I'm glad I saw this posted over at twitter... what a thoughtful piece.
I find that most people who post comments on the tech blogs like tech crunch offer little insight into what's really going on in technology. Half of those folks have never run a company let even thought of an idea for a tech startup. They don't have the experience to see the big picture.
I personally love VCs - not because of who they are, but what they represent. The excitement of turning an idea into a billion dollar business and putting the money into the pot when it's just a logo on a piece of paper. It's that kind of vision and aggressive business moves make starting a company exciting.
So in a long winded way of answering your question.. I don't think it's the VCs that are going to change first - it's the entrepreneurs. VCs will always find a way to get the money. It's the startup founders that are going to need to get creative. That in turn will change how VCs deal with entrepreneurs. In a few months they will see which start ups survived and you'll have your answer.
I will check back and continue reading..
Mark
· 1 year ago
This is a really good point, in that there's no doubt things are changing, but entrepreneurs - regardless of how much many of them dislike VC's - will have to realize that they need the capital to build their businesses. If they don't, then it's a non-issue for them anyways. I do think the model in general needs to evolve, but it's not the entrepreneurs or the VC's - it's more the market in general. Technology is maturing, thus the industry has moved out of its infancy and is perhaps hitting the teenage years, which of course can be the most volatile. So, again, this is all the more reason to argue that whatever changes that occur will not be one-sided. Thanks for contributing really good discussion. I always love to hear from entrepreneurs!
Guy Havenstein
· 1 year ago
This is exactly what my company is doing to alleviate this problem - gTrade Global Trading Platform. We are launching a stock exchange for startup web companies for this very reason.
I totally agree with the current pitfalls you have outlined, and they need to change to match the whole web 2.0 mantra - for the people by the people.
Guy, I'm intrigued by gTrade. I suggest you recommend it to my friend Scott Scheper (www.scottdig.com), who has proposed similar ideas. A private exchange for venture-backed start-ups could have amazing potential and it would interest someone like me a great deal, who prefers publicly traded investments but also works in private equity. My only question is whether or not such a model will face regulatory challenges, in the US at least. Have you verified that a system such as this will meet SEC requirements on private equity investing? For instance, in the US, to invest in a private start-up seeking outside capital, you have to qualify as an accredited investor, which has very specific criteria. I admit that the regulatory oversight of this rule is lax, but it's something that could pose significant challenges. Let me know and I'd love to dig deeper.
Jim Lukas
· 1 year ago
I suggest VCs do a little introspection on why people want them to fail, and what the entrepreneurs complaints are. You can find some of the entrepreneur feedback on VC abuses in Founders at Work or at thefunded.com. And VCs can start theNOTfunded.com and continue the dialog there.
Off the top of my head, VCs are rigging "standard" term sheets now and blaming the economy, VCs dont' actually take much risk, VCs act as an oligopoly, VCs solicit your business plan and then hand a copy of it to the CEO of their portfolio company, VCs set milestones then say you didn't meet them and take a larger bite of your stock, VCs say they'll give you lots of advice and then don't, VCs manipulate the board, etc.
Food for thought.
Mark
· 1 year ago
@Jim, want who to fail? Not sure what you're saying there, but in terms of entrepreneurs' complaints at The Funded, there are a lot of good points come up there. However, there are also more instances than not where a bitter entrepreneur does not like the tone of a VC or is frustrated that he didn't get an email reply, so he goes to The Funded and openly trashes them, in some cases saying things that are totally untrue. That's been my biggest complaint to Adea (The Funded's founder), there is no method for ensuring veracity of the information posted, so it has come to be known as a gripe fest by disgruntled entrepreneurs. I'll admit that some of the things said about some of the investors are true - there are a lot of jerks on the VC side, but for the most part, I don't think that's the case. There are likely more people just overreacting than actual instances of truely being treated wrongly. Some times, though, people have to grow up and deal with the fact that investors may not be interested in spending millions of dollars on their concept.
In terms of The Not Funded, I suggest you go back and look at a post that Josh Kopelman wrote back in the spring (http://redeye.firstround.com/2008/04/the-unfund...). He secretly created a website called theunfunded.com which was a parady of The Funded. He eventually came out and admitted he was behind it and that it was all just an April Fool's joke. Needless to say, most investors have better things to do with our time than complain about entrepreneurs or other VC's, but it certainly would be nice to get some viewpoints from different sides on The Funded.
On your other claims, I think they are definitely off and by the sound of them, I'm assuming you've never worked on the VC side of things. Again, we have better things to do with our time than "rig term sheets" and whatever else. Yes, some VC's use pitches with competing firms to gain market intelligence, but I do not and I argue most don't. Nevertheless, that's a part of the business and as long as there is no breach of NDA, then it is not illegal; perhaps unethical and lacking integrity yes, but not uncommon for any sector. Are there VC's like how you describe? Sure, but I would argue most are not like this, so it's hard to say "VC's do this and that," b/c your claims don't apply to most.
All Comments
I find that most people who post comments on the tech blogs like tech crunch offer little insight into what's really going on in technology. Half of those folks have never run a company let even thought of an idea for a tech startup. They don't have the experience to see the big picture.
I personally love VCs - not because of who they are, but what they represent. The excitement of turning an idea into a billion dollar business and putting the money into the pot when it's just a logo on a piece of paper. It's that kind of vision and aggressive business moves make starting a company exciting.
So in a long winded way of answering your question.. I don't think it's the VCs that are going to change first - it's the entrepreneurs. VCs will always find a way to get the money. It's the startup founders that are going to need to get creative. That in turn will change how VCs deal with entrepreneurs. In a few months they will see which start ups survived and you'll have your answer.
I will check back and continue reading..
I totally agree with the current pitfalls you have outlined, and they need to change to match the whole web 2.0 mantra - for the people by the people.
http://www.gtradenet.com
Off the top of my head, VCs are rigging "standard" term sheets now and blaming the economy, VCs dont' actually take much risk, VCs act as an oligopoly, VCs solicit your business plan and then hand a copy of it to the CEO of their portfolio company, VCs set milestones then say you didn't meet them and take a larger bite of your stock, VCs say they'll give you lots of advice and then don't, VCs manipulate the board, etc.
Food for thought.
In terms of The Not Funded, I suggest you go back and look at a post that Josh Kopelman wrote back in the spring (http://redeye.firstround.com/2008/04/the-unfund...). He secretly created a website called theunfunded.com which was a parady of The Funded. He eventually came out and admitted he was behind it and that it was all just an April Fool's joke. Needless to say, most investors have better things to do with our time than complain about entrepreneurs or other VC's, but it certainly would be nice to get some viewpoints from different sides on The Funded.
On your other claims, I think they are definitely off and by the sound of them, I'm assuming you've never worked on the VC side of things. Again, we have better things to do with our time than "rig term sheets" and whatever else. Yes, some VC's use pitches with competing firms to gain market intelligence, but I do not and I argue most don't. Nevertheless, that's a part of the business and as long as there is no breach of NDA, then it is not illegal; perhaps unethical and lacking integrity yes, but not uncommon for any sector. Are there VC's like how you describe? Sure, but I would argue most are not like this, so it's hard to say "VC's do this and that," b/c your claims don't apply to most.