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I had the great honor to introduce a panel of VC legends at the WAVC event this evening. Here is one of several moments of playful quips and banter.
5 responses to “Reminiscing”
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Forgive me for longing for these days…
Don Valentine:
"Don founded Sequoia Capital in 1972 and was one of the original investors in Apple Computer (AAPL), Atari, Cisco Systems (CSCO), LSI Logic (LSI), Oracle (ORCL) and Electronic Arts (ERTS). Prior to starting Sequoia Capital, Don was a Founder of National Semiconductor and a senior sales and marketing executive with Fairchild Semiconductor."
Back when startups made actual products instead of no-business-model web 2.0 junkware. I think the VC model will be forced to return to a tighter focus on real business models and products that can generate. The investment returns in the VC field in the last decade will all but force that reversion (Moritz obviously has nothing to worry about 😉 ).
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"Back when startups made actual products instead of no-business-model web 2.0 junkware."
Can we point to the origin of this trend?
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Fed by artificially cheap capital perhaps? A trend that continued from the late 1990s until about 18 months ago. Take for example some of the large institutional investors; they’ve thrown massive sums of capital at hyper risk VC funds that have yielded very bad returns – a lot of that capital to burn came from the leverage bubble that just exploded.
Most of the largest tech companies were built on low levels of venture capital, in a boot-strap model. Then you have the YouTubes and Facebooks (or the old failures like eToys or WebVan), that have chewed through massive piles of capital, with no clear business models, and no clear path to profitability; they’re more products than they are real companies (which is why most of the web 2.0 ‘companies’ have ended up acquired rather than growing into larger independent businesses). Even Google, which was funded during the height of the dotcom bubble, took a relatively paltry sum of VC; compare that to what Facebook has eaten while continuing to burn at a torrid pace. I would argue that, at least as it stands thus far, most of web 2.0 consists of products, rather than sustainable companies with business models. That is to say, a lot of products and services are being funded and sold, not companies with sustainable models.
Back when VC funds were smaller (pre early 1990s), it’s not that the companies being funded couldn’t still end up very large eventually – it’s that the return on investment from venture capital invested, and relative risk (based on the investment scale) was dramatically different. I truly expect we’ll see a return to a VC approach that funds companies able to stand on their own two feet; and the returns in VC will jump significantly while less capital will be invested. It’s inevitable.
In other words, now is an excellent time, IMO, to get into venture capital; as is typically the case when everyone else exits or dies.
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Jonathan, I also think change is coming to the way we fund innovation in the US.
For details, backtrack from here: http://www.flickr.com/photos/jurvetson/3387562519/comment7215761...
I’m not sure I’d take such a broad sweep at Web 2.0, but I get your point.
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