…his firm often considers $2 of annual revenue per user to be an important target threshold for startups.
via How Much Is a User Worth? – Technology Review.
Not really much else compelling in this blog post with such a strong title.
Category: Venture Capital
the VC model needs to evolve, or valuations need to come down.
This has been true even before the recent early stage deal inflation surge. All the increase in average Series A rounds did was reveal it. Still too much money chasing too few deals.
“At at time when the average Series A round is now north of $20mm (based on very anecdotal evidence and not at all scientific), this poses challenges for the VC industry,” says Wilson.
via CHART OF THE DAY: Why It’s Hard Being An Early Stage Investor Right Now, According To Fred Wilson.
The sweet spot in adtech, the “average” expected exit value, seems to be around $400mm- Reaction Wheel
Esther Dyson on Facebook vs. Groupon
My last post pointed out the contrasts between Facebook and Groupon (only because they are being talked about as two good IPO candidates and not because they are competitors). Esther Dyson not only points out the same differences I did between the two companies but also seems to consider them potential competitors:
For my money, Facebook has a stronger position than anyone in the market. If it can extend its power to daily deals, its competitors had better watch out.
Which makes me realize something I missed my last post– that even though Groupon can be valued on revenues, it’s really isn’t by some. In fact, it’s really on the same end of the spectrum as Facebook. That’s because many investors see/want to see Groupon not just for what it is today, but for what it can be in the future: a local advertising juggernaut where group deals is only one sliver of their business.
(Think of Fred Wilson’s post on AirBNB– “We focused too much on what they were doing at the time and not enough on what they could do, would do, and did do.”)
Barry Diller on tech bubble:’All the money that’s going to be lost will be by people who can afford to lose it. so who cares?’
Another older post–
Said another way, there is not much systemic risk in new tech investing. There are no tightly coupled linkages and the fallout should be largely contained.
“Barry Diller on tech bubble: ‘All the money that’s going to be lost will be by people who can afford to lose it. so who cares?'”
Outside.In Sold To AOL
Terralliance- New Name, New Funds
Terralliance has changed it’s name, raised $60M in new venture capital, and is at it again. Adam Lashinsky points us to this release:
EOS GeoSolutions, Inc. today announced that it has successfully closed on a $60 million financing round. New investors Energy Capital Group and Bill Gates joined existing investors – including Goldman Sachs, Kleiner Perkins Caufield & Byers, and Passport Capital – in this oversubscribed funding round.
I started writing about Terralliance because they were one of the “green energy” startups that Kleiner Perkins invested in a few years ago when they thought there was no more money left in internet deals and stopped doing them. They turned their focus to green energy and Terralliance was positioned as one of these startups. Little did we know that they were actually a traditional energy oriented firm that was trying to improve on existing oil exploration methods. Little did anyone know that there was some shady things going on at the company and they burned through a lot of venture capital. But I guess they’ve raised a big round, recapitalized, hired new management, and lived to fight another day.
Here are some of my old posts on the subject:
Terralliance – “The Google of the oil and gas industry”
Trouble at Kleiner Perkins-Backed Terralliance
Terralliance Sues Ex-CEO For Stealing Intellectual Property
Kleiner Perkins’ lessons learned dabbling in clean tech
A few years ago, Kleiner seemed to be deemphasizing the Web to focus more on opportunities in cleantech, but the news today is just another signal of how serious Kleiner is about this market opportunity. “This third wave of disruption of social and mobile has meant that digital investing has taken on a new prominence in Kleiner,” Doerr says.
via John Doerr and Mary Meeker Speak about their New Partnership.
It’s no secret that Kleiner stopped doing internet deals a couple of years ago and decided to focus more on energy and clean tech. Now that they’re through with that phase, I wonder if that strategic misstep will be turned into an HBS case study or instead be overshadowed entirely by the structural changes reverberating through the industry.
As for the Meeker hire, I think Paul Kedrosky said it best in this tweet:
We stopped doing the “analyst turns VC” thing post-2001. This seems so hoary, like your parents showing up in their disco clothes.
Great question: What Percentage of 2010 Seed Deals Won’t Raise The Next Round?
I’m not really big on the posts about the seed bubble because I don’t find them substantive. What I’m a fan of are posts opining on how these things will play out. That’s why I’ll spend time reading a post like this (versus one talking about how things today feel like they did in 1999):
Some percentage of seed deals will quickly raise their next round (30% if you believe the two anecdotes above.) Some percentage of seed deals will fizzle out. But some percentage will get stuck in the middle. They will be interesting ideas with solid teams that realize their first idea out of the gate needs a pivot. Or they’ll be in the middle of a pivot when they run out of cash. In the absence of the existing seed investors stepping up and writing another check (without any new / outside validation) it’s going to be hard for these companies to get to the place where they raise a next round financing.
via What Percentage of 2010 Seed Deals Won’t Raise The Next Round?.
I would be more direct and say that a minority percentage will go on to raise more cash. The rest will not, and of these, the lucky and connected ones will get “acq-hired” like Hot Potato or Drop.io, others might tried to merge with each other or pivot to a local optima that can bring in some cash flow. My point is that there will be a reaction and things won’t be so neat, orderly, or transparent.
The bursting of a seed bubble won’t follow with a huge fallout and contagion that spreads to the rest of the economy. The difference between this and the debt bubble is the smaller scale and the fact that seed investing is relatively sheltered from the rest of the tightly coupled financial economy.
When we reached the peak of the bubble, which we don’t know if this is a peak yet, I predicted that we’d see a lot more fighting for engineering talent among startups. It hasn’t been happening at startups though. Instead, this war for talent is playing out at the big tech firms like Google, which just increased salaries for all their employees to defend themselves against rivals.
Andreessen Horowitz Raises $650 Million Fund, Crowds Out Other VCs
I don’t need to convince anyone that venture capital is a cottage industry and hasn’t scaled well as more money has poured into the asset class. So why is more money pouring into venture? Because even though overall venture returns are abysmal, the top funds will always perform. Andreessen Horowitz has the momentum to succeed in today’s environment because they have all the right ingredients (and the access/deal flow). And when they succeed, they’ll be taking other firms’ lunches. Venture capital is a Pareto Optimal game so while these guys are high fiving each other, the rest of Sand Hill Road is probably throwing chairs across the office.
The fundraising crunch doesn’t seem to be hitting venture capital firm Andreessen Horowitz, which announced today that it has raised $650 million for a second fund, more than doubling the $300 million it raised 16 months ago.
via Andreessen Horowitz Doubles Down, Raises $650 Million Fund: Tech News «.
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