tag:blogger.com,1999:blog-4503292949532760618.post3708503350015961258..comments2024-03-28T13:39:27.601-07:00Comments on DSHR's Blog: Two Great ReadsDavid.http://www.blogger.com/profile/14498131502038331594noreply@blogger.comBlogger5125tag:blogger.com,1999:blog-4503292949532760618.post-54102234768519168672023-06-05T14:30:38.852-07:002023-06-05T14:30:38.852-07:00Kyle Harrison's VC Contagion: Is Venture Capit...Kyle Harrison's <a href="https://www.newcomer.co/p/guest-essay-vc-contagion" rel="nofollow"><i>VC Contagion: Is Venture Capital Killing Itself?</i></a> is a must-read:<br /><br />"Venture capital is no exception. Every engine needs fuel. Every process has inputs and outputs. But eventually, when incentives align, you start to see a hunger that is dangerously self-reinforcing.<br /><br />Capital owners will rationally seek to multiply their wealth. But too often they hunger for risk. Capital allocators should pursue great investments. But too often they hunger for a way to deploy capital quickly. Startups want fuel to grow their businesses. But too often they hunger for cash as a status symbol or for their own quick enrichment.<br />...<br />There are a number of businesses that have yet to demonstrate their ability to consistently turn a profit. That doesn’t mean they are bad businesses, but they’ve certainly been beneficiaries of exorbitant amounts of capital that may hide the less-than-economical aspects of their businesses."<br /><br />Harrison looks at Uber, Airbnb and Netflix as examples, then:<br /><br />"As the amount of venture capital exploded from <a href="https://www.statista.com/statistics/280260/venture-capital-fund-raising-by-holding-companies-in-the-usa/" rel="nofollow">$23B</a> in 2012 to <a href="https://www.statista.com/statistics/277501/venture-capital-amount-invested-in-the-united-states-since-1995/" rel="nofollow">$345B</a> in 2021, the appetite for funding unsustainable growth only increased. The <a href="https://investing1012dot0.substack.com/p/the-blackstone-of-innovation" rel="nofollow">business model of venture</a> is increasingly about aggregating as much AUM as possible. As a result, that sends VCs out looking for cash-hungry startups that want to consume ever more capital.<br /><br />In the pursuit of unsustainable growth, there are two common strategies (among many others) that venture-backed startups have discovered as excellent cash infernos: (1) acquisition at all costs, and (2) selling to startups (aka turtles all the way down)."<br /><br />Harrison concludes:<br /><br />"There are very few playbooks for how to make progress from unsustainable to sustainable territory. Instead, you have a bit of a mentality of “passing the bag.” Who cares if Uber is at $30B of revenue, still trying to figure out “if our unit economics work”? The early investors made lots of money. The next phase is someone else’s problem."<br /><br />This "I got mine, now its your problem" is seen clearly in cryptocurrency <a href="https://blog.dshr.org/2022/02/list-and-dump-schemes.html" rel="nofollow"><i>List And Dump Schemes</i></a> like those from <a href="https://blog.dshr.org/2023/05/lies-damned-lies-a16zs-statistics.html" rel="nofollow">A16Z</a>.David.https://www.blogger.com/profile/14498131502038331594noreply@blogger.comtag:blogger.com,1999:blog-4503292949532760618.post-61258177503636733042023-04-13T10:32:09.145-07:002023-04-13T10:32:09.145-07:00Molly White eviscerates A16Z's latest attempt ...<a href="https://hachyderm.io/@molly0xfff/110180992143277604" rel="nofollow">Molly White eviscerates</a> A16Z's latest attempt to pump life into the Web3 bubble. It is a laugh riot.David.https://www.blogger.com/profile/14498131502038331594noreply@blogger.comtag:blogger.com,1999:blog-4503292949532760618.post-72752660206056116322023-04-12T10:23:21.441-07:002023-04-12T10:23:21.441-07:00Crypto VC Funding Plunges by 80% in Dire Quarter f...<a href="https://www.bloomberg.com/news/articles/2023-04-12/crypto-vc-funding-plunges-by-80-in-dire-quarter-for-startups" rel="nofollow"><i>Crypto VC Funding Plunges by 80% in Dire Quarter for Startups</i></a> by Hannah Miller confirms that the "consummation Devoutly to be wish'd" is happening:<br /><br />"Global VC funding for the industry fell to $2.4 billion in the quarter, an 80% decline from its all-time high of $12.3 billion during the same period last year, according to PitchBook. The drop is “not a surprise,” said PitchBook crypto analyst Robert Le, who noted that venture investing has dwindled across the board this year. In addition to rising interest rates, the first quarter also saw the unraveling of Silicon Valley Bank, an institution widely relied on by venture-backed companies."<br /><br />Apparently, the real problem is that VCs have started doing their job:<br /><br />"Le said the collapse and bankruptcy of crypto exchange FTX has helped slow down the pace of funding rounds and has reinforced the need for due diligence. Rather than rushing into deals, VCs are conducting months of research and asking founders more questions before deciding whether to back a startup."<br /><br />What a novel idea!David.https://www.blogger.com/profile/14498131502038331594noreply@blogger.comtag:blogger.com,1999:blog-4503292949532760618.post-15466374473398315322023-04-04T07:35:27.448-07:002023-04-04T07:35:27.448-07:00Thank you for the post and kind words! Let me know...Thank you for the post and kind words! Let me know if you'd be interested in any topics for future posts.<br /><br />-Faisalfaisalkhanhttps://www.blogger.com/profile/05215537832143224324noreply@blogger.comtag:blogger.com,1999:blog-4503292949532760618.post-73166948898971512762023-03-28T11:30:50.761-07:002023-03-28T11:30:50.761-07:00In Silicon Valley Bank’s Collapse Chills Start-Up ...In <a href="https://www.nytimes.com/2023/03/27/technology/silicon-valley-bank-start-ups.html" rel="nofollow"><i>Silicon Valley Bank’s Collapse Chills Start-Up Funding</i></a> Erin Griffith writes as if the "consummation Devoutly to be wish'd" is a disaster:<br /><br />"SVB’s collapse was not directly caused by the tech downturn, and the start-ups that banked there won’t lose their deposits since the Treasury Department and Federal Reserve eventually guaranteed all of SVB’s deposits. But the institution’s implosion followed a 61 percent drop in venture funding in the last three months of 2022 from a year earlier, according to PitchBook, which tracks start-ups.<br /><br />Kyle Stanford, a PitchBook analyst, said he expected SVB’s collapse to “hasten” the market downturn that was already happening."<br /><br />Griffith has internalized the Silicon Valley point of view to the extent that, as Jacob Bacharach <a href="https://twitter.com/jakebackpack/status/1640403881485123615" rel="nofollow">tweets</a>, the example of a struggling startup trying to raise $2.5M is not an actual tech company, but a ex-VC wanting to advise companies in the process of IPO-ing! How self-referential can you get?David.https://www.blogger.com/profile/14498131502038331594noreply@blogger.com