Of course a VC does not want you wasting his money and will finger wag all day long to try to make entrepreneurs behave.
However his analysis focusing on isolated economic indicators is missing the forest for the trees (presumably willfully). Why is money cheap? Because investors have no place to put their money. The accelerating consolidation of wealth within the super rich (ie. the 0.01% funding VCs) and the pathetic amount of tax and philanthropy mean they have nowhere to put their money. It is going to be impossible to get the returns they demand because of the decimation of the middle class and on a larger scale the impossibility of sustaining 20th century level growth over the long term.
Tech is a long way from being an unattractive investment because it still provides the best avenue to scaling a business quickly. It will survive a tremendous amount of douchebag entrepreneur cash burning simply because there's no better game out there, and until society comes to term with what's actually happening economically rather than wishfully believing the juked stats the government puts out to get re-elected I don't see any better investment opportunities coming along.
The majority of funding for the VC industry does not come from the super rich, but rather endowments, pensions, and other forms of institutional capital. These institutions do have many other markets where they invest their capital, most of which are more attractive on a risk-adjusted basis when taking into consideration the illiquid nature of venture capital as well as the high fees.
But the 2008 slide deck was right. It was comically easy to hire great people for a few years after Lehman. Rents were going down in San Francisco. SOMA wasn't a ghost town, exactly, but it was pretty empty compared to now. The bust was real.
The rapid recovery in tech has more-or-less paralleled the rapid recovery in the stock market as a whole. There's no lesson to be learned from cynicism here, except that the tech industry probably never paid the full price for the last crash, because the "fix" for that was flooding the market with cheap capital, which makes risky investments look reasonable.
You point out that we've been hearing VCs belly ache about the high prices they've been paying for many years, but I don't see how it follows that the market is irrational, but even if it is, in that case it'd make it easier to remain solvent. Which directly contradicts your second thought.
I hope so. Currently, VC money is a horrible market distortion that encourages what is basically dumping - companies with good products and actual business models being starved of oxygen by cashed-up competitors who simply give products away for free. I'm not even sure of the economic term for it but wouldn't be surprised if it's illegal in a few years, after we've gotten more sophisticated.
A related argument had been made a lot lately about how "free" can lead to scummy business models like surveillance and manipulative black hat media tactics.
You can do free sustainably if your costs are low and if you have something a tier up you can sell. That's freemium and it can work for some things. But if your costs are high or if a paid tier does not materialize... Now you have a big problem. You own a liability, one purchased via massive investment and employing many people. You must find a way to make it pay, so you start looking at what you have a little differently. Your users... Now there's a product.
South Park parodied the grow-first-monetize-later gambit in the "underpants gnomes" episode:
1) collect underpants
2) ...?
3) profit!
Nobody knew the second step back then. Of course now companies like Facebook have shown us what step two is. It's:
I think it's fair to say that this analysis applies better to web/app companies. There's just a fundamental problem with raising (and burning) millions trying to grow a site for inbound marketing, or an app for dating, or what have you, even though these are great ideas and things that people want:
You likely won't be able to generate real revenue on something whose value is so immediately replicable or replaceable.
There needs to be a caveat to "build something people want": there has to be some barrier so that others can't compete so easily. Customer and market understanding is one, and that's certainly helped. But again, the replication model, which will drive down profits for everyone, kicks in. Technical superiority is a possible solution, but most web/app products simply wouldn't benefit from this because their functionality is trivial.
Of course, there are exceptions. Unicorns. Things like Whatsapp, Twitter, and Salesforce come to mind. Obviously their initial products were replicable, but the winner-takes-all network effects (and eventual "platform dynamics") create that lock-in. For every one of them, 1000s of similar companies fail. The problem is when VC money is chasing those 1000s of likely-to-fail-I-might-do-it-too companies. They're more likely to fail than laundromats, but they're burning millions in an attempt to be those "winners". Easier than investing in clean energy though.
Fundamentally, as a society we need some technical advancement to create meaningful economic growth. We can't just keep advertising and selling the same stuff to each other. When a sector is running dry on innovation opportunities (i.e. webs/apps) maybe it's time to look elsewhere. Or stick around and wait for unicorns. Meh.
For now though, how people want to misappropriate (in my opinion) their money is their choice, as long as most of this doesn't get dumped on John Smith from The Public like it did in 2000.
> Fundamentally, as a society we need some technical advancement to create meaningful economic growth
Fundamentally, as a society we need a social+economic advancement that allows society to continue to function in the absence of growth.
Farms don't need growth to produce food. Power plants don't need growth to produce energy. Construction companies don't need growth to build houses. There is no good reason why the wheels should come off our economic system in the absence of growth.
The fact that the wheels do come off in the absence of growth is a bug. Plain and simple. We need to fix the bug rather than "working around" it by trying to produce unending growth.
Truth is, it is not their money. They are borrowing it at low rates. The most important point is that the private capital is fuelled by cheap public money. When that money dries up, so will the funding for the startup scene.
Winter is always coming. Gurley's analysis is spot on but it really talks about VC money not "real" money. Something not enough startups internalize has always been how "expensive" it is to use the dollars you get from investors to fund operations.
Will any of the bootcamps survive, do you think? It seems unlikely given the stories I've read here, lsc hiring a former coworker (his technical superior) out of a sandwich shop, or tptacek having to move from San Francisco to Ann Arbor because there were no jobs going in San Francisco for someone who co-founded a large ISP and had lots of security publications.
I'm sure it'll be bad enough in the US but I pity the graduates of General Assembly London or the Berlin bootcamp.
Translation: "Waaaaaah! I'm a VC; I'm not the only game in town anymore; and I have to pay money. Waaaaah!"
Yeah, guess what? Nobody likes VC's. They screwed everybody over in the 1999-2000 bust, so those people have stayed away ever since. And, now, the stupid 20-somethings are starting figure the same thing out, are buckling down on very small amounts of money and cashing out to Yagglesoftazon ASAP since there is very little barrier to entry on something which is solely software.
I'm always amazed by stories of startups that generate almost no profit and yet burn millions of VC dollars. Yes, I know that VC count on that 1 out of 100 invested in companies to generate profit larger than all the other combined, but still it's a bit ridiculous and in my opinion not healthy for the industry. It's a different story if you've a bootstrapped, profitable company and want to boost the growth - you can negotiate better terms with the VC, because a) you've paying customers and have a proven business model and b) you don't need the VC money to survive, unlike a fresh company without any profits.
Some types of companies are harder to bootstrap in a way that is profitable from day 1, also the risk for a small bootstrapped company is they just prove the market for a VC backed juggernaut to come in and eat them alive.
I don't think there is an overall tech bubble like 1999, but there may indeed be smaller scale bubbles in overheated or overhyped sectors.
There are two areas of worry from what I see. One is free apps and services with high burn and no good path to revenue. Another is what looks to me like a mini-bubble in startups that cater to other startups. Scene-centric inbreeding like that is probably more worrisome than the overvalued pic sharing services.
I somehow hope it's gonna happen sooner than later, just because that way it could hurt a little less.
What's not clear here is that the impact on global economy will be not that big.
Anyway, if they're called venture capitalists, shouldn't they be able to look forward a little better than the market? That way they know what will happen if they keep going on like this. A quick deflation of the bubble, with some notable victims, would be better than a complete burst. Especially for VCs
Actually for me it is getting a bit ridiculous when an app like Yo can get like a million dollars when it goes viral without anyone actually figuring out what's so great about it.
It does seem like growth is triumphing over other metrics, like revenue, or common sense. Of course if we go by that measure, companies like facebook will never survive at all, not sure how this is gonna play out.
Can somebody explain to me why every startup company(or at least every one that articles are written about) feels the need to raise as much VC as possible ASAP? There are so many options for developing scalable systems relatively easily and the cost of running an entirely web/software based company(read: 90% of the hot startups) today is comically low, especially with pay what you use PaaS/IaaS systems like those offered by Google and Amazon. If your product crashes and burns, you will be out a couple thousand dollars MAX + whatever time and effort you put in. If your product is successful, by the time running it on one of these platforms gets too expensive to pay for out of pocket(meaning you have a lot of users running up bandwidth/infrastructure costs), I'd guess that VC firms would be coming to you rather than you to them, and you would basically have more authority to dictate investment terms, and wouldn't have to slog around pitching to firm after firm - most of who will probably reject early stage investment in anything that isn't some rehashed social media dreck made by the white boys from Stanford. I've never pitched to a VC firm, but I don't believe that any pitch is better than "Hey my thing has 10,000 fucking users and we get a metric shitton of new signups every day". I don't think they would care if you were a hobo clown from Latvia who dropped out of elementary school if your product had users and pull, they'd throw money at you since they all want to jump in on the next big thing.
This confuses me as it would seem to be a counter trend to what I'd expect based on what stuff was like a few years ago, when infrastructure costs were much higher, there were much less options, and development was more difficult. Google and Facebook - both of which are practically the model now for successful web companies - were fairly bootstrapped(run out of garages and dorm rooms by a few friends who had scraped together money from friends and family) before getting VC funding, which they got after their products had received somewhat widespread hype/adoption. I don't even think it would have been difficult to raise money or make VC connections before the product even launched for these people, they were practically the definition of the white boys from Stanford - but they didn't. The founders of both of those companies still retain massive shares and control in them compared to what you would expect from almost any other type of company of their calibre. Neither of them had to resort to advertising before their companies got big. The excuse that seems to be given is that by getting VC you don't have to worry about profits and paying costs for a while and you can just focus purely on the product, but as I said before, the costs are minimal - if you had even a small amount of savings or hit a family member up for a loan, you could run for quite a while on Google App Engine and such and not really have to worry about cost. If your founders are even remotely technical, I don't see how you would need more staff members in your early stages, successful web/software companies love to brag about how early on their team consisted of 3 people who worked a million hours a week on the product subsisting on nothing but cocaine and melon rinds because they were so dedicated to the company. As a person who I guess would be considered technical(though if you ask me I'm just a monkey who doesn't have a clue what they are doing and just bangs rocks together and hacks at stuff till something working comes out), I simply don't see the appeal of begging a bunch of of suits - most of whom probably don't know a shit about computers - for venture funding, and having to sell large stakes of your company to get it when you don't absolutely need it at the time.
The only reason I would postulate for this trend is an increasing amount of non-technical founders who need to pay for developers to make and maintain their product, but don't want to give these developers significant equity in the company. Almost all of the cofounders of Google and Facebook were highly technical and very driven and intelligent from what I can see, so I could easily believe that they were able to chug along on their own for a while without hiring more technical staff. I've put a couple of fairly popular and highly trafficked web projects(nothing huge, current one pushes about 2TB of bandwidth a day from 30k visitors, and costs about $100 a month to run on a dedicated server) together with some friends and am currently learning iOS dev, and I don't believe its a stretch at all to think that me and a buddy could build something like Snapchat or Instagram in a couple of weeks and throw it up on App Engine.
I know almost nothing about finance and haven't ever managed or worked at a for really reals startup, so let me know if I'm way off here. I would just like to get some people's perspectives on this. Sorry for the rant.
Sure you can throw together another Snapchat in a weekend. But very soon - if you have real significant user base - you will need to build and maintain apps on all platforms. You will need someone to fix bugs, add new features and scale things better everywhere. You will need people who can create and conduct marketing campaigns (FYI - Techcrunch isn't writing about for you without getting paid and Snapchat didn't become popular without playing tons of marketing tricks). You will need guys who can do business development, accounting & taxes, create partner relationships and so on. You will also need customer support, social media management, metrics measurement, all kind of dashboards and so on. Before you know, you will end up with significant staff, needing office space, doing moral events and likes.
Per head aggregate cost of an engineer these days is upwards of $230K when you add up all health insurance, 401K, signing bonuses, office space and so on. Even if you hire just 50 employees, you can easily expect $1 million burn rate per month. For things like Snapchat, you can't anticipate much income during initial growth period. So this means you need VC for getting ~$10-20M of funding per year until you get sold, IPOed or have ad based income flowing in.
In support of your thesis, there was actually one guy who did plantyoffish.com and managed it through out everything all by himself for many years. But finally things have caught up to him. Now he has more than dozen employees. This is of course outlier case and not a typical scenario where competition will eat you alive if you don't defend your castle aggressively every day by one-uping them. And for that you need employees and bandwidth to work on lot of things at the same time, many of which likely won't work out.
>Can somebody explain to me why every startup company(or at least every one that articles are written about) feels the need to raise as much VC as possible ASAP?
>The only reason I would postulate for this trend is an increasing amount of non-technical founders who need to pay for developers to make and maintain their product, but don't want to give these developers significant equity in the company.
I think this is the best explanation. It's not just tougher to find engineers period, but you have to incentivize them away from the big co's who are paying like 120k/engineer. Equity helps, vision helps, but more than anything so does cash. However it is telling if companies need to rely primarily on cash to incentivize rather than the first two.
Maybe this could be a good litmus test for you as a founder: can you get your early engineers to work at half, or less, their market rate? If so, it implies you're putting something together worth working on (or you're really damn good at recruiting). But if not, if you have to pay close to their big co salary, then I think there's a problem.
> Can somebody explain to me why every startup company(or at least every one that articles are written about) feels the need to raise as much VC as possible ASAP?
1. It pays the bills.
2. Raising money is a strong signal of success both from a personal entrepreneur perspective and for the success of the team (whether you disagree with that notion or not, it's simply true). Whether that translate to success is a different story.
3. Raising money means your business exists. Many people (especially B2B) don't want to do business with vendors who aren't going to be around in 6 months.
4. The speed at which tech startups are created, also exists in reverse. Startups close down all of the time.
> Neither of them had to resort to advertising before their companies got big.
> I don't believe its a stretch at all to think that me and a buddy could build something like Snapchat or Instagram in a couple of weeks and throw it up on App Engine.
Heh, if it's that easy then, ummm, go build it? Chucking millions of dollars at these startups isn't necessarily about building the product, it's about supporting their growth to get network effects ASAP. Achieving "the network effect" means you've got a nice big moat around your business, which VCs and entrepreneurs love. You're right, they didn't have to do advertising, but they did have to pay for shit-hot SRE people to make sure 1bil tweets could be sent every week (or whatever).
Most startups outside the US grow without VC capital. But in the US, with all the money trees around, you would be crazy to pass up the opportunity for free money.
Because the founders often don't really believe in their startup's offering/services in terms of profitability. They want to hand over all the risk to investors and coast on other people's capital while they take a paycheck, boost their credentials and hey, maybe we'll get acquired?
There is a whole world of businesses out there, many of them online, that don't raise VC money and don't necessarily get written about on Hacker News and the like. Check out (for example) the Startups for the Rest of Us podcast.
I'm guessing it's in 18-24 months. Companies are still getting acquired left and right and BigCo still has cash to spend (especially Yahoo, Google, Facebook and Twitter). As long as BigCo is acquiring, VCs will continue pumping.
Somehow though, maybe because this came a day or two after Suster's response to the Gurley interivew, I had a good idea going into it that the post had something to do with the impending VC crunch.
[+] [-] dasil003|11 years ago|reply
However his analysis focusing on isolated economic indicators is missing the forest for the trees (presumably willfully). Why is money cheap? Because investors have no place to put their money. The accelerating consolidation of wealth within the super rich (ie. the 0.01% funding VCs) and the pathetic amount of tax and philanthropy mean they have nowhere to put their money. It is going to be impossible to get the returns they demand because of the decimation of the middle class and on a larger scale the impossibility of sustaining 20th century level growth over the long term.
Tech is a long way from being an unattractive investment because it still provides the best avenue to scaling a business quickly. It will survive a tremendous amount of douchebag entrepreneur cash burning simply because there's no better game out there, and until society comes to term with what's actually happening economically rather than wishfully believing the juked stats the government puts out to get re-elected I don't see any better investment opportunities coming along.
Let the party continue...
[+] [-] surfearth|11 years ago|reply
[+] [-] jeffreyrogers|11 years ago|reply
[+] [-] ojbyrne|11 years ago|reply
2008: http://techcrunch.com/2008/10/10/sequoia-capitals-56-slide-p...
2011: http://www.startuplessonslearned.com/2011/08/winter-is-comin...
And it makes me think of 2 things:
1. "the market can remain irrational longer than you can remain solvent."
2. The way large companies use layoffs not to actually cut the total number of jobs, but to cut deadwood. This seems like the VC equivalent.
[+] [-] timr|11 years ago|reply
The rapid recovery in tech has more-or-less paralleled the rapid recovery in the stock market as a whole. There's no lesson to be learned from cynicism here, except that the tech industry probably never paid the full price for the last crash, because the "fix" for that was flooding the market with cheap capital, which makes risky investments look reasonable.
[+] [-] minimaxi|11 years ago|reply
[+] [-] venus|11 years ago|reply
[+] [-] api|11 years ago|reply
You can do free sustainably if your costs are low and if you have something a tier up you can sell. That's freemium and it can work for some things. But if your costs are high or if a paid tier does not materialize... Now you have a big problem. You own a liability, one purchased via massive investment and employing many people. You must find a way to make it pay, so you start looking at what you have a little differently. Your users... Now there's a product.
South Park parodied the grow-first-monetize-later gambit in the "underpants gnomes" episode:
1) collect underpants
2) ...?
3) profit!
Nobody knew the second step back then. Of course now companies like Facebook have shown us what step two is. It's:
2) sniff underpants
:)
[+] [-] sliverstorm|11 years ago|reply
[+] [-] vrama|11 years ago|reply
[deleted]
[+] [-] zxcvvcxz|11 years ago|reply
You likely won't be able to generate real revenue on something whose value is so immediately replicable or replaceable.
There needs to be a caveat to "build something people want": there has to be some barrier so that others can't compete so easily. Customer and market understanding is one, and that's certainly helped. But again, the replication model, which will drive down profits for everyone, kicks in. Technical superiority is a possible solution, but most web/app products simply wouldn't benefit from this because their functionality is trivial.
Of course, there are exceptions. Unicorns. Things like Whatsapp, Twitter, and Salesforce come to mind. Obviously their initial products were replicable, but the winner-takes-all network effects (and eventual "platform dynamics") create that lock-in. For every one of them, 1000s of similar companies fail. The problem is when VC money is chasing those 1000s of likely-to-fail-I-might-do-it-too companies. They're more likely to fail than laundromats, but they're burning millions in an attempt to be those "winners". Easier than investing in clean energy though.
Fundamentally, as a society we need some technical advancement to create meaningful economic growth. We can't just keep advertising and selling the same stuff to each other. When a sector is running dry on innovation opportunities (i.e. webs/apps) maybe it's time to look elsewhere. Or stick around and wait for unicorns. Meh.
For now though, how people want to misappropriate (in my opinion) their money is their choice, as long as most of this doesn't get dumped on John Smith from The Public like it did in 2000.
[+] [-] jjoonathan|11 years ago|reply
Fundamentally, as a society we need a social+economic advancement that allows society to continue to function in the absence of growth.
Farms don't need growth to produce food. Power plants don't need growth to produce energy. Construction companies don't need growth to build houses. There is no good reason why the wheels should come off our economic system in the absence of growth.
The fact that the wheels do come off in the absence of growth is a bug. Plain and simple. We need to fix the bug rather than "working around" it by trying to produce unending growth.
[+] [-] mempko|11 years ago|reply
[+] [-] ChuckMcM|11 years ago|reply
[+] [-] barry-cotter|11 years ago|reply
I'm sure it'll be bad enough in the US but I pity the graduates of General Assembly London or the Berlin bootcamp.
[+] [-] enraged_camel|11 years ago|reply
[+] [-] bsder|11 years ago|reply
Yeah, guess what? Nobody likes VC's. They screwed everybody over in the 1999-2000 bust, so those people have stayed away ever since. And, now, the stupid 20-somethings are starting figure the same thing out, are buckling down on very small amounts of money and cashing out to Yagglesoftazon ASAP since there is very little barrier to entry on something which is solely software.
[+] [-] pkorzeniewski|11 years ago|reply
[+] [-] jiggy2011|11 years ago|reply
[+] [-] api|11 years ago|reply
There are two areas of worry from what I see. One is free apps and services with high burn and no good path to revenue. Another is what looks to me like a mini-bubble in startups that cater to other startups. Scene-centric inbreeding like that is probably more worrisome than the overvalued pic sharing services.
[+] [-] unknown|11 years ago|reply
[deleted]
[+] [-] camillomiller|11 years ago|reply
[+] [-] unknown|11 years ago|reply
[deleted]
[+] [-] KonoHito|11 years ago|reply
Actually for me it is getting a bit ridiculous when an app like Yo can get like a million dollars when it goes viral without anyone actually figuring out what's so great about it.
It does seem like growth is triumphing over other metrics, like revenue, or common sense. Of course if we go by that measure, companies like facebook will never survive at all, not sure how this is gonna play out.
[+] [-] no_future|11 years ago|reply
This confuses me as it would seem to be a counter trend to what I'd expect based on what stuff was like a few years ago, when infrastructure costs were much higher, there were much less options, and development was more difficult. Google and Facebook - both of which are practically the model now for successful web companies - were fairly bootstrapped(run out of garages and dorm rooms by a few friends who had scraped together money from friends and family) before getting VC funding, which they got after their products had received somewhat widespread hype/adoption. I don't even think it would have been difficult to raise money or make VC connections before the product even launched for these people, they were practically the definition of the white boys from Stanford - but they didn't. The founders of both of those companies still retain massive shares and control in them compared to what you would expect from almost any other type of company of their calibre. Neither of them had to resort to advertising before their companies got big. The excuse that seems to be given is that by getting VC you don't have to worry about profits and paying costs for a while and you can just focus purely on the product, but as I said before, the costs are minimal - if you had even a small amount of savings or hit a family member up for a loan, you could run for quite a while on Google App Engine and such and not really have to worry about cost. If your founders are even remotely technical, I don't see how you would need more staff members in your early stages, successful web/software companies love to brag about how early on their team consisted of 3 people who worked a million hours a week on the product subsisting on nothing but cocaine and melon rinds because they were so dedicated to the company. As a person who I guess would be considered technical(though if you ask me I'm just a monkey who doesn't have a clue what they are doing and just bangs rocks together and hacks at stuff till something working comes out), I simply don't see the appeal of begging a bunch of of suits - most of whom probably don't know a shit about computers - for venture funding, and having to sell large stakes of your company to get it when you don't absolutely need it at the time.
The only reason I would postulate for this trend is an increasing amount of non-technical founders who need to pay for developers to make and maintain their product, but don't want to give these developers significant equity in the company. Almost all of the cofounders of Google and Facebook were highly technical and very driven and intelligent from what I can see, so I could easily believe that they were able to chug along on their own for a while without hiring more technical staff. I've put a couple of fairly popular and highly trafficked web projects(nothing huge, current one pushes about 2TB of bandwidth a day from 30k visitors, and costs about $100 a month to run on a dedicated server) together with some friends and am currently learning iOS dev, and I don't believe its a stretch at all to think that me and a buddy could build something like Snapchat or Instagram in a couple of weeks and throw it up on App Engine.
I know almost nothing about finance and haven't ever managed or worked at a for really reals startup, so let me know if I'm way off here. I would just like to get some people's perspectives on this. Sorry for the rant.
[+] [-] sytelus|11 years ago|reply
Per head aggregate cost of an engineer these days is upwards of $230K when you add up all health insurance, 401K, signing bonuses, office space and so on. Even if you hire just 50 employees, you can easily expect $1 million burn rate per month. For things like Snapchat, you can't anticipate much income during initial growth period. So this means you need VC for getting ~$10-20M of funding per year until you get sold, IPOed or have ad based income flowing in.
In support of your thesis, there was actually one guy who did plantyoffish.com and managed it through out everything all by himself for many years. But finally things have caught up to him. Now he has more than dozen employees. This is of course outlier case and not a typical scenario where competition will eat you alive if you don't defend your castle aggressively every day by one-uping them. And for that you need employees and bandwidth to work on lot of things at the same time, many of which likely won't work out.
[+] [-] zxcvvcxz|11 years ago|reply
>The only reason I would postulate for this trend is an increasing amount of non-technical founders who need to pay for developers to make and maintain their product, but don't want to give these developers significant equity in the company.
I think this is the best explanation. It's not just tougher to find engineers period, but you have to incentivize them away from the big co's who are paying like 120k/engineer. Equity helps, vision helps, but more than anything so does cash. However it is telling if companies need to rely primarily on cash to incentivize rather than the first two.
Maybe this could be a good litmus test for you as a founder: can you get your early engineers to work at half, or less, their market rate? If so, it implies you're putting something together worth working on (or you're really damn good at recruiting). But if not, if you have to pay close to their big co salary, then I think there's a problem.
[+] [-] mbesto|11 years ago|reply
1. It pays the bills.
2. Raising money is a strong signal of success both from a personal entrepreneur perspective and for the success of the team (whether you disagree with that notion or not, it's simply true). Whether that translate to success is a different story.
3. Raising money means your business exists. Many people (especially B2B) don't want to do business with vendors who aren't going to be around in 6 months.
4. The speed at which tech startups are created, also exists in reverse. Startups close down all of the time.
> Neither of them had to resort to advertising before their companies got big.
> I don't believe its a stretch at all to think that me and a buddy could build something like Snapchat or Instagram in a couple of weeks and throw it up on App Engine.
Heh, if it's that easy then, ummm, go build it? Chucking millions of dollars at these startups isn't necessarily about building the product, it's about supporting their growth to get network effects ASAP. Achieving "the network effect" means you've got a nice big moat around your business, which VCs and entrepreneurs love. You're right, they didn't have to do advertising, but they did have to pay for shit-hot SRE people to make sure 1bil tweets could be sent every week (or whatever).
[+] [-] return0|11 years ago|reply
[+] [-] cylinder|11 years ago|reply
[+] [-] chromaton|11 years ago|reply
[+] [-] mbesto|11 years ago|reply
[+] [-] seanmcdirmid|11 years ago|reply
[+] [-] AVTizzle|11 years ago|reply
Somehow though, maybe because this came a day or two after Suster's response to the Gurley interivew, I had a good idea going into it that the post had something to do with the impending VC crunch.
[+] [-] recalibrator|11 years ago|reply