VCs Party Like It's 1996

from the coming-back dept

For all those who still think that there are no more startups, and venture capitalists aren’t funding anything any more, here’s a good reality check. It’s looking like venture funding levels will be similar to what they were in 1996, just as the tech world was really starting to heat up again. Actually, this is based on data from the first half of the year, and from what many VCs have been saying over the past few months, the pace has only been speeding up. The article also makes some good points about how VCs, historically, funded “technology risk” and not “market risk”. That is, they would fund a new technology, believing that the market existed for such a technology. However, things got flipped during the dot com boom – and they were funding market risk, but not technology risk. As an example, all the dot coms funded to sell a random category of products online. The technology wasn’t tricky, the question was always whether or not that particular startup could find the market willing to buy whatever (shoes, books, hats, pet food, etc.) online. One other note of optimism (which has been mentioned plenty of times before): often, the longest lasting tech companies are founded during downturns when they learn to survive by being efficient and providing customers products they actually need.

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