Can People Keep Their Feet On The Ground When Money Flows?

from the here-comes-the-rush dept

Uh oh. There have been lots of little signs that things in the startup/tech world were picking up, but now it seems that even the venture capitalists are convinced we’re entering the next boom. That might be all that matters, because those VCs have lots of money they’ve been sitting on, so this could be a self-fulfilling prophecy. What’s interesting, though, are the quotes in the first article. The VCs claim things will be different this time, because they know not to take “the bread out of the oven too early,” but are going to let things fully bake before moving on to an exit strategy. Meanwhile, all the entrepreneurs quotes, sound like they’re standing on the shore bracing for a tidal wave, and don’t want to get swept off their feet, talking about the importance of long term vision, ignoring things like share price, but having a strong management team that’s in it for the long haul. These are all things that are good advice and make sense – but which always seem to get tossed out the window when serious money starts flowing (something about all those zeroes…). As the money flows, so goes the hype, and that means more competition, and companies start making short-term decisions because they feel they need to respond more than hold onto their vision.

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Comments on “Can People Keep Their Feet On The Ground When Money Flows?”

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DV Henkel-Wallace says:

The truth on the ground is less exciting

That article didn’t say much (except for the eye-catching “gold rush” statement). The reality is that the VCs are staying out of the early stage deals (initial financing) and are only doing follow-on deals (B round or later) for established companies.

The problem with these large funds (NEA just raised another megafund) is that they just can’t afford to do a lot of small early-stage deals. They have to do larger chunks, which rules out the companies just getting started.

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