Since 2009 we’ve been in an unequivocal bull market. Venture capitalists have raised increasing amounts of money from their investors (LPs) every year. An impressive number of new VCs have been created – most of them with new seed funds. We’ve had an explosion of alternate sources of financing from crowd-sourcing, angels, accelerators, incubators, corporates, corporate incubators. And importantly we’ve had revenue. Consumers buying through smart phones, travelers using the new, shared economy and businesses replacing old software with modern cloud-based solutions.
It has been a good run.
But it won’t last forever. It could last 6 more months or 6 more years for all I know. But the economy grows in cycles and always has: Expansion & contraction. For what ever reason we’re wired to have amnesia during the run up and prescient memories of how we ‘knew it all along’ as soon as the slide begins. I do believe that we are in structural change where technology will increasingly play a bigger role in all facets of life so the long run up for tech is promising through all of these cycles. Once you understand both sides of the cycle you start to recognize signs of behavior during each phase.
I’d like to do a few posts on what life looks like on the way up and perhaps how to keep your head on straight and avoid drinking your own Kool Aid because as I often advise entrepreneurs on irrational exuberance, “In a strong wind even turkeys can fly.” It helps to have seen the way down twice before to know many of the signs. And as I always assert,
“Great companies are built in downturns.
By now almost everybody knows that Marc Andreessen has taken Twitter by storm. By Tweetstorm, that is. Marc seems to single handedly have changed all conventions in Tweeting by dropping 7-10 rapid Tweets in a related stream-of-consciousness labeling each Tweet with a number and a slash before it.
Fred Wilson wrote a Tweetstorm and then did a blog post on the topic. I’ll address his questions at the end of this post.
While Fred’s post makes sense, I honestly think Tweetstorming isn’t Marc’s real magic on Twitter. So I’d like to weigh in with what I believe is.
Marc Andreessen was a prolific and much read blogger for a brief period of time. People religiously read, shared and pontificated on his work. This was pre social media. And then out of nowhere he abruptly stopped. And from there Ben Horowitz became the amazing blogger of record at a16z. Of course they then added Chris Dixon, Ben Evans and many other great public voices.
It’s not hard to find people willing to write the narrative that “venture capital is not an asset class” or “venture capital has performed terribly.”
The most recent was 18 months ago or so called The Kauffman Report. It had an influence on the people who fund our industry in a negative way as many asset managers who fund our industry read this flawed report. That’s a shame because many of these people missed out on what will be a few great VC vintages.
The biggest problem with the report was that it pulled together data from more than a decade ago to proclaim what the future of our industry would look like. I wrote about this in a blog post last year titled “It’s Morning in VC” but I never made the full deck available until now.
I presented the deck below – which was prepared with the great help of Upfront Venture’s Principal Jordan Hudson – at Dave McClure’s must attend event called PreMoney with much more data and narrative than I had in my blog post.
Startups are hard. You’ve heard that a million times. Those that we survive with become family. It’s something you can’t know unless you’ve ever been in the trenches. Working hard together at a big company just isn’t the same.
The truth is you really don’t know how your teammates or your bosses will perform in good times and bad. You hire people who look good on paper. You join teams that got good write-ups on TechCrunch, have great VCs, have star CEO’s, whatever.
After 6 months – you know. You REALLY know. Which engineers dialed it in before a big release because it was during July 4th weekend? Who came in the office at 2am when the servers crashed – even on the night of the big company party. Who was willing to jump on a plan on a Sunday morning with a hang-over to make sure they were there the night before an important biz dev pitch on a Monday morning.
I just returned from 3 days in Cincinnati including attending the annual meeting of one of Upfront’s LPs – Cintrifuse.
I have never been more optimistic about the impact that the tech startup community is having on cities in America or about the role that cities outside of San Francisco / Silicon Valley can play in our future.
Cincinnati, like many startup communities in the US over the past 5 years, has revitalized important regions in its urban core, created accelerators, built co-working facilities, pooled together angel capital, attracted VCs, involved educational institutions and solicited the help of important corporations in a more cohesive ecosystem. I believe the next 20 years will be an excited time of regeneration for Cincinnati and many more progressive communities across the country.
The “Infrastructure Phase” of the Internet …
Before we had an Internet startup explosion we needed infrastructure which spawned the original tech startup community in Silicon Valley. It required a diffusion of personal computers that led to the massive growth of Hewlett Packard, Intel, Apple Computers and others.
In my Twitter bio is says that I’m “looking to invest in passionate entrepreneurs,” which almost sounds like I was just looking for a cliché soundbite to describe myself. Yet along with “authenticity” they are two of the key attributes I look for when I meet with companies I may consider funding one day.
Passion is also the featured heavily in nearly every presentation I give to entrepreneurs or on college campuses or in talks with MBA students. We live in interesting times where working at a startup is glamorized to the point that many founders even refer to their team members as “rock stars,” which to my ears is cringe worthy. Great programmers are artists, for sure, but rock stars is about the last definition I’d choose.
We’ve gotten to the point where after the film The Social Network and now with our own ironic HBO drama “Silicon Valley,” (makes it sound like writing a algorithm can easily net you $10 million without trying) one might think starting a company is a bit like the gold rush where riches flow to you with ease.
The reality is quite the opposite. Running a startup is a grind. It wears you down.