Comments on: “Something is wrong in Venture Capital”

By: Sushrut

Sushrut — Tue, 18 Nov 2008 07:01:51 +0000

I think one of the major reasons in Investment advisers that we have managing Indian portfolios of multinational funds. Also success stories of many starts like youtube, facebook has given fuel to greed of VC in finding the next so called big thing. Thats why we see 10+ million dollars in investment in mediocre companies that do not have any potential to give 10x returns at all. But since these companies are positioned to target growing Internet consumer market, VC are willing to bet on them. This mindset needs to change.
I think VCs are concentrating too much on teams that come from branded institutions. VCs should at least meet entrepreneurs before deciding he/she is not entrepreneur material. First screening should only be based on solidity of the business plan and target market.
Also to find a micro level exit deal, which will typically come from acquisition, we will need to have a bigger India centric product company which can acquire such smaller product companies. Unless we have such bigger player looking to acquire smaller players, I do not think funding scene for micro-fund raising requirement is going to improve.

By: Banibrata Dutta

Banibrata Dutta — Mon, 17 Nov 2008 06:10:00 +0000

Slide #16,17 take the cake, i.e. seen with a Startup’s eyes. Wondering, if VCs here would agree and why they don’t if they don’t — i.e. how does it hurt their interests ?

By: Old Hand

Old Hand — Sun, 16 Nov 2008 13:26:25 +0000

Some possibilities to watch out for

* As academic foundations and Calpers & peers take major portfolio losses, availability of VC money goes down (2008-13). Fundraising becomes difficult. Many funds get consolidated. Smaller VC funds, esp. in emerging markets “sell themselves off”.

* Web 2.0 startup bubble bursts (2008-9)

* SaaS and cloud tech startup bubble builds up (2008) and bursts (2009-10)

* US VCs increase presence in emerging markets, esp. India in search of returns. More investments are made, but most do not create VC-type scale and returns.

* Internet 1.0 biggies face their first real crisit post 2001. Yahoo and Ebay get sold. Many other 1.0 firms becomes irrelevant due to new technologies. Only Amazon and Google survive (2009-10).

* Individuals who are in the investment business for passion and not for money continue to build, often developing great individual investment portfolios of startups.

By: Udhay Shankar N

Udhay Shankar N — Sun, 16 Nov 2008 11:51:51 +0000

Not sure if there’s anything really new here, due to the way the VC model is structured. The biggest gotcha is that there’s probably too much money (with its attendant issues) in VC today.

Here’s a response from Fred Wilson of Union Square Ventures that makes those points.

By: Indus Khaitan

Indus Khaitan — Sat, 15 Nov 2008 16:11:33 +0000

“take Wallstrip which was funded by Howard Lindzon for $500K, and was sold for $5 million in a year. Yes, this selling ecosystem needs to happen here, but is this kind of deal totally absent”

You know the reason?

I saw multiple ads from TiE (and their partners) touting their next big conference to find the next 800 million dollar opportunity in India.

Their has to be some realism, somewhere — even while copying the silicon valley models, people seem to choose the wrong ones.

Seeds are sown at the ground level and not sprayed from an airplane.

By: Krish

Krish — Sat, 15 Nov 2008 07:10:34 +0000

So what’s in common amongst all those themes courted by VCs? Easier availability of replacement capital that broadens their exit options that makes them seem highly liquid with low gestation and quicker payback. While a Sequoia can drool over the prospect of palming off its internet investments someday to a Google or Microsoft, a KKR or TPG can’t do that so easily with a REIT fund in its portfolio to a real estate or manufacturing company. Not many industries free up capital as fast as these sectors do. Investors crave for faster liquidity options. Investors desire disproportionate returns for the level of risk they assume.