
Why One of Silicon Valley’s Savviest Investors Has Shut His Wallet - hef19898
http://www.wired.com/epicenter/2012/05/angel-no-more-why-one-of-silicon-valleys-savviest-investors-has-shut-his-wallet/
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mgkimsal
_“Everyone is competing for the same people, going after the same real estate,
the same support services,” Hartz says. “The natural resources of the startup
world are getting scarcer and scarcer, and the cost is getting higher and
higher. It’s all an outgrowth of an abundance of capital.”_

And largely still doing this in just a few square miles in California. Are
investors so emotionally tied to one geographic area that long-term investing
in other areas of the US is strictly verboten? Techstars and other programs
should be demonstrating there's 'natural resources' outside of California, no?

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nirvana
I really don't understand the over fixation on Silicon Valley. I lived there
for awhile. Its got high population density is full of a lot of fake people
(people who are happy to "help" your startup for just a taste of the equity),
fake investors, and an extraordinary amount of noise. I'm sure there are many
people who love it for the same reasons that high pressure finance types love
new york city.

But this seems anathema to building a good startup- where you need some
isolation some time to focus and to keep a broad and rational perspective, not
to be high on each others fumes.

Plus, the bay area is very expensive, it attracts engineers who are more
likely to jump to the next hot startup, its hard to find good office space,
etc.

It isn't like you can't get broadband everywhere.

And I think people really misunderestimate the importance of good engineers
who stick around. Turnover means critical knowledge is walking out the door.

This makes bumfuck Ohio[1] a better place if retaining talent is important.
The idea that only Stanford educated engineers are good enough to work at
startups is silly. (my experience- finding the best engineers is not
correlated with ivy league degrees.)

Bumfuck Ohio may not have the cool meet ups that SV has, but it doesn't have
the two orders of magnitude more distractions that SV has as well. Nor does it
have the jealousy driven culture where every 4th person has an overpriced show
off car, etc.

The reason everyone focuses on the Valley? People are focused on venture
capital, not building profitable businesses. Venture capital lives in the
valley because for a lot of these VC firms a 90 minute flight to Seattle for a
board meeting is just too much effort.

That's it.

[1] Nothing against Ohio, never been there, just picking it for an example.

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rogerbinns
One thing about California is that state law explicitly says anything
developed on your own time with your own equipment is yours (obvious conflicts
with your employer aside).

Every employment contract I have seen outside of California has said something
to the effect that anything you develop, no matter whose time and equipment is
used, or relevance to your job or employer belongs to them. Even if you worked
for a software company, coming up with new cat food would belong to them. Many
times there is also a non-compete but at least some states require payment
during the non-compete period.

This lack of "friction" in California makes for a more vibrant scene in
starting companies and getting people to join.

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mgkimsal
"Even if you worked for a software company, coming up with new cat food would
belong to them."

As would any terrorist plans or child porn. This has come up a couple times in
contracts with employers in the past, and I tell them they _really_ don't want
to own everything I develop, and I've had that clause struck from a contract
with a bit of pushing.

~~~
rogerbinns
I've encountered several contracts in California where they ask you to list
everything you created outside of the company. The implication is that
anything you don't list was then created while working for the company and
hence implicitly owned by them. They explained the provision is for my
benefit. I finally just started putting in "Numerous past and future works
identified with my personal copyright".

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sparknlaunch12
_All that money makes novice entrepreneurs do funny things, Hartz says. “That
relentless competition coupled with the cash tends to train entrepreneurs to
be far more aggressive and less focused on things like measurable results,”
Hartz says. “There are some entrepreneurs who can and should be aggressive,
but they possess a certain type of pattern recognition, an understanding about
what’s really lifting a business.”_

The investment game has got tough. Not only do you need to gamble on an
uncertain business model, now you have to compete with a growing investor
population. With all the noise and vying investment dollars it is not so a bad
idea to sit out and hang on to your past investments.

Unfortunately not everyone has the same portfolio as Hartz....

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maybird

      investment in internet companies at $1.4 billion was down
      slightly in dollar terms in Q1 of 2012 compared to the
      end of 2011
    

To me, this is a clear sign we're not in a bubble. Investments don't slow down
in a bubble, which is exactly why they're so dangerous, they just pop.

Seems to me like investors are pretty smart this time around, and are doing
everything to avoid a bubble.

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trotsky
That includes $250MM to dropbox in Q4. Imagine if they had closed in 2012 -
the same statistic would show investments up like 40% or 50% quarter over
quarter. It also doesn't include angels.

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JVIDEL
“When people openly mock the consumer internet space and the excesses of it,
that’s when I will start investing again.”

What? people are already mocking the consumer internet space

They weren't (at least not so much) 3-4 years ago, but now? instagram just
broke the levees.

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danmaz74
He was probably referring to when people were saying that you couldn't make
money on the consumer internet, thus not investing, thus leaving a lot of
space to those who did. People now are mocking the valuations given to some
comapanies, not saying that you can't make money with consumers on the
internet... ;)

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JonnieCache
Makes sense, but in that case, what is the word "excesses" doing in that
sentence? I think somebody miss-transcribed the interview tape.

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debacle
It makes a lot of logical sense - the demand for startups is higher than the
supply, and that's driving costs up. Better to buy low and sell high than buy
high and hope for higher.

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wavephorm
I think we're only in a Facebook-fueled Social Network bubble. While at the
same time, we are only at the beginning of genuine technology boom. Mobile and
cloud computing tech isn't going to go away like a fad.

~~~
cageface
I agree but, like last time, the social crash will ripple through the real
businesses too.

