
Venture Outlook 2016 - rcarrigan87
http://www.bothsidesofthetable.com/2015/10/18/venture-outlook-2016/
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birken
> And why not? The platforms often get paid fees. The platforms often get free
> carry. And what many people don’t realize is that most syndicates get what
> is known as “deal-by-deal” carry

This is really such a huge point. A popular syndicate on AngelList might
invest 25k of their money and get another 300k going along with them. So in
this example they are essentially getting 70k worth of upside (25k + (15%
carry * 300k)) for 25k. On top of that, they might be investing 25k of their
funds money (IE, other people's money they get a small carry from) but getting
the AngelList carry for themselves.

If you had a deal like this, why not pump every company you can imagine? It is
just transferring money from your followers to yourself in a roundabout way.
Of course, what if the deals are good and everybody makes money? Well, that is
certainly possible, but economically speaking "deal-by-deal" carry doesn't
encourage that behavior. The biggest incentive lies in the syndicate leader
making as many deals as possible in hopes of finding a winner, because losers
barely hurt them at all. Your incentives are not aligned if you invest in
every deal. And if you are just picking and choosing your deals, then you are
essentially giving away 20% carry even though you are doing all the filtering.

Also speaking for YC companies, none of the "hot" companies coming out of demo
day raised money on AngelList, because they didn't need to. So there is also a
selection bias where the "hot" companies wont ever go on AngelList. Now, the
"hot" companies may or may not be the companies with the best return, but
based on their valuations the market thinks they are.

Now not to be too negative to AngelList, because I think as a platform to
allow investors to invest directly in companies it is great. But the syndicate
stuff is a little hairy. Of course you never hear anything negative about it
because it is a great way for SV "influencers" to turn their followers into
money.

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osullivj
The market can stay irrational longer than you can stay solvent. Someone once
said...

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goodcjw2
I am wondering what will happen once private funding source diminishes. When
it becomes way harder to raise money in private market, then over valued yet-
not-profitable startups will have two choices: 1) go dead, or 2) try desperate
hard to go public. Then, we can really start talking about the crush. Guess
2016 could be 1999 all over again?

Smart founders may already see this. They might already have started to
control burn rate, working hard on get real profits. At the end of the day,
the survivors will shine.

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an4rchy
I feel like it's always going to be a cycle as with the markets. As long as
there is demand and money available the prices go up and when some other
economic factors lead to a downturn people want their money and as money is
pulled out prices go down.

If the VCs are willing to pay the price, they're willing to accept the risks.

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rcarrigan87
What'll be interesting this time around is most of the money is tied up in the
illiquid private markets rather than the public market IPO frenzy in 2000.

