

There Are Two VC Industries - krschultz
http://www.avc.com/a_vc/2010/09/there-are-two-venture-capital-industries.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+AVc+%28A+VC%29&utm_content=Google+Reader

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krschultz
There have been a bunch of articles about VCs being replaced by Angels and
Bootstrapping, but really those articles should just be saying that software
businesses have matured to the point where VC funding might not be necessary
at all.

At what point can I walk into a bank and get a normal business loan for my web
app company? I think we're approaching that point.

In my mind you can bootstrap the average web app company, and when you
actually acquire some revenue and need capital to grow, get a small business
loan. Is the risk in these kind of companies any greater than the average
restaurent? I don't think it is. Software has lower capital requirements at
first, lower operating expenses, lower overhead, but for some reason the norm
is still to trade equity for cash. Forget that, just trade debt for cash like
a normal business. I'm not sure banks will go for it yet but I think we're
approaching that point when it is possible.

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david927
But if a restaurant goes under, you have all the capital right there (pizza
ovens, tables). Software consumes its capital. Banks aren't the answer. If it
fails, what are they going to get back? That year of your life?

What we need is crowd-sourced, micro-equity. Anyone who thinks an idea is good
to invest small amounts for small stakes of equity. The barriers have been
regulatory legal issues, but those will be soon eliminated. OpenStarts is one
such initiative working on this.

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T_S_
If a restaurant goes under, whoever provided funding takes a big hit. Losses =
value destroyed. Liquidation values on fixtures and equipment are low.

BTW, here's a good rule of thumb for investing in restaurants as a non-
controlling partner: Don't. I never heard of a good ending, even if it was
good for a while.

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blasdel
That's why realistic restaurateurs buy all their initial fixtures and
equipment used from liquidation auctions :)

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rubyrescue
is it possible to get pg to filter out the utm_source= google/feedburner
querystring params on submit? it would filter out a lot of dupes...

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garret
<http://news.ycombinator.com/item?id=363>

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tspare
Since the capital requirement is no longer a large barrier to entry for web
startups, I am wondering this mean:

\- a startup should stay in stealth mode longer in order to give it a bigger
legs up on its possible competitors \- silicon valley connection to VC money
becomes less critical and the team makeup for execution becomes more
important. This may mitigate some of the advantages of starting in the valley.

What do you think about the assertion above?

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Swizec
Working on a web startup in Europe the big majority of advice I get is saying
"Go to the Valley".

The thing is, in Europe, nobody takes web startups seriously yet. The web is
still seen as something that neighbour kid does perfectly well. Why start a
company based on that when some kid can do it for a fraction of the price and
just as well?

In the Valley, I hear, the attitude is a lot different and if nothing else
that means it's a lot easier to get traction.

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bcurdy
I guess the grass is always greener on the other side of the fence... Sure,
people in Silicon Valley usually have a great attitude towards the web and
entrepreneurs but it's also cut-throat competition out there. Don't believe
that being based in the valley alone will make your life much easier. If you
already have a complete team, a minimum viable product and some traction, then
you'll be able to meet there people who know how to build up your audience and
maybe get funding. There's definitely more experienced people there per square
meter than anywhere else. But it's also a very expensive place in terms of
housing/office space and talents.

Europe might not be as web-friendly but there has never been a better time for
startups there. Think Seedcamp in the UK, startup bootcamp in Danemark,
Hackfwd in Germany and many, many more.. There are loads of people in Europe
taking startups very seriously.

At the end of the day, users don't care if you're based in Singapore, London
or San Francisco. Also, you should be able to get an iPad not too long after
anybody else in the US :)

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pfmendez
While I develop my first prototype in Mallorca I´m observing what's happening
in the continent and speculate about the emergence of a fuzzy system of VCs,
talented geeks, developers and researchers, with the same virtues of Silicon
Valley. I dare say that the event here in Europe will be a Silicon Landscape
instead of a Valley. We have the funding and the technical systems. The
economic one will develop slowly. I see the main constraints within the
policy-political system, which is based on command-and-control and top-down
hierarchies, making it very difficult to emerge from the bottom.

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mjfern
This article raises an interesting point. However, I would argue that the
startup costs have fallen across the board, whether you're a software startup
or a startup in another field. First, it's much less expensive today for
startups to obtain key services due to the prevalence and availability of
offshoring. Second, new technology enables many startups to handle some
services in-house, whereas before it required hiring an expensive service
provider (e.g., Google AdWords). Third, there is a shift in mentality towards
a leaner, smarter mode of starting up. Founders no longer feel the need to
obtain overhead that (a) requires substantial investment and (b) creates
little direct value for customers. If I remember correctly, a story from the
dot com bust was when eToys used some of its funding to BUY a high-rise office
building in Los Angeles.

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eru
Your second point: Isn't Google AdWords an example of a good third party
service that replaces an expensive in-house specialist (or hired outside
specialist)?

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asanwal
Here's data that breaks the "Two Venture Capital Industries" down by dollars
of funding, # of deals and median deal size.

[http://www.cbinsights.com/blog/venture-capital/there-are-
two...](http://www.cbinsights.com/blog/venture-capital/there-are-two-venture-
capital-industries-heres-the-data)

