Bill Reichert, Managing Director - Garage Technology Ventures on the State of the Union of Venture Capital
Host: John Furrier, Founder PodTech.net
Venture capital is becoming segmented and specialized. Way to much focus on the bubble not enough ton the way the VC business and process has changed. Most significant dynamic in the late 90s – funds increased in to a variety of funds…more capital at the institutional level forced into the sector. It was the cause of the bubble..
The money didn’t go away and there is still massive amount of money earmarked for venture capital. There exists lots of opportunity for brand name funds to raise large amount of money for entrepreneurs. However, there has been some cutting backing in the large funds but generally there is capital available to deploy now. The net result is an optimal fund size about 400 million for the big funds – manageable and deployable. The scale is still 10x then VC funds in the 90s…however the cost to build companies is not 10x. In fact the cost to build a company is actually less. This is changing the entrepreneurial process.
This new entrepreneurial process in Silicon Valley is at work just look at Google as an example. Stanford was Google’s “Garage”. The Google-like entrepreneurship process: incubate ideas, build core technology, validate, get launch product and customers before actually having to compete… all before taking a dime in venture capital. Lesson learned in Silicon Valley - don’t get to corporate too early.
There is a new reality … in emerging growth companies it is critically important that entrepreneurs don’t fossilize the systems early on - like product plans, corporate structure, every piece of the business is changing. Startups must be nimble in order to move rapidly – not just to adapt at the product, market and customer level but at the infrastructure level…last years code is legacy code and you don’t want to drag legacy code around. The goal is to stay light and lethal. Don’t over invest in massive technologies but startups must invest in appropriate technologies for the scale and time of life. This makes companies capital efficient and allow companies to get even further and faster then 10 years ago.
Silicon Valley is back and it is much better than the numbers being published… more people are busier then now then as long as they can remember ever, ton of stuff happening, hiring is happening, products are shipping, customers are buying and companies are getting acquired…. What’s not happening is the IPO market. The quiet IPO market may be a good thing.
Confidence in the VC business can be related to the diversity of investments the marketplace…in the 90s there was a high degree of correlation of dependency now it isn’t necessarily the case now…things are now mutually reinforcing and interdependent. Everything is looking good with the exception of enterprise software.
Venture capital and Silicon Valley is back and it’s great news for entrepreneurs.
Bill Reichert GarageVenture Capital Entrepreneurship Technology Podcast Silicon Valley John Furrier Business Podcasts podcast shows Early Stage Venture Capital
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