Netizen: Venture capital

Showing posts with label Venture capital. Show all posts

Thursday, February 11, 2016

FlipKart: Owned 80% By Investors

I learned today that FlipKart is owned 80% by investors. That is a sad state of affairs. Investors should have the discipline to not own 35-40% of a tech startup, otherwise you are killing the hen that lays the golden egg. It is racism to think Indian tech startup founders can get by with little ownership because, well, they are Indian and they are in India.

I wish FlipKart all the best, but I can't see how a tech startup that is so weak at its foundation can be a trailblazer. It has been set to fall, if not now then later. The ownership structure is bull.

Rahul Yadav is another story that caught my attention months ago. The Indian media made it look like the guy sent out one wrong, arrogant email and that is why. That is missing the point. He had all the inklings of a tech startup founder. But the ownership structure there also was all messed up. And I gather Housing.com has bombed since. The hen got killed.

The Real Rahul Yadav Story
Rahul Yadav Has A Bright Future

I hope there will be a second coming of Rahul Yadav just like there was a second coming of Steve Jobs.

If FlipKart is owned 80% by investors, I am not sure it is the Indian Alibaba.

Saudi Arabia: SuperPower?

A tech startup founder is not a CEO. A tech startup founder has to be in a commanding position. Because you have to make drastic moves as you grow. And you need power to be able to make those moves. And the power comes from equity ownership. I don't know what the FlipKart investors are thinking.

A company owned 80% by investors, when it goes for its next round of funding, the investors will make the call. The founder CEO will not be at the negotiating table. That should never happen. An irrelevant founder CEO is not a founder CEO but an employee.

Tech Startup Equity Distribution
Zuck, Free Basics, India
Zuck, Free Basics, India (2)
Dorsey Ouster Was DNA Damage At Twitter

There is venture capital. And then there is vulture capital.

Sunday, July 12, 2015

Middle Age

English: Steve Jobs shows off the white iPhone 4 at the 2010 Worldwide Developers Conference Español: Presentación del iPhone 4 por Steve Jobs en la Worldwide Developers Conference del año 2010 (Photo credit: Wikipedia)

Why middle-aged entrepreneurs will be critical to the next trillion-dollar business

Steve Jobs was 52 when he announced the iPhone. That was in 2007. Years later, the Apple cofounder introduced the MacBook Air, App Store, and iPad. Tim Cook, who was 51 when he took over from Jobs, is building on his legacy. They both shattered a myth that the young rule the technology industry. ........ Research on successful technology firms by a team I led at Duke and Harvard in 2008 looked only at companies that had made it out of the garage and were generating at least $1 million in revenue. The research revealed that the average and median age of their founders was 39. Twice as many were older than 50 as were younger than 25. And twice as many were older than 60 as were younger than 20. In a follow-up project, we studied the backgrounds of 549 successful entrepreneurs in 12 high-growth industries. The average and median age of male founders in this group was 40, and a significant proportion were older than 50. ...... in every year from 1996 to 2013, Americans in the 55-to-64 age group started new businesses at a higher rate than those in their twenties and thirties. And the trend is building. Those ages 55 to 64 started 14 percent of all new businesses in 1996 but nearly 24 percent of them in 2013. ...... What makes entrepreneurs successful, as my team’s research revealed, is work and industry experience and management ability. These come with age. ..... The inexperience — and immaturity — of youth is one reason venture capitalists’ track record is so poor. In 2012, the Kauffman Foundation analyzed 20 years of investment data from nearly 100 venture funds. It found that the vast majority of them produced lower returns than did the public markets. ........ The experiment by Thiel to pay college students to drop out did not result in any world-changing startups. Most Thiel fellows joined other companies or went back to school. The Thiel Foundation quietly redesigned its program, which now provides an alternative education to children. Perhaps the realization set in that the innovation advantage isn’t provided by youth, but by knowledge, maturity, experience, and connections......... the average age at which Nobel laureates performed their prizewinning work and the average age at which inventors had their great achievement was 39. He also found that twice as many — 14 percent — were older than 50 as were younger than 26. Jones found that the average age of innovators is steadily rising, with the average age of greatest achievement for Nobel Prize winners and great tech inventors having increased six years, to 45, in the 20th century. ......... It also is easier to write code for a cellphone than to learn how to motivate and inspire employees, manage finances, and market products. But building a business requires all of those skills. That is why older entrepreneurs have more success. ...... A technology shift is happening that will dramatically alter the entrepreneurial landscape in the next few years. Several technologies — involving medicine, robotics, artificial intelligence, synthetic biology, 3D printing, and nanomaterials — are advancing at exponential rates and are converging. This is the same type of advance that is occurring with computers — with processing power doubling every 18 months, prices falling, and devices becoming smaller. A $500 laptop today has more computing power than did a Cray 2 supercomputer that cost $17.5 million in 1985 and had to be housed in a large building. ........ These advances are making it possible to solve the global problems of health, energy, education, and hunger. Inexpensive sensor-based devices, for example, allow the continual measurement of heart rate, temperature, movement, pressure and light. They can be used to build devices that keep track of blood pressure, glucose and blood oxygen levels, respiration and even sleeping habits. They also can be used to improve agriculture, monitor the environment and reduce food spoilage. Systems based on artificial intelligence can be used to make medical diagnoses, to drive autonomous cars, and to predict traffic patterns, crime and trends. Robotic devices will allow us to care for the elderly and automate routine processes. Digital tutors will be able to transform education. .......... These technologies will make it possible to create the next trillion-dollar industries and to better our lives. But they require knowledge of fields such as medicine, biotechnology, engineering, and nanotechnology. They require experience, an understanding of the problems people face, and cross-disciplinary skills. All of these come with age and experience, which middle-aged entrepreneurs have in abundance. That is why we need to get beyond the stereotypes and realize that

older entrepreneurs are going to better the world
.

Sunday, June 21, 2015

A Bizarre Blog Post By Ben Horowitz

Ben Horowitz does not have a hometown advantage with me. But once in a while I will drop by his blog to see what he has been up to recently, like I just did. And I think I just read the most bizarre blog post ever at his blog. What has venture capitalism come to?

There was a phase in my childhood when I used to fantasize about having curly hair. I thought it was just so cool. One of my post Spring Break jokes at college was to rib my white friends, "You getting there! You getting there!" It took me the longest time to see any kind of racial connotation between chicken and watermelons and the black identity. I still don't see the connection. I just so happen to be a huge fan of watermelons. If you grew up in the south of Nepal like I did where summers are hot enough for a siesta culture, you would also take watermelons at face value. They are a treat. They are better than any summer drink I ever had. Talking of siestas, Brad Feld has a most delightful blog post on that.

For the first time I am thinking those who think the VC firm A16Z has raised too much money might be right. They are now investing in bizarre territory. And here's some historical context.

The watermelon is no mango, the king of all fruits, but it sits right up there in the royal court. That has always been my opinion, and I am not changing it. Anything wrong you hear about watermelons has been planted in your brain by the fast buck fast food industry.

Also, how about this for a contemporary context? And to think, I have put out as many blog posts about The Tramp, as I have about Hillary!

Monday, May 18, 2015

The A16Z (AHo) Numbers

English: Mark Zuckerberg, Facebook founder and CEO, during his European Tour. (Photo credit: Wikipedia)

Each year, three thousand startups approach a16z with a “warm intro” from someone the firm knows. A16z invests in fifteen. Of those, at least ten will fold, three or four will prosper, and one might soar to be worth more than a billion dollars—a “unicorn,” in the local parlance.
With great luck, once a decade that unicorn will become a Google or a Facebook and return the V.C.’s money a thousand times over: the storied 1,000x. There are eight hundred and three V.C. firms in the U.S., and last year they spent forty-eight billion dollars chasing that dream........ Venture capitalists with a knack for the 1,000x know that true innovations don’t follow a pattern. The future is always stranger than we expect: mobile phones and the Internet, not flying cars. .... “The biggest outcomes come when you break your previous mental model. ...... en Horowitz, who sits next to his co-founder at the head of the table, is an astute manager who quotes the rap lyrics of his friends Nas and Kanye West to inspire fearless thinking—but he doesn’t try to manage Andreessen. ..... A16z was designed to be a full-throated argument about the future, a design predicated on its founders’ comfort with conflict. In 1996, when Horowitz was a Netscape product manager, he wrote a note to Andreessen, accusing him of prematurely revealing the company’s new strategy to a reporter. Andreessen wrote back to say that it would be Horowitz’s fault if the company failed: “Next time do the fucking interview yourself. Fuck you.” Ordinarily, relationship over. “When he feels disrespected, Marc can cut you out of his life like a cancer,” one of Andreessen’s close friends said. “But Ben and Marc fight like cats and dogs, then forget about it.” ....... He also tweets a hundred and ten times a day, inundating his three hundred and ten thousand followers with aphorisms and statistics and tweetstorm jeremiads. Andreessen says that he loves Twitter because “reporters are obsessed with it. It’s like a tube and I have loudspeakers installed in every reporting cubicle around the world.” ...... “We have this theory of nerd nation, of forty or fifty million people all over the world who believe that other nerds have more in common with them than the people in their own country. ...... Silicon Valley, the fifteen-hundred- square-mile shelf an hour south of San Francisco, was called the Santa Clara Valley until the rise of the microprocessor, in the nineteen-seventies. It remains contested ground. Armies of startups attack every incumbent, with early employees—and sometimes even their lawyers and landlords—taking deferred compensation, in the hope that their options and warrants will pay off down the line. Yet workers’ loyalty is not to a company or even to an idea but to the iterative promise of the region. “Uber is built on the efforts of thousands of people in the Valley,” the investor Naval Ravikant said. “On the back of the iPhone and Android and G.P.S. and battery technology and online credit-card payments, all stacked on themselves.”......... Apple and Microsoft got started with venture money; so did Starbucks, the Home Depot, Whole Foods Market, and JetBlue. V.C.s made their key introductions and stole from every page of Sun Tzu to help them penetrate markets. And yet V.C.s maintain a zone of embarrassed privacy around their activities. They tell strangers they’re investors, or work in technology, because, in a Valley that valorizes the entrepreneur, they don’t want to be seen as just the money. “I say I’m in the software industry,” one of the Valley’s best-known V.C.s told me. “I’m ashamed of the truth.” .......... they often follow one another, lemming-like, pursuing the latest innovation—pen-based computers, biotech, interactive television, superconductors, clean tech—off a cliff. ........ landing Sequoia, Peter Thiel, and a16z as seed investors “was a signal that was not lost on the banks we wanted to work with.” ....... The standard fee is “two and twenty”: two per cent of the fund each year, and twenty per cent of the ultimate profits. (The top firms, including a16z, charge thirty per cent.) ......... At the moment, venture funding accounts for less than 0.3 per cent of the U.S.’s G.D.P. “Venture is often called a rounding error in the economy” ....... the United States is as fossilized as Microsoft, and that the Valley has become stronger than Boston, New York, Los Angeles, and Washington, D.C., combined, Srinivasan believes that its denizens should “build an opt-in society, ultimately outside the U.S., run by technology.” ......... prescience. And then it’s removing every obstacle to the ferocious clarity of your vision: incumbents, regulations, folkways, people. Can you not just see the future but summon it? ....... A charismatic introvert, Andreessen draws people in but doesn’t really want them around. ..... has toyed with the idea of wearing a T-shirt that says “No hugging, no touching.” He doesn’t grasp the protocols of social chitchat, and prefers getting a memo to which he can e-mail a response, typing at a hundred and forty words a minute. He didn’t attend Netscape’s twentieth-anniversary celebration, because it combined two things from which he recoils: parties and reminiscing. ....... energetic and decisive, which makes him a valued counsellor. In 2006, Yahoo! offered to buy Facebook for a billion dollars, and Accel Partners, Facebook’s lead investor, urged Mark Zuckerberg to accept. Andreessen said, “Every single person involved in Facebook wanted Mark to take the Yahoo! offer. The psychological pressure they put on this twenty-two-year-old was intense. Mark and I really bonded in that period, because I told him, ‘Don’t sell, don’t sell, don’t sell!’ ” Zuckerberg told me, “Marc has this really deep belief that when companies are executing well on their vision they can have a much bigger effect on the world than people think, not just as a business but as a steward of humanity—if they have the time to execute.” He didn’t sell; Facebook is now worth two hundred and eighteen billion dollars. ......... Andreessen’s range of reference extends from Ibn Khaldun to “South Park,” yet he approaches new topics as if starved, eating through men’s fashion or whiskey-making or congressional politics until it has yielded every micronutrient. ....... He turns to theory the way a drinker turns to the minibar. ....... Horowitz also routinely forces a founder to abandon her script and regroup. It’s a stress test intended to elicit biography, resilience, and the real story...... the “idea maze”: you want the entrepreneur to have spent years thinking her idea into—and out of—every conceivable dead end ...... “we’re not funding Mother Teresa. We’re funding imperial, will-to-power people who want to crush their competition. ......... sixty-five specialists in executive talent, tech talent, market development, corporate development, and marketing. A16z maintains a network of twenty thousand contacts and brings two thousand established companies a year to its executive briefing center to meet its startups (which has produced a pipeline of deals worth three billion dollars). Andreessen told me, “We give our founders the networking superpower, hyper-accelerating someone into a fully functional C.E.O. in five years.” ...... They’ve moved into next-gen agricultural products and wearables and drone software ...... fifteen technology companies a year reach a hundred million dollars in annual revenue—and they account for ninety-eight per cent of the market capitalization of companies that go public. ....... “Deal flow is everything” ...... “I put ninety per cent of my effort into seeking out deals from the top eight venture firms, ten per cent into the next twelve, and zero per cent into all the rest.” ........ the bottom three-quarters of venture firms didn’t beat the Nasdaq for the past five years ...... “Since 1997, less cash has been returned to V.C. investors than they have invested.” ........ most V.C.s subsist entirely on fees, which they compound by raising a new fund every three years ....... V.C.s also logo shop, buying into late rounds of hot companies at high prices so they can list them on their portfolio page. ..... The tech publicist Margit Wennmachers built an eight-person marketing department and helped to orchestrate stories in Forbes and Fortune. ........ “In twenty-four months, Andreessen Horowitz was the talk of the town.” ...... house in Atherton, five minutes from a16z’s office ..... The toilet in the powder room is so visionary, and the surrounding dimmer lights so flattering, that I had to study it for some time to figure out how it flushed. ....... be aggressive and to fight your instinct to pattern-match. “Breakthrough ideas look crazy, nuts” ..... I see it in other people’s body language, and I can feel it in my own, where I sometimes feel like I don’t even care if it’s going to work, I can’t take more change.” ....... “O.K., Google, O.K., Twitter—but Airbnb? People staying in each other’s houses without there being a lot of axe murders?” .......... A16z passed on Airbnb’s A round in 2009. ..... Between 2004 and 2013, a mere 0.4 per cent of all venture investments returned at least 50x. The real mistakes aren’t the errors of commission, the companies that crash—all you can lose is your investment—but those of omission. There were good reasons that a16z passed on buying twelve per cent of Uber in 2011, including a deadline of just hours to make a decision. But the firm missed a profit, on paper, of more than three billion dollars. ................ Peter Thiel, who is four years older than Andreessen, observed that “the late nineties, for Gen Xers in Silicon Valley, was an experience as powerful as the late sixties was for the younger boomers. ....... “I always thought the entire venture thing was incredibly cool,” he told me. “Going to Kleiner Perkins”—the firm that funded Netscape—“with the high ceilings, the markers on the wall of all the great companies they’d I.P.O.’d, Larry Ellison walking through, and, at 11 A.M., the biggest buffet you’ve ever seen, at a time when I was eating at Subway? It was the closest thing to a cathedral for nerds.” Mark Zuckerberg told me, “When Marc started Andreessen Horowitz, I asked him why he didn’t start another company instead, and he said, ‘It would be like going back to kindergarten.’ ” .......... “Every firm we talk to now is ‘Hey, we’re doing all this recruiting, and we’ll introduce you to big customers.’ It’s become the table stakes.” ....... Andreessen is attempting to assuage the wound of the 2000 crash, by maintaining that it was an isolated event. “The argument in favor of concern is cyclical,” he told me—busts follow booms. “The counterargument is that stuff works now. In 2000, you had fifty million people on the Internet, and the number of smartphones was zero. Today, you have three billion Internet users and two billion smartphones. It’s Pong versus Nintendo. .......... “While Twitter is a lesser innovation than flying cars, it’s a much more valuable business. ........ Webvan was what he called a “ghost story”—a cautionary tale that still frightened investors. But Instacart proved that even haunted houses could be rehabilitated. ....... “This is an ‘I missed Uber, I don’t want to miss the next one’ climate.” ....... “Ordinary people love the iPhone, Facebook, Google Search, Airbnb, and Lyft. It’s only the intellectuals who worry.” ........ “Would the world be a better place if there were fifty Silicon Valleys?” he said. “Obviously, yes. ....... Pessimism always sounds more sophisticated than optimism ....... Software is already squeezing out other intermediaries—travel agents, financial advisers—and, at the end of the day, V.C.s are intermediaries. We’re all just selling cash.” ...... “What if we’re the most evolved dinosaur, and Naval is a bird?” ...... Already, more than half the tech companies that reached a billion-dollar valuation in the past decade were based outside Silicon Valley. ...... “Odds are, nothing your V.C. does, no matter how helpful or well-intentioned, is going to tip the balance between success and failure.” ........... “Over twenty years,” he continued, “our returns are going to come down to two or three or four investments ......... —you just don’t know which Tuesday Mark Zuckerberg is going to walk in.” ........ “Even if we could do perfect analysis, we just can’t know the future,” he said. “What if Google Ventures had access to all Google searches—could you predict hit products? Or perfect access to all of people’s conversations or purchases? You still wouldn’t know what’s going to happen. ....... If we could revise the industry completely, we’d just dump all the business plans and focus on people—the twenty-three-year-old Mark Zuckerberg, Bill Gates, Steve Jobs.” ......... “We’re imperfect people pursuing perfect ideas, and there’s tremendous frustration in the gap,” he said. “Writing code, one or two people, that’s the Platonic ideal. But when you want to impact the world you need one hundred people, then one thousand, then ten thousand—and people have all these people issues.” He examined the problem in silence. “A world of just computers wouldn’t work,” he concluded wistfully. “But a world of just people could certainly be improved.”

Monday, December 01, 2014

Fred Wilson And Mark Suster Missing Out On AirBnB And Uber

Mark Suster (Photo credit: Wikipedia)

photo of Paul Graham (Photo credit: Wikipedia)

Fred Wilson (Photo credit: Wikipedia)

Fred Wilson was one of the earliest people Paul Graham reached out to as AirBnB was making its early moves. Wilson said, nah. And here is Mark Suster waxing eloquent on his missing out on Uber.

These are smart guys, well connected. They are VC bloggers I like. What happened? How did they miss out?

They say about companies, you become so good at one thing, you tend to miss out on the next thing.

AirBnB and Uber are alike in that there are physical things in their equations. There are apartments and cars involved. I think they sit on top of a mega trend where software actively interacts with the physical environment. And I feel many more large companies will get created at that intersection.

When you have stellar track records of information only kind of software plays, I guess you don't feel the love for the physical.

Wednesday, October 22, 2014

Star Citizen: Gamers Pay For Gaming

Gamers' funding fuels meteoric rise of 'Star Citizen'

Roberts' brain spun out a grand vision: a rich, immersive galaxy; exquisite spaceships traversing between infinite star systems with thousands of computer gamers manning the cockpits, racing, dogfighting and defending humanity. ...... it would be built outside the traditional publisher system dominated by big game companies such as Activision Blizzard and Electronic Arts. ....... The vision was clear. All he required was money. ....... Chris is demonstrating you can fund 100% development of a game if you have an audience that wants the game. We've never seen this for a game of this size. ..... Roberts — former Hollywood producer, movie director and veteran computer game creator — had a plan: raise several million dollars from true believers who would place advance orders. That would prove demand to venture capitalists, who could supply the tens of millions of dollars more that "Star Citizen" would require. ...... It turned out he didn't need the venture capitalists......... More than $58 million has poured into the coffers of Roberts' West Hollywood company, Cloud Imperium Games Corp., since "Star Citizen's" inception two years ago. And cash continues to flow — nearly all of it raised from hard-core gamers who make pre-orders and spend cash on digital goods that range from one-man spaceships to interstellar caterpillars that look cool when they explode in space. ....... Small-scale video games have raised as much as a few million dollars through crowdfunding, a fundraising technique in which creators pitch ideas on the Web to attract relatively small amounts of cash from lots of people. But "Star Citizen" did something extraordinary: It quickly reached the several-million mark and then blew past it. ...... The result is a game industry phenomenon. .... The full product isn't scheduled for completion until sometime in 2016, but, according to Roberts, more than 600,000 fans worldwide are playing modules of the partly built game and suggesting improvements to developers. And they're buying digital goods — an average of more than $90 per crowdfund contributor. Roberts attributes the success to the game's possibility to last a lifetime. ...... "The idea is to make it a huge space playground that you dream of spending time in if you've ever watched 'Star Wars,'" he said. "You can be a pilot, a mercenary, an explorer, a salvager; everything's available to you." ....... Cloud Imperium's website features a live fundraising tracker and monthly progress reports on the accomplishments of its 280 employees and contractors ...... He's spent $1,500 on spaceships, including $300 this month to partner with a wingman to buy the 890 Jump, an exclusive space yacht whose "very presence signifies power," according to Cloud Imperium. ...... "How many of us have dreamed of being astronauts at some point?" Snyder said. "This is the only way it's going to happen these days for a lot of us ...... By 2011, technology had "massively changed," he said. Powerful graphics processors, computer chips and memory cards had become cheap enough for Roberts to deliver a game that drops people and their friends into an Internet-hosted universe where players by the thousands interact in a virtual reality. ....... Activision's console title "Destiny," a first-person shooter game released last month, sold 5 million copies in its first five days. ...... With their support, he avoided the strings of big corporations and wealthy individuals......... The video game market is huge: $15.4 billion in U.S. sales alone in 2013 .... About half of that revenue comes from digital content like "Star Citizen," downloaded on a computer, not bought in a store. ...... Cloud Imperium's marketing budget includes large dollops spent on keeping the community engaged, holding live events, producing regular programs on YouTube and Twitch, and pumping out promotional videos that trumpet the latest spaceships on sale as if they were the newest must-have Mercedes-Benzes. ...... I wouldn't be surprised by $100 million in crowdfunding

Thursday, March 20, 2014

San Fran And New York

Out of fog Bay Bridge and Golden Gate Bridge and San Francisco in fog and crepuscular rays. (Photo credit: Wikipedia)

San Francisco is not a "city" the way New York is a city. San Fran is not big enough. It is not dirty enough. It is not Delhi/Mumbai enough.

Why San Francisco Is Not New York

For one thing, today’s San Francisco is much more of a company town. Go into any bar in San Francisco and you will hear people talking about their start-up, or a battle they recently had with a line of code. Stop by a coffee shop in some neighborhoods here and you will be surrounded by venture capitalists being pitched a new idea for a new app. All of these people rarely, if ever, interact with people outside the tech world...... In New York, if you meet someone who works in tech you feel like you’ve met a long-lost relative. Bars, coffee shops and restaurants are a mishmash of people from vastly different industries. ..... The lack of diversity between social groups in San Francisco isn’t going to change anytime soon, as the number of tech employees in the Bay Area is only going to continue to rise. ..... in the early-90s, tech workers made up less than 1 percent of city workers in San Francisco. In 2000, tech employees had risen to 3 percent of the workforce. By 2013, that number had passed 6 percent. ..... Unlike New York, which arguably has more economic, social, and employment diversity than anywhere else on earth, San Francisco’s tech-on-tech layering has created a not-so-little echo chamber. As I wrote last year, people seem to build products here that would make the rest of the country scratch their heads. ....... In San Francisco .. (I know of one successful founder who owns an old beat-up 1985 Honda that he drives to his secret private jet.) ....... When I came across a passage in the book, “The Annals of San Francisco,” about the 1840s Gold Rush, I found the answer to that question...... “Despite the amazingly high cost of living and the extraordinary opportunities for frittering away money, everyone in early San Francisco was supremely confident that he would soon be able to return home with an incalculable amount of gold,” the author writes in the book while describing the city decades ago. “Everything was conceived on a vast scale, and there was always plenty of cash available for any scheme that might be proposed, no matter how impossible or bizarre it seemed.” ..... Well would you look at that. It seems that San Francisco is the new San Francisco.