December 6, 2008
There has been a lot of chatter in the blogshpere about the VC model being broken.
Adeo Ressi of theFunded, kicked off the recent discussion with his presentation at HBS. The telling slide from the presentation is #13 showing more money going into the VC model than coming out.
Fred Wilson from Union Square Ventures responded with his usual insight.
Furqan Nazeeri x EIR at Softbank Capital and now founder of Virid.us presents some numbers to show the VC model is really broken, and the negative impact it will have on startups.
Paul Graham of Y Combinator fame talks about the VCs possibly becoming less relevant as a result of this downturn.
A good variety of perspectives on an important subject for us.
First of all, lets recognize that each of these commentators comes from the Web startup space, which you will agree does not have the same requirements as a BioTech startup.
With that in mind, which if any opinions do you agree with? How do you see this issue shaking out in the next couple of years?
November 7, 2008
Well, he states in his post Why to Start a Startup in a Bad Economy “”For years I’ve been telling founders that the surest route to success is to be the cockroaches of the corporate world.”
I am always up for a good biological metaphor when describing business and am particularly fond of bugs, so while I agree with the point that startups should be hard to kill, I don’t think a cockroach fits the bill.
In fact a cockroach is easy to kill, just one light tap of a toe and the pop lets you know that bug is no more. Cockroaches are hard to kill however, because you can’t kill all of them. So the choice of the bug in his metaphor might bely an investor perspective that funds 40 companies a year. The portfolio will survive but not each individual.
Coming from the bootstrap perspective, I prefer using a tick, not “the tick” but a tick as my bug of choice. Have you ever tried to kill one of those babies? Not easy.
So the point is still the same, keep the burn rate low and survive until the next moose comes along. From where we sit, there aren’t a million brothers ready to take my place, so we have to keep cranking, even when we have a shoe trying to crush us.