Category: Venture Capital

Andreessen Horowitz saw the future — but did the future leave it behind?

In many ways, a16z created the playbook for the boom times in tech. During the era of fawning tech journalism and low interest rates, valuations of private companies exploded. Founders were “geniuses” and “rockstars”; it was easy to raise and easy to spend. There were herds of “unicorns,” companies that are valued at more than $1 billion. (This is to say nothing of “decacorns.”) Startups stopped running lean and instead got fat, attempting to outspend their competition.

This strategy is now at least two vibe shifts behind.

→ The Verge

What Tech’s Unicorn Cult Can Learn from the Art World

The art world knows about prices floating ever higher on abstraction and hope. The resonances aren’t completely coincidental. Both venture capitalists and art buyers are in the business of valuing the invaluable. Both stake their reputations on exquisite selection. Both nurture talent before it can support itself. Both have a soft spot for youth, for unbowed ego, for the myth of solitary genius, for the next new thing. Both operate in a world of frustratingly limited information and maddeningly unpredictable success. Both depend on consumer culture while holding themselves superior to it. And both the art market and venture investing have become increasingly winner-take-all games, with more clout to the companies and artists backed by the most powerful dealers or venture capitalists.

Credit : Harold Cunningham

→ The New Yorker

 

Who Funds the Future?

“The biggest outcomes come when you break your previous mental model. The black-swan events of the past forty years—the PC, the router, the Internet, the iPhone—nobody had theses around those. So what’s useful to us is having Dumbo ears.” A great V.C. keeps his ears pricked for a disturbing story with the elements of a fairy tale. This tale begins in another age (which happens to be the future), and features a lowborn hero who knows a secret from his hardscrabble experience. The hero encounters royalty (the V.C.s) who test him, and he harnesses magic (technology) to prevail. The tale ends in heaping treasure chests for all, borne home on the unicorn’s back.

→ The New Yorker

The Fable Of The Unicorn

Yet in other ways Theranos evokes a central theme in today’s tech industry: start-ups which promise to disrupt lucrative businesses and become valued on the basis of fantasies about their potential, rather than present reality. Investors are so keen to get a piece of any sexy-sounding startup that they lap up entrepreneurs’ hype—and anyone who asks awkward questions risks being cut out of the funding round in favour of someone more trusting.

All this helps to explain the inflation of valuations among unlisted technology companies. Today there are 142 unicorns, more than three times as many as in 2013. Many of them are growing quickly. But in terms of reaching profitability, they are often far behind the stockmarket-listed competitors they are seeking to displace, and thus are burning through cash. Theranos, for example, is not believed to have any significant revenues or profits, yet it is valued about as highly as Quest Diagnostics, a listed laboratory company, which achieved $7.4 billion in revenues and nearly $600m in net profits in 2014.

→ The Economist

Bros Funding Bros : What’s Wrong with Venture Capital

A VC on VCs :

From the foundations and NGOs that are eradicating poverty and taking care of the world’s worst off, to companies like Facebook, Google and Apple that are inventing the future while looking after our best off, they have all explicitly decided to become less consensus driven and less homogeneous. They have found this increases creativity and drives business results. In turn, they are doing the ambitious, groundbreaking work that we used to do. And even though they have more work to do, when you compare the complexion of these leaders to the leaders within our industry, we look like total laggards.

→ The Information