A VC might not a get a 10x return on web2 companies anymore, but with lower barriers to entry, the cost of capital is also lower.

For a seed-stage company to get to a break-even point and be cash flow positive isn’t too difficult even pre VC money. At this point, I would think it’s a much lower risk for incoming capital. It would thus seem a model with lower risk, and lower expected exits/multiples (5-6x) would be a good one…it’s just a different mindset

Glad to hear we’re in the same boat.

The VC investment threat issue is a complex one. It’s part about certain diminishing startup costs, part about a shakeout that’s going on right now based on poor fund performance from bubble investments, part about an IPO bar that sits higher than it has in the past, part about an increasingly transparent startup market and lots of investment dollars creating more competitive deals and worse terms for investors. The risk/return profile doesn’t look as good as it did a couple decades ago. Further, I don’t think the business has yet shown that firms can scale and invest in significantly more startups. Rather, firms have tended to start later-stage groups that can put dollars to work in big chunks. Draper Fisher Jurvetson has effectively created a franchise model (many affiliate funds) which likely benefits from better market information and a large advisory network but which indicates that a venture firm’s growth is still limited by human capital.

Nevertheless, good firms are finding plenty of great opportunities and will, I suspect, continue to do well.

Best,
Matt

Well if we both think that the number of good ideas will proliferate I wonder why everyone is so worried about VCs dying off? I guess folks just feel that the returns won’t justify the effort even if done more on volume?

Thanks for the kind words!

Regarding my post, I don’t actually suspect that opportunities will diminish; quite the opposite, I expect that they will proliferate and that evaluating the growing number of prospective investments will require some effort, perhaps even innovation, on the part of VCs. Hopefully some of us will get it right and not erect more walls between entrepreneurs and investors.

You’re absolutely right that certain opportunities stick out. 4-5 a year, worldwide, is an understatement to me but I understand it in the context of revolutionary and viable ideas. And the “me too” question is tricky – after all, Google was something of a “me too.” Many evolutionary and viable ideas create sizeable wins.

Best,
Matt