October 5, 2009

Articles about venture capital and startup funding

If you're interested in venture funding, the following articles are worth spending some time on. And as they are pretty long articles, be prepared to spend some time.

Dave McCloud: Gordon Gekko 2.0: Flipping is GOOD. (aka Memo to Jason Fried: Sorry, You're Fucking Wrong.). "In summary, the benefits of selling startups early -- or simply when a transaction is available -- may be a smart strategy for both entrepreneurs and VCs to help improve the market, and reward themselves at the same time. It may not be the best strategy for Bill Gates, Steve Jobs, Mark Zuckerberg, or other titans of industry, but it might be a reasonable strategy for 1st-time entrepreneurs under 30 looking to establish their careers & ensure that future endeavors are more likely."

Reaction Wheel: Is the Time for Angels Past? "The people I've co-invested with over the past couple of years have been a huge resource to the companies we're in. I'd hate to see that strategic value squeezed out in favor of investors who are more money-manager than company-builder. But that, I think, is what is about to happen."

Fred Destin: On risk taking in the venture world. "Each venture firm tends to have a "risk-return DNA" that determines the natural risk habitat in which they will feel comfortable investing. Some folks are highly comfortable with taking on two technical co-founders in an unproven market whilst others like to help companies scale and like to use reliable KPI's and financial models as a guideline to decision making. The best, most experienced investors and outstanding partnerships may be able to operate across the spectrum."

Both Sides of the Table: The Great VC Ice Age is Thawing (for now) – Part 1 of 3, The Big VC Thaw – Why The Market is Moving Again (part 2 of 3) & 2010 VC Funding Outlook for Startups – Prepare for Winter (Part 3/3). "So what is driving the new energy in the remaining venture capital firms when we kept hearing how much the whole industry was "against the ropes?" 1. The market rebound, 2. IPOs and M&A have returned, 3. You can't get paid for sitting on the sidelines, 4. The success of the iPhone, 5. The growth of Facebook and social gaming led by Zynga, 6. The growth and $1 billion valuation of Twitter and its impact on business.

Above The Crowd: What Is Really Happening to the Venture Capital Industry? "It is indeed quite likely that the venture industry is in the process of a very substantial reduction in size, perhaps the first in the history of the industry. However, the specific catalyst for this reduction is not directly related to the issues just mentioned. In order to fully understand what is happening, one must look upstream from the venture capitalists to the source of funds, for that is where the wheels of change are in motion."

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