The changing role of VCs & Angels in Consumer Internet Companies
Topics :
Internet ·
Venture Capital ·
Dec 16, 2009 | 0 Comments
Bill Burnham has published a really great piece on the consumer internet market and the role of VCs & Angels.
Go read the whole post
Key Excerpts:
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VCs increasingly perceive the market success of Consumer Startups to be almost a Random Walk. A few years ago, if you told VCs that Twitter would do a financing at $1BN pre, almost all of them would have laughed heartily at the thought. Same thing if you had told them that Friendster, a Kleiner & Sequoia deal with an A-list management team would be schooled by an east coast (East Coast!) knock-off run by a 23 year old. Yet here we are. Despite all the bravado about investment themes, deal flow, and thesis driven investing, in moments of candor many VCs will tell you they have been surprised as much as anyone else by which deals have worked and which deals have not.
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Confronted with a profusion of random walk startups that don’t actually need a sufficiently large amount of investment, VCs have made a very rational decision: they’ve simply abandoned the early stage Consumer Internet business and resigned themselves to only providing what is traditionally known as expansion or even late stage capital. An added bonus of refocusing on expansion or late stage deals is that these investment rounds tend to be a lot larger which means more money can be put to work. Sure that money goes in at much higher valuations and thus returns should theoretically be lower, but for many VCs, thanks to size of the their funds, returns are not as important to them as they used to be.
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