optimistic vs pessimistic case for entrepreneurs
Post on 21-Oct-2014
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I gave this presentation recently after debating David Sacks on Bloomberg on whether we should be optimistic vs. pessimistic about startups.TRANSCRIPT
“End of Silicon Valley” vs. “Morning in VC”
Mark Suster @msuster
Which Is It?
VC Funding Environment
Valuations
Status of Los Angeles
Are There Too Many Fucking Accelerators?
Want to Cover Where We’re at in the Cycle …. Plus the Stuff People Always Ask
About
The Set Up
David Sackswatch
http://bloom.bg/TLP1IA
Mark Susterwatch http://bloom.bg/TJZ5h
Just sold Yammer to Microsoft for $1.2bn
Facebook, Google, Apple, Microsoft will dominate
Only succeed at edge of forest
IE vs. Netscape, AOL/TW merger, Google monopoly, FB / Twitter / Instagram
Edge is smart
But Box.net, Dropbox, Yammer
1. The Case for Doomsday
David Sacks
silicon valley may be coming to an end .. You have to find an idea that
(1) Escaped attention of major Internet companies, which are better run than ever before
(2) Capable of being launched and proven out for ~$5M
(3) Protectable from the onslaught of those big companies
How many ideas like that are left?
Sobering that most of true disruption:
•Tesla Motors, •SpaceX, •Google driverless cars, •Google Glasses
Created by just 2 people Elon Musk & Sebastian Thrun
Steve Blank
“…shift away from … transformational technologies & toward more cynical, incrementalist investments broke venture capital.”
Founders Fund
Peter Thiel
There won’t be a “Facebook of mobile” or a “Google of mobile”
There will be Facebook & Google.
Facebook has lost more value in market cap than Lehman did through the whole
financial crisisDown•$52 billion•54%
And Price / Earnings is still 115
2. The Case for Optimism
A. Many More Startups Being Created
Lower Costs The Social Network
Movie
Seed Deals /
Incubation
This has led to a boom in seed-stage deals through accelerators, angels & seed funds
Text
B. There are 20x More Consumers Online
20x Users Online. 3.1 Hours / Day
C. We’re Online All The Time & at High Speeds
D. Mobile Really Does Change Everything
Ubiquity Personal Geo Located Bottom of Sales
Funnel
Text
E. Everybody is Payment Ready
Text
F. We’re All Socially Linked
G. “Software is Eating the World.”
(Marc Andreessen)
The Opportunities for “Hacking” Industries Not Traditionally Thought of as Tech
Opportunities
Education Khan Academy, Code Academy, General Assembly,
Treehouse
Healthcare HealthDataInsights, GoodRX
Transportation Tesla, Uber, Lyft
Finance Square, ZestCash, Simple
So What is the Status of Venture Capital?
The VC market has been right-sized – only 98 first invested $1 million per quarter in 2011
SeedSeedC-E
RoundC-E
RoundA, B
RoundA, B
Round
$25-75m
Market Gap
$200-300m
$500m-$1bn
The majority of LP money still going to seed & mega funds
29
•Ad-Tech & eCommerce (low margins, low multiples)
•Won’t Silicon Valley VCs just fly down and fund best companies?
•Regional funds never worked
•Marketing muscle of NYC
But perception is starting to change
And the Market Not Sure About LA Venture Capital
A, B Round VCs
Seed Deals
A, B Round Crunch Has Already Begun
31
MehValuation
Insensitive
There’s a Narrative of Haves & Have Nots
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•“10 million users is the new 1 million”
•“They haven’t really reached ‘escape velocity’”
YC Vinod Khosla
And People Privately (and Publicly) Calling Bullshit
33
•Uncapped Notes
•$12m Pre Money
•Party Rounds
“I Feel Sad For Y Combinator Companies That Get So Much Hype”
On Los Angeles
35
Now that we’re out of the “infrastructure phase” of the Internet, more big startups being created outside of Silicon Valley
TrueCarMaker StudiosDemand MediaShoeDazzleBeachmintNastyGal
TrueCarMaker StudiosDemand MediaShoeDazzleBeachmintNastyGal
HDIHDI
Gilt GroupeAdmeldFoursquareEtsyKickStarterStackExchange
Gilt GroupeAdmeldFoursquareEtsyKickStarterStackExchange
LivingSocialLivingSocial
GrouponGroupon
QuattroQuattro
Recent Non-Silicon Valley Successes
We Are Unique … Necessity is the Mother of All Invention
We Invented the Incubator Model – Idealab
We created monetization on the webo Overtureo Applied Semanticso Affiliate Marketingo Lead Generation
We are poised for the big Internet video boomo Maker Studioso Machinimao Big Frameo Movie Clipso Fullscreen
But Local Venture Money Remains an Issue
New Pool of Talented Entrepreneurs Driving Up Exit Events / Returns. This
Should Help
And About all These Incubators / Accelerators
•Amplify•Idealab•Launchpad•Mucker•Science•Start Engine
•10 I’m forgetting
3. The Tie Breaker
(wild cards / Black Swans)
Iran & Middle East Conflicts
Consumer Debt
US Baby Boomer Retirement
• 46% < $10,000 saved
• 29% < $1,000 saved
• 17% of senior citizens live below the poverty line
• 1950 retiree / worker = 16. Today =1.75
Euro Crisis (PIIGS) / Globally Connected World
On the other hand … aren’t these all just
opportunities for entrepreneurs?
I rest my case
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@msuster