VC Archives - Assert Digital Ventures

Tim O’Reilly makes a persuasive case for why venture…

June 27, 2020June 27, 2020
by Andy

Tim O’Reilly has a financial incentive to pooh-pooh the traditional VC model, wherein investors gamble on nascent startups in hopes of seeing many times their money back. Bryce Roberts, who is O’Reilly’s longtime investing partner at the early-stage venture firm O’Reilly AlphaTech Ventures (OATV), now actively steers the partnership away from these riskier investments and into companies around the country that are already generating revenue and don’t necessarily want to be blitzscaled.
https://techcrunch.com/2020/06/26/tim-oreilly-makes-a-persuasive-case-for-why-venture-capital-is-starting-to-do-more-harm-than-good/

Exactly. VC is broken and breaks entrepreneurs and solid businesses by putting them on an unsustainable growth push looking for outsize returns. Its all in the interest of the VC.

Entrepreneur fetishization has broken venture

February 4, 2020February 9, 2020
by Andy

VC is broken. I’m not the first to say that but just more evidence from some recent articles:

“Sometimes investors are a little too serious about monetizing something immediately,” Ms. Singareddy said. “With MSCHF, there’s faith that it’ll pay off. There’s an inherent virality and absurdness to all the projects that they’ve created, and it’s something people want to share and ask questions about.”
https://www.nytimes.com/2020/01/30/style/millennial-entrepreneur-startups.html

That’s her quote about MSCHF, an “agency” of sorts in Brooklyn where they attempt to come up with viral products like “Jesus Shoes” which have water from the River Jordan in Air Jordans. Sure, that sounds like another prank viral hit by an innovative marketer building a reputation. However, that’s apparently not the goal of MSCHF. They’re a product company who doesn’t produce scalable products nor care about profits. A non-profit art gallery?

Investors defending the lack of monetization too early has shown how warped this has become. VC used to be about funding fundamental science and technology that had a huge potential impact, a long runway and a lot of risk. Unfortunately, the successes were fetishized far too much and the 99.9999% of failures are now lauded in Silicon Valley simply as learning.

With almost 40% of VC dollars now going toward digital marketing, we’ve crossed a precipice where business fundamentals like profitability and margins no longer matter. VC cash is revenue. Fail this one and start up your next supposedly wiser.

Certainly, the supply-demand imbalance with capital seeking alpha greater than market returns has fueled some of this. However, investing is psychological and emotional with a herd mentality. This just drives fund sizes and startup valuations up. Funds can only have returns with out-sized “unicorn” exits. Thus, VC kills a lot of nice small to mid-sized businesses by putting them on the rocket to stardom where almost all fail. All businesses have natural ceilings but not in VC land. Forget fundamentals, we want growth. A VC doesn’t make a $500m fund on a $25m exit. They need billion dollar companies and will starve all, including viable businesses, who do not fit that. Its broken…but there is another way and new opportunities that have arisen from this.

It’s a Disservice to Urge Young People To Become…

November 17, 2019
by Andy

I speak often to those I advise and my students about the misguided path of rocket ship entrepreneurship that pervades business “pop-culture” today. VC is broken in funding too many ideas that should just be nice small to mid-sized enterprises. The real problem is that young people aren’t being taught business fundamentals along with the new models that tech enables. This, coupled with a grounding in how you can structure and fund businesses outside of VC, is most important and most overlooked.

I received sage advice many years ago when thinking about a new venture: what is your goal with the business? Do you really believe this is a .0001% venture-backed rocket-ship or is this going to be a self-sustaining small to mid-sized business (as the vast majority of the 7,000,000 private companies in the US are).

“Lifestyle” businesses somehow became a derogatory term. Here’s to right scaled businesses that generate cash flow and return dividends to investors who have their goals aligned with the entrepreneur. Digital business models only make this even more feasible with lower fixed costs and assets.

Everywhere you look these days, there are people and programs urging people just out of school to forget working for the man; instead, just start a new business and become a folk hero. The legend of the twenty-something business wunderkind is everywhere in pop culture. Here’s the problem. The data are in. It turns out that the whole thing is a gigantic myth.
https://www.aier.org/article/its-a-disservice-to-urge-young-people-to-become-entrepreneurs/