Outsider vs Disruptor

Mark Suster wrote an interesting post on the state of the VC business this weekend.

In it, he makes this comment and puts the blame on the current rabid environment on “outsiders”:

If “the market” is driving up prices beyond intrinsic value the main new entrants to the market that have taken a less rational view of historical prices are a series of “non VCs” including corporate investors, hedge funds, mutual funds and crowdsourcing. Note that I’m not absolving my industry, venture capital, from bad behavior. I’m merely pointing out that price drivers are more strongly correlated with outsiders.

The question I always try to ask myself about new entrants in a market is “are they stupid or do they actually know something we don’t?”

Or said another way, are they outsiders or are they disruptors?

Combine that with Jerry Neumann’s recent post observing this:

Where are we in the cycle? Perez, in a 2013 paper10, says we are now in the deployment period. This has big consequences for how you run your business.

This quote makes a shocking claim I didn’t think the Transition audience would be interested in: financial capital’s job is done.

“Financial Capital” is VCs (and mutual funds and hedge funds). Production capital is corporations investing their capital in the innovation cycle now that it is well understood. Think Alphabet.

So I’m not sure I would go there with Mark. It’s tempting but might be the wrong place.

#VC & Technology

Comments (Archived):

  1. jason wright

    “intrinsic value”?

  2. LIAD

    I’m reading the post thinking:Please don’t just dismiss the newcomers as maniacs.Please don’t just discount their actions out of hand.Please don’t write a protectionist piece under the guise of sounding the alarm about exuberant market entrants.Please accept there at least might be logic and rationale to their behaviour.Kudos. You did.

    1. fredwilson

      I think it’s possible that Carlota is right and that financial capital’s work is done on the information revolution. If that’s so, fhen what revolution should financial capital turn its attention to?

      1. Twain Twain

        Financial Capital’s work is far from done on the Information Revolution.Pls see graphics above.

      2. LIAD

        dude, your killing me. i can’t resist a challenge.whilst i contemplate – at least take solace the future is not evenly distributed.

      3. LE

        I think you need to spend your day continuing to meet with entrepreneurs to try and pick winners and doing your marketing as you have always done. This idea that you will somehow magically find the next “hot neighborhood” to bank 100% of your time and effort on simply doesn’t fly with me. That neighborhood won’t be developed until you are well into your 70’s. Stick to what you know and what you have been doing that works for you. Let others get the arrows in their back (at this point in your business life). If you were younger I would probably feel differently. [1][1] Ralph Roberts was 43 [2] when he bought his first cable system instead of going into, say, automobile manufacturing.[2] Born 1920, Comcast started 1963.

        1. Richard

          The idea that usv and fred cant transition to new technologies is nonsense. Fred is 53 not 103.

          1. Wyatt Brown

            – If Fred lives to 103, then he will be even more “intellectually adaptable” and valuable, though he may be less “productive” and less accessible. As you can see from this handy little chart 😉

          2. LE

            Fred said “financial capital’s work is done on the information revolution If that’s so, fhen (sic) what revolution should financial capital turn its attention to?”. To me I read that as something that has nothing to do with technology.

          3. Semil Shah

            totally. the “engaged networks” thesis can extend to machines, groups, new grids, platforms, etc.

        2. Semil Shah

          For smaller funds, many LPs prefer them as access points and like them to be “specific” on a category. Makes raising funds easier, but riskier to put eggs in one category especially if a bad vintage.

      4. Boris Wertz

        I have been thinking about that question a lot in the past few weeks and while I don’t have an answer for what’s next, I am also pretty sure that the transition to the deployment period doesn’t happen overnight. There are still opportunities left in this cycle for financial capital, there are just smaller than before.

      5. SubstrateUndertow

        So the single-cell information-colonizing revolution is over ?So lets see now, what new territory could we possibly open up by organically dovetailing/weaving/synchronizing lots and lots of these single-cell information-suckers into collaborative organisms ?

      6. Richard

        Material science / Nanotechnology bring on an EIR to AVC

      7. rafer

        I’ve been doing a lot of work with corporate VCs, some that I’ve been able to disclose, and some not. Using those lenses, and from my old-scarred-founder view of other corporate shops, there is nearly no Production Risk Capital. They are attempting to be financial players with little or no connection to their product groups, and they are still largely averse to self-cannibalization at any scale that moves the needle. I believe that some of them, largely the ones with explicitly no connection to their product groups and are the minority that pay carry to the investment managers, will be very successful financially if they chase their pro rata rights.

      8. James Ferguson @kWIQly

        Information production and exploitation are very different.We can scale analytics to the nth degree with aws, docker and a handful of statistical processing libraries.The difference is insight.A three legged stool is statically stable (more than a four legged chair)A four wheeled car is dynamically stable (more than a three wheeled car)The above is obvious – but the insight arises not from counting legs but from understanding mechanics , geometry, gravity and movement.So the insight is not a result of information production but of selective exploitation – and in this field information disruption has hardly begun.It is easy to mash up music, or sports equipment, but it takes discernment to evaluate the results. – Would you try this ?

      9. Rob Larson

        I think your term “information revolution” paints with too broad a brush.Is financial capital’s work done on silicon wafers? Yes, decades ago.Is it done on building websites to attract eyeballs? Yes, in the 90’sIs it done on web 2.0 / networking? Yes, probably.Is it done on blockchain? Not if you believe in the blockchain’s promise. Is it done on internet of things? NoIs it done on stuff that will emerge from AI development? Obviously not.

        1. JamesHRH

          is it done on mobile?

          1. Rob Larson

            -If you mean the mobile from “social / mobile / local,” then yes.-If you mean traditional mobile apps (casual gaming, etc), then yes.-If you mean “one more screen for people to look at, carry around with them, and access countless services yet to be developed”, then no.But in the third case, “mobile” isn’t the thing. The new service is the thing. Mobile is just the screen.

          2. JamesHRH

            I don’t see first – as a thing: its jargon mumbo jumbo.Services that are mobile ICT enabled are early stage, I think. I also think we agree there.

          3. Rob Larson

            Yes, we agree 100% on the substance.

      10. JamesHRH

        You are typically way too early, when you are not right on, timing wise.I think that there is still some info-licks to be hit, as a regular likes to say.But the question you ask is, indeed, the question you should be asking.

      11. Pete Griffiths

        I think that possibility is vanishingly unlikely. We have barely scratched the surface of the information revolution.

      12. Semil Shah

        New platforms (BTC, VR, AR, Drones, etc.)New types of customers (like governments)New tech drivers (solar, emerging markets, etc.)

      13. sigmaalgebra

        First, Carlota would be giving up on “the information revolution” too soon, IMHO, way too soon.Second, the exploitation of Moore’s law, optical fibers, infrastructure software, is not nearly over.Old common biggie claim: The appetite for information is infinite; similarly for the variety, uses, and value. IMHO, for Carlota’s pattern, “this time it’s different” for information.It took a while for people to figure out what to do with stone, wheels, domestic animals, agriculture, textiles, bronze, iron, open ocean sailing, steel, steam, …. E.g., not every worker in the barn could be trusted to install and run a steam engine without creating a disaster.Well, information is arbitrarily complicated, and so are the means of getting and applying it. It’s taking a long time for people to learn how to work effectively with information.In simple terms, necessarily, inescapably, a lot of what is needed is a lot of math, but currently we are concentrating on just computer science with mostly poor or little use of math.So far, the universities are connecting math and … applications of information only indirectly and weakly. E.g., there was just a list of the 50 most popular MOOCs: By far the most popular was Android programming. For math, it was mostly just beginning calculus and some not very interesting statistics.In particular, the statistics situation is so bad I don’t even know of a good text, and too often I’ve had to do my own derivations.E.g., darned few statistics profs actually understand the important topic of sufficient statistics as in the Radon-Nikodym theorem and the classic Halmos-Savage paper. For workers in information technology, on that topic could hold a convention in an airplane wash room. Disaster.Part of the reason is that the US research math departments have long enjoyed ignoring serious work in statistics. Similarly for optimization, (graduate) probability (e.g., with the Radon-Nikodym theorem), and stochastic processes. They wouldn’t know a stopping time and the strong Markov property from road kill.The blunt fact is that so many college students study computer science because of the hope of getting a job in programming, but such studies are next to useless for the innovative part of the future of information technology. There the crucial, core issue is the math; given the math, the software development is supposed to be routine. Thankfully, the physics community does understand this point.For math and serious statistics, so far there is little hope of jobs in the help wanted ads. Such ads come fairly late in Carlota the time line, and we are not there yet.In the land of MOOCs, the situation on optimization, probability, and stochastic processes is worse.In comparison, the interest in steam eventually got people to understand thermodynamics, entropy, heat of condensation, the second law, efficiency, etc.; it took a while. When using coal for steam to run a factory, make ice, or pull a train, with low efficiency the coal bills will really add up. Working effectively with information will also take a while.Here’s the central point: For the information we want, we take in data, manipulate it, and put out our results. The value of the results depends on both the data and the manipulations. Given plenty of data, suddenly much more reasonable now, what is left are the manipulations. Any manipulations are necessarily mathematically something, weak, powerful, correct, or nonsense. For correct and more powerful manipulations, by far the best approach is some good work in math.Until people have started to exploit math for information, the information revolution is still in leaky diapers.Getting the opinion of a programmer on the future of the information revolution would be like asking an 1830 snake oil salesman about the future of medicine.

        1. James Ferguson @kWIQly

          I so agree with this.I am an engineer not a statistician ( with enough stats to be dangerous). However I am astonished that many Mathematicians fail to understand that value is in the application of appropriate methods.Equally and perhaps more disheartening is the trend for “Big Data” analytics to be boxed as solutions to generic domains. They are not solutions they are tool-boxes.Often a knotty domain problem needs only an elegant feature extraction (an abstraction) and all becomes clear. Elegant abstractions are usually not found in the tool-box.It is the same (perhaps more familiar) with calculus – the right tool (eg a good substitution) clears away the distractions and can make the seemingly impossible a cake-walk. But you need to recognise the problem type.Real value in statistics often comes when an inference is related to something causal from the real world – that always requires the problem to be seen from the right standpoint.It is often almost disarmingly obvious when it happens. – Elegance.

          1. sigmaalgebra

            Mathematicians fail to understand that value is in the application of appropriate methods. Yes: The research mathematics community wants to concentrate on some of the pure research topics; some of the very best stuff comes from such work. But also important is contact with applications: They can help pay the bills, get students jobs, and motivate more math. So, math also needs, say, a clinical side. I explained inhttp://avc.com/2015/10/tpp/…Unfortunately, currently math does the hard work, and other fields, relatively poor at the math, get the applications, students, money to pay the bills, etc.In the information revolution, math was already in the catbird seat but gave it up like an unwanted puppy to computer science, statistics, operations research, finance, econometrics, social science, marketing, etc. who were poor puppy parents. Bummer.If medicine were run like math, then all the MDs would be working on research on the possibilities of silicon-based life on the planet Far Away and no one would want to go to a hospital no matter how bad they hurt. Instead, medicine is one of the very best fields for fundamental research, clinically motivated research, and clinical practice. Great for medicine and our society.The start of the movie on J. Nash was correct: Math won WWII. And then the math departments got plenty of research grant funds from DC. But too soon, math went off on T. Lehrer’s “analytic, algebraic topology of the locally Euclidean metrization of infinitely differentiable Riemann manifolds” and pushed out interest in applications and application motivated research. Then DC lost patience, and math lost funding, students, etc.Sure, the most prestigious math shop is at Princeton, and, thankfully, they have a long history of research in math stimulated by then current application. So, they had J. Tukey, Ford and Fulkerson, Kuhn and Tucker, von Neumann (next door) and Morgenstern, etc.But, somehow they failed to follow through: E.g., the Ford and Fulkerson work is a good first step into, say, minimum cost capacitated network flows, that is, a graph is some arcs connecting some nodes, and we can think of the arcs as pipes to carry flow; on each pipe between two nodes, there is a price per gallon of flow and a maximum permitted flow; and we want to move so many gallons from some origin nodes to some destination nodes at least total cost. So, which pipes should carry how much flow?So, right, this is a linear programming problem. It turns out, the simplex algorithm basic solution corresponds to a spanning tree of arcs on the network, and one iteration of that algorithm consists of adding an arc to the tree, thus, creating a circuit, running flow around the circuit to save money until the flow on some old arc goes to zero, and then removing that arc and getting a spanning tree again. Cute. Easy to program, and, of course, runs blindingly fast on a computer. Unreal how fast that is.So what? Well, for a small thing, the famous transportation problem, that is, the least cost way to supply the retail stores from the warehouses and also the least cost way to supply the warehouses from the factories, is a special case and, sure, the source of the Kantorovich Nobel prize.For more, one case of the NP-complete problems for the question P v NP is integer linear programming, that is, linear programming except ask that the variable values be integers. Well, in practice, a nice fraction of those problems are really just least cost capacitated network flow problems.So what? Well, if the arc capacities are all integers (common in practice but, right, maybe not true exactly in the multi-commodity network flow problem), if attack that network problem with the simplex algorithm, and if start the simplex algorithm with an integer basic feasible solution (usually not too difficult to find), then at each iteration the simplex algorithm will continue to observe the integer constraints and give an optimal, basic feasible integer solution. So, get integer programming for free. Nice.I had one of those problems once, how best to allocate efforts of the sales force of some high end products.Point: Sadly, IIRC, that nice extension to the Ford and Fulkerson work was not done at Princeton. So, Princeton sort of dropped the ball there.However well Princeton has done with math research on new real problems, nearly all the rest of math research has done much less. Ah, maybe the #2 shop was at Berkeley with Dantzig (linear programming), Loeve (probability), Breiman (Loeve student, probability, statistics, e.g., random forests), Brillinger (Tukey student, time series), etc. Equally and perhaps more disheartening is the trend for “Big Data” analytics to be boxed as solutions to generic domains. They are not solutions they are tool-boxes. Yup, well put. Now there are two people in the world interested in information technology and who understand this point. Often a knotty domain problem needs only an elegant feature extraction (an abstraction) and all becomes clear. Elegant abstractions are usually not found in the tool-box. I’d suspect that the NSA had put a tap into my brain with a wireless connection and somehow you were getting the data except that’s better than I’d thought of.Nicely put.IIRC, S. Eilenberg once said: “Elegance in mathematics is directly proportional to what you can see in it and inversely proportional to the effort it takes to see it.”.For “feature extraction”, at least a few times, I’ve done that or something like it.One example is inhttp://avc.com/2015/07/bitc…The math in my startup is another example but more complicated and advanced. Real value in statistics often comes when an inference is related to something causal from the real world – that always requires the problem to be seen from the right standpoint. Congrats: Correct, biggie point. It’s super tough to get statistics to give solid evidence of causality. But if from other information do basically know the cause, then statistics can test that hypothesis and also estimate the strength of the cause.Time for @JLM: “I agree with you more than you agree with yourself.”

      14. RichardF

        Are you saying that even when you see something really novel and innovative and challenging that production capital is outbidding you or are you just not seeing stuff now that really requires vision?I think the information revolution is still in it’s infancy and we are possibly just in a down cycle in terms of real innovation. It’s the VC’s job to spot the innovation and the opportunity. In the near term and I know you are heavily into Twitter but something way better than Twitter is around the corner (and that’s not even an example of real innovation)

        1. James Ferguson @kWIQly

          Hmmm – Agreement grayscale !Twitter was innovative in terms of identifying a niche that could expand if served. Technologically it was not innovative – a bit of plumbing.I think much VC money has a problem identifying real innovation that requires more than an elevator pitch to explain.The problem of filtering noise (of which I am sure there is plenty) is one of quantity not quality. But the elevator pitch – is a quantitative filter which is almost universally applied. Filtering for depth and substance is as easily and rapidly applied but requires a tiny bit of domain experience which many VC just don’t have.I believe many VC are scared of really interesting propositions.An “investment thesis” is often nothing more than a proxy for understanding that apparently legitimises arbitrary judgements.Can a real innovation express itself in a single phrase – yes but only with superficiality. Hunting for value in the superficial is like hope to compete with a deep gold mine by panning in the run-off – you can get lucky – but don’t expect to hit a seam.

  3. andyswan

    Or maybe there is no significant mispricing.Maybe tech is simply that powerful and that valuable. The pot has grown massively, more rational actors want a seat at the table, therefore table stakes have grown appropriately.This would also explain almost all “income inequality” as well.Instead of blaming “systems” or outsiders, I prefer to take the more likely, more optimistic view:The ability of individuals to create massive wealth is rising faster than the collective can imagine.

    1. LE

      Maybe tech is simply that powerful and that valuable.Interesting. This is similar my thinking about prices for Superbowl ads. In one time and place they were priced way less (even adjusted for inflation and audience I will totally guess) than they are today. However even at the current prices in 2015 there appears to be a market that sees value at that cost. Meaning it was cheap in the olden days and has now risen to the level of value.

      1. Matt Zagaja

        I think Super Bowl ad pricing is also a function of scarcity. As people are dropping TV and cable there are increasingly less places to have that amount of cultural reach at once.

        1. LE

          Yep. You’d also have to factor in the DVR effect and the value of a live broadcast vs. an event that can be recorded and watched later. (In particular with the commercials being skipped).For that matter the SuperBowl is most likely the only event that people also watch for the commercials and even the commercials get free PR before and after the broadcast.Would be interesting to correlate that (live & additional commercial impact) on pricing as well.

    2. LE

      This would also explain almost all “income inequality” as well.Which can also be explained such that growth of wealth also relates to the gambles that one is able to take as a result of the money that they already have.So once someone reaches the “magic number” of having “made it” (let’s arbitrarily call it $10,000,000) they can then deploy some of that money on more risky gambles (where startup gambling is only one of those things). They are therefore able to potentially hit a big win among some of the things they invest in.This isn’t particular to startup investing. If you had enough money perhaps you might gamble that NYC real estate continues to rise. And if it did you’d make out like a bandit. If it didn’t no big deal as you are able to take the hit even if it drops (because you have already “made it”).

      1. thinkdisruptive

        It’s also how those with an overabundance of hubris about the reasons they “made it” promptly lose it all at the craps table. Betting with a data-based system, or with knowledge is called “calculated risk” or “investment”. Spreading your money around on a wish and a prayer that one will hit it big is called fun at the casino.

        1. LE

          Exactly. Luck does not equal smart. (Although someone can be both!)”Calculated risk”. Well there are exceptions. In the stock market there is plenty of information and data about companies. However there is also a great deal of info that you do not know as well. So all of that “do your research” is total bullshit. For the average person. Now of course if you devote yourself to it full time perhaps you will get an edge. Because maybe you can sense better and see patterns that tell you to take a chance. But then that’s your job so for that matter if it’s your job to win at the poker table and you dedicate yourself to it full time you can apparently earn a living that way also.

          1. thinkdisruptive

            There is skill needed to consistently win at the poker table, just like at anything else. If you lack the skills, you may occasionally win a pot or two, but you are also the “mark” that the pros make their consistent winnings from. Assessing probability and ranges of likely results and being wrong on individual investments doesn’t make the methodology wrong. A 60% probability of being right means a 40% probability of being wrong — it’s the difference between the two that you win on, not the individual bets. So, even with imperfect information about companies (is there any other kind?), you can still have a system (an “investment thesis”) for assessing your research and placing your bets.To carry on with Mark’s original thought about irrational outsiders being responsible for (mistakenly) driving up the value, I think that’s poppycock. There are a lot of insiders irrationally pushing value up too, and there are newbies doing everything right. What pushes value up is more people/dollars chasing fewer good opportunities. Supply and demand. Not stupid outsiders.

          2. LE

            Not sure I agree.In the asset that I sell and deal with, there was a pretty stable price paid by “investors” for the past 15 to 20 or so years. And a price paid by “end users” of this asset (for lack of a better way to put it). Then all of the sudden the Chinese got into the game in a big way this year. They had always been in the game but then something changed and they went haywire. As a result I was able to rape and pillage these new investors because they were willing to pay a price at levels never seen before on the wholesale market. A feeding frenzy. (They were paying close to end user prices). That peaked and went away but now (3 or 4 months later) they are back.Like the asset that VC’s invest in, for the assets that I sell (and it really doesn’t matter what that asset is) the price that someone will pay is based both on potential future value that they see as well as “greater fool” mentality. The potential future value is to an end user. The “greater fool” is to another investor.Supply and demand relates (in my mind at least) more to something that has actual value (like airline seats, hotel rooms or oil) to someone for some reason.So I am not saying you aren’t correct as much as thinking that I can think of a personal case where “a lot of insiders irrationally pushing value up” is actually happening.

          3. thinkdisruptive

            Supply and demand have almost no relationship to value. Supply can be infinite (or nearly infinite, relative to need) while value can also be extraordinarily high, yet price is zero. Air is a great example. We all need it to survive, but because it is abundant, it is free. And neither the value nor the price affects the demand. If we did have to pay for air, who wouldn’t line up to get some?In economic theory, price is simply the tool we use to establish equilibrium between the supply and demand of scarce goods. In other words, it is (relative) scarcity that creates price and perceived value. Is caviar “worth” 50x the price of high quality beef by pound? Not really, but if you want some, price is how we ration it.Airline seats don’t have much intrinsic value, and an unused airline seat has a big cost, which is why I can be sitting beside you in the same class of service and pay 10x what you did for the same travel from A to B. But, if you want to fly home the day before Thanksgiving, you will pay through the nose for the worst service you’ll ever get. Value is perceived, and relative to context, not real.Ultimately, even in your example, the price is driven by supply and demand. Presumably the supply of whatever asset you sell stayed relatively constant. But, you suddenly had a class of consumer demanding a lot more of it, and willing to pay 3-4x the price. The Chinese did the same thing to first growth French wines — drove the prices into the stratosphere to the point where mere mortals like me can’t afford it anymore. Is it their “fault” that they are willing to pay more for the status associated with the vineyard/label? I might not like that I can’t buy it anymore, but is it wrong for the suppliers to charge what they can get? I might call the Chinese buying pattern irrational, but it isn’t going to get me any more wine to drink, unless I’m willing to compete for it at the same price they are.That’s what Mark’s problem is. He doesn’t want to pay the price associated with the new demand created by outsiders who didn’t traditionally play in his space. Unfortunately, price regulation almost never works, so he’ll just have to wait for a “rational” market correction, or adjust to the new reality of crazy outsiders.

          4. LE

            He doesn’t want to pay the price associated with the new demand created by outsiders who didn’t traditionally play in his space.Also known I believe as “last man over the bridge” thinking. An island with a bridge witnesses development. Newcomers are flooding in changing the way of life for the “old timers”. Everyone wants to think they should be allowed to be there who is already there, just not any new guy who hasn’t made it over yet. (Or something like that..)

          5. thinkdisruptive

            Yes, and you could also conclude the opposite. The incumbents benefited irrationally from the absence of outsiders who always would have been willing to pay more if they’d known about the opportunity, or had access to it. In other words, it was the old rules of the game that were wrong, not the new ones.It’s frustrating for participants (I’ve lived in cities going through dramatic changes like the bridge/island metaphor, and it’s definitely not fun on either side), but the outsiders or newcomers aren’t “wrong” — they’re doing what is in their perceived economic interest, just like Mark is.

          6. LE

            Well just to be clear in no way shape or form do I think the outsiders are wrong. And absolutely 100% 98% people will always criticize someone else for acting in their own economic interest as long as it doesn’t impact them personally. Then they quickly change their tune when it does. It’s easy to spend money that is not yours. (And of course some people are schmucks even with their own money).An example would hypothetically be a wedding venue that kept the deposit of a bride or groom that was killed in an auto accident. Mostly everyone would think “that is so terrible how could they do that!!” because they are not the party that suffers the economic loss.An example though of what we are talking about is this. Back when I was a kid a hot new game came out that my father (an importer) got to sell. The game became so popular that his suppliers (who he had dealt with for many years) cut him off to sell to others. Of course my father was upset because he had spent so many years selling the other merchandise that nobody wanted but him. To retail stores, department stores etc.. But the truth is there was other merchandise that the factories offered to sell to him that he wouldn’t touch. No market no way to make money. Not in his best interest. So all he did was fill a need that was there he wasn’t a martyr in any way. He acted in his own self interest. Yet he was mad when his supplier did the same thing.

          7. thinkdisruptive

            The suppliers were stupid, and your dad was better off without them, even if it didn’t feel like it in the short term. No one needs fair weather friends, and nothing prevented the supplier from maintaining the longstanding relationship with your dad. This strikes me as a completely different issue from whether or not the outsiders are doing anything wrong.I also think the hypothetical example of keeping the deposit has two sides. What you are legally entitled to do, and what you should do as a kindness in an extreme circumstance are not related. Even if the people demanding the deposit refund are assholes, it’s still the right thing to do morally, and better for your business pr-wise. The golden rule is rarely the cheapest way to run your life, but it is usually the most profitable.

          8. LE

            Well I can’t argue that it’s better for business PR wise.But I can take issue with “what you should do as a kindness”. How does “kindness” enter into a businesses financial situation? Where do you draw the line exactly?We don’t know at least two things.1) The financial situation of the business. Most likely a small business. Could be super profitable and busy, could be 1 event from bankruptcy. And remember wedding dates are perishable and booked way in advance. They have payroll, they have fixed overhead and so on. For that matter they very well might have “bride cancellation insurance” who knows?2) The financial situation of the groom or bride. There is often insurance you can buy, event insurance just like I have purchased trip insurance (and had to use it one time). Very likely there was also life insurance. So how can we conclude any financial impact? Maybe there wasn’t any at all? Life insurance payout covers that type of thing.As far as “assholes” in theory that shouldn’t really make a difference. However when stories are told for some reason whether the person is a saint or a sinner often adds to the emotional impact and changes peoples minds because it essentially colors their judgement (in either direction).You know we just got done with having a small “affair”. And everyone required to be paid in advance. You couldn’t even wait until the day to make sure the, for example, photographer showed up! What does that tell you? It means that all of those parties have been burned by people. Most likely more than a reputable business has burned it’s customers.

          9. thinkdisruptive

            Businesses are about people and relationships, not just commerce. If you’re one payday from bankruptcy, and you haven’t taken the precautions such as recommending cancellation insurance, then you’re probably going to fail anyway. Regardless, your long term ability to keep on going and/or start again is going to be determined by how you treat the people you do business with. As a business owner, I have to live with myself, not just my finances, and I’ve never felt harmed by doing the right thing for someone else.Whether you are kind or not is a personal choice in any dealings. I’ve never “had” to be a dick to someone in business (although I’ve certainly stepped over the line personally on occasion), but if I felt squeezed between a rock and a hard place, I would certainly take into consideration whether they had behaved like a dick to me, and even then, I might still choose to take the high road. I don’t believe that morality stops at the door of my business in any case. It’s a slippery slope from being a hardass, to being an asshole, to feeling customers “owe” you their business, to deliberately trying to cheat your customers, probably with a few more steps in between, and trust and the belief that you will always do the right thing by someone is a very powerful factor in retaining and attracting loyal customers who do right by you. Occasionally, the person on the other side will treat you badly, and you’ll lose. Write one off to experience. More often, you’ll be surprised when random people do something nice for you. Karma is a bitch, and don’t you just feel better about yourself when you do the right thing?You’re right that it shouldn’t make a difference whether the person in question is an ass, but in general, most people are far more willing to help out someone they like and/or who asks nicely, and do the opposite when they start out by being demanding and confrontational. So, it does matter.On the other hand, consider businesses that have rules they never break, and who always treat their customers with suspicion and take a hard line. Those types of businesses do exist — my cable (ISP) provider, phone company, and a few other “utility” type businesses come to mind. They are precisely the businesses that everyone reviles, and where customers look for ways to “get even”. It creates zero loyalty, and makes them hugely disruptable (if a competitive alternative ever exists, a huge percentage of customers would leave immediately). How you treat people matters.So, where do I draw the line with kindness? I’m not throwing away free money to everyone who asks for it, but I draw the line at trying to act as I would like people to act towards me in a similar situation. I think that’s just common business sense.I actually have a scenario that I can relate this to in my distant past very directly. My sister’s wedding got delayed when the groom’s brother (who was in the wedding party) was in a fatal car crash on the way to the rehearsal party the night before their wedding. He was revived at the scene and flown to a critical care center by helicopter, but he was basically brain-dead on impact, and the hospital was simply waiting for the family to make a decision about pulling the plug and donating his organs. The families all went to the hospital (which was in another city), and even if they had not needed to leave the wedding location, everyone was in a state of shock and grief that made holding the wedding impossible anyway. Obviously, many people were affected — the church, the reception hall, the entertainment, the photographer, hairdressers, soloist, musicians, caterers and probably more. All of them had deposits or prepayment in full before the event. Not a single one of them played hardball, and in the long run, every one of them benefited because they bent over backwards to be helpful at a very difficult time. I don’t know why anyone would chose to behave differently.

          10. LE

            I am sorry to hear that that happened to your sister. Did the wedding happen later and how did that work out exactly?So you are saying that all of those involved refunded all of the money that was paid as deposits and took the hit for this loss? Or (see below).and you haven’t taken the precautions such as recommending cancellation insurance, then you’re probably going to fail anyway. Well as you know you can recommend cancellation insurance but that doesn’t mean that someone will buy the cancellation insurance. Also it is quite possible that those that refunded the money actually have some “act of god” insurance that is a specific business rider. In other words if a wedding is cancelled because of an event such as you mentioned their insurance covers that. That is much different than simply “doing the right thing”. That is just putting in an insurance claim. Also it’s quite possible that “act of god” insurance doesn’t cover “Uncle Harry” but only certain members. So what happens then?

          11. thinkdisruptive

            This was a long time ago. I don’t recall anyone offering cancellation insurance in those days.The wedding did happen 5 weeks later, and though we tried to make the best of it, it was a somber affair. They left an empty chair for the groom’s brother, and all of the groom’s family were crying through all the speeches. (They probably cried through the ceremony too, but I don’t specifically recall that.) Things cheered up a bit for the dance.As for the service providers, I would be very surprised if the photographer or DJ or caterers or musicians even had the option to get insurance. And, I imagine it’s more common than we think for weddings to get called off for other reasons in the last weeks before the event, although I suspect the reason it’s called off would impact how willing people are to work with you. They all did the event at the later date for no extra charges, although I know they all got very generous gratuities. It may have helped that the reschedule date was in the first week of January (not a lot of weddings at that time of year).Perhaps today, service providers would have insurance, or be able to offer it to people, but as I said, not then, so everyone shared in the pain. Even today, I think if one of the key people (bride, groom, parents, immediate family) had something serious happen, most people would cut them slack with or without a policy in place.The people who were hurt the most were family traveling from long distances. Air fares were much larger then relative to income, and several couldn’t come on the reschedule date, so they lost the money and didn’t get to be there. Airlines aren’t fond of going the extra mile.I think they had to pay more for the flowers, but I’m pretty sure they got them at cost for the re-do.Anyway, there are all kinds of reasons to cut people slack, and in my experience, most people do, and I try to as well when it seems right. I don’t distinguish between how I treat people in my personal life or in business, although some would say I treat business associates and customers better. I don’t perceive a cost to it, and my code says that’s what you should do, even if not reciprocated.

    3. William Mougayar

      But rising prices affect the multiples that are fundamental to the VC models. It’s like a huge inflation on everything.Where it doesn’t add-up is that incoming inflation doesn’t equate to higher exits necessarily. Someone will be left with a deficit along the way.

      1. awaldstein

        Then your model will have to change.The power of the VC industry and their control over the direction of innovation is really daunting.if all this is true and it shakes it up, that is goodness.

        1. William Mougayar

          But you could argue VCs have done a pretty good job partnering with entrepreneurs so far. If you want a blank cheque, then you have to be very responsible about it, and not all entrepreneurs or startup stages can handle that.

          1. awaldstein

            No question and I am not implying otherwise.I’ve raised a bank vault of capital and still doing it. Many friends obviously amongst those folks.Change is good.

    4. reggiedog

      What is too infrequently asked is “why” any system exists.That will explain “what”.And the answer is usually much simpler, and less romantic than most justifications.

    5. Matt Zagaja

      I think tech really is that disruptive, but I think that has nothing to do with income inequality. Income inequality is a function of the shift in the labor market to a model where employers and employees no longer feel a duty of loyalty to each other. Developers and other tech workers are thus courted like crazy due to scarcity (when I go by Kendall Square I see ads from tech companies like Amazon saying “We’re Hiring!”) but workers with common or easy to learn skills are easily replaced if they get sick one day or miss a shift or something. Law firms have shifted the budgets they’d use to train new employees to hiring trained employees that some other sucker trained.

      1. LE

        Well you do realize though that what has happened in law (with lawyers as you know since you are an attorney) will happen in tech as soon as supply and demand gets in balance, right? Look at all of the push toward everyone learning to code. [1] Even if the majority of those people suck there will be for sure people who choose to code who would have made great lawyers (if there wasn’t an oversupply). As a result at some point, and I don’t know that point, coding will see a drop in wages and job security. The sucking sound will be heard.Also there is one big difference between coding and law that is important to consider. If you are an older lawyer (or a doctor) or consultant with years of experience in a specialty (or even if you are a generalist) you have a big advantage over a young law school graduate. You have years of knowledge and perhaps a customer base which gives you business. Someone in computers is for sure disadvantaged as they get older and newer languages need to be learned. There is no question about that. Especially if there are so many people flooding into the career.[1] Girls, boys, people that would have chosen other careers. It’s a frenzy and seen like any gold rush (which always ends).

        1. Matt Zagaja

          In law having a portable book of business is a very nice moat to have but you can create a similar moat in the world of programming if you are either operating on a consulting model or if you happen to also be an owner of your company. Even if Marco Arment can’t program anymore (although he does!) he still benefits from the continued success of Tumblr and is able to leverage that line on his resume into other ventures.Law, like code, is often in flux. Congress passes new statutes, the Supreme Court strikes some down. The intrinsic ability that coders need to have to learn new languages is the same ability that lawyers need to have to learn the changing law.To be honest I believe lawyers are generally more replaceable than most others probably believe. If Sullivan and Cromwell arbitrarily cut its starting associate salaries by 50% I think it still could get a similar average quality of attorney overall. However the salary bands are not designed to attract their average attorney but to help them attract their 10x attorney, the David Boies. When you do not know who David Boies is before he presents himself, the best you can do is attract a pool of people who will likely present a David Boies. So that’s where I think that premium comes from and the other lawyers in the pool just enjoy the spillover benefits.

          1. Salt Shaker

            Curious if you have regrets about becoming a lawyer? (My apologies if this Q is a tad too personal)? All my lawyer friends got out or are just plain miserable. Of course, the pay is good, especially at blue-chip corporate firms, but the time commitment, politics, etc., are quite onerous. There are all types and kinds of lawyers, some who are actually doing stuff that is socially redeeming. I have a lot of respect for those kind of lawyers, although those pursuits generally are considerably less lucrative.

          2. Matt Zagaja

            Not really but I am lucky to have gotten a position doing what I enjoy (at least for the next year), even if it isn’t quite as lucrative as my friend’s law firm jobs. I was always interested in science and tech policy and viewed going to law school as a means to build some intrinsic value and toolsets in my own career and I felt I got that out of it, though with a hell of a student loan payment. If I had decided to “settle” for a typical attorney job out of law school I probably would have regretted it. In the past few years I’ve learned you sometimes end up having to place a lot of bets on your career before one pays off.

          3. sigmaalgebra

            You are saying, don’t be an employee, instead own your own business and, maybe, be an employer. Yup.

        2. Dan Moore

          I’m not sure that the advantage of youth is in the ‘knowing newer languages’, but rather:* lack of belief that ‘this isn’t possible’* innate experience you can only get growing up with new technology* more free time* cheaperOn the flip side, older folks tend to:* have seen this problem before (aka have made mistakes on someone else’s dime)* have better ‘big picture’ skills–the code is only one piece of developmentIt’s also very wise for older developers to plan to ‘consult’, network or somehow build a moat so they aren’t competing with everyone else when it comes time to look for new work. (It behooves younger folks too, but they have the price advantage.)I’m talking my book a bit, because I’m one of those older programmers (hey, when did that happen!), but I’ve found that more senior developers are far more in demand at present than younger folks

      2. thinkdisruptive

        Tech is not disruptive, and doesn’t inherently enable disruption. That may be the big mistake that many are making in rolling the dice in an area they don’t really know enough about. There is no doubt that crowd-sourcing will fund a few things that traditional VC and angel money would have ignored, so we’ll surface a few more decent sized hits. There is also no doubt that many many companies are riding a wave of over-valuation, and there will be a correction that flushes out many of those who shouldn’t be risking so much.I don’t see Fred’s thesis being right or wrong. VCs aren’t missing huge opportunities, and anyone who has the cash and can afford to bet some of it is entitled to play. The larger pools of money from more sources will temporarily reduce the risk premium that entrepreneurs pay to get money, but it may also increase their risk if they don’t receive the mentoring, connections, and signalling of winners that good VCs provide. In the long run, things even out, and everyone has their niche.

    6. pointsnfigures

      I remember 1999. “It’s different this time”. You couldn’t short that market and you can’t short this one. Uber raising another billion at a $60B valuation….do you think they could get that in the public market?Agree with you, The ability for individuals from anywhere in the world to create massive wealth is indeed rising faster and is more accessible to them than ever before.And the fears and calls from people decrying all kinds of progress, putting their faith in bureaucracy over people networks has never been more forceful either.

      1. andyswan

        Yes I think Uber could get a billion at 60 on public market for shares that get the first billion out and carry other preferences and rights.

        1. pointsnfigures

          That’s a different point! What does their cap table look like? Going public probably wouldn’t be a clean cut and dried transaction for them.

          1. andyswan

            The valuation on preferred is pretty irrelevant. That’s big part of why you get such crazy numbers.

          2. Jerry Neumann

            The valuation is relevant if you believe the goal of investors is to make money, rather than avoid losing money.You only make money when the price goes up.

          3. mike

            not true. If I invest $100m in uber in a senior security with a 2x liq pref I’d make 2x my money even if it sold for $1b, which is a $60b decline in value.

          4. Jerry Neumann

            Well sure, and if they were giving out ponies, then you would also have a pony. But as far as I know, Uber is not selling participating preferred. https://www.theinformation….

    7. Donna Brewington White

      I’m not a historian, but haven’t we seen this before? Now, it’s tech and capital markets… in the past, gold, oil, etc.? The internet allows for more players, and levels the field… well, somewhat. But in the end there are forces that come into play — macroeconomic forces, for instance. So one question is whether those forces are being disrupted or are we just playing out another cycle?

    8. JamesHRH

      Benedict Evans would agree I believe, given he believes and says, regularly “Mobile is 10X the web.”

    9. sigmaalgebra

      The ability of individuals to create massive wealth is rising faster than the collective can imagine. Yup: Athttp://a16z.com/2014/07/30/…isSam Gerstenzang,”The Happy Demise of the 10X Engineer”andThis is the new normal: fewer engineers and dollars to ship code to more users than ever before. The potential impact of the lone software engineer is soaring. How long before we have a billion-dollar acquisition offer for a one-engineer startup?One of the keys to a good startup is a good idea, but typically that comes almost entirely from between just one pair of ears — committees just get in the way.Now the computer hardware and infrastructure software are so cheap that one guy with a good idea can be nearly to the finish line and step over it alone.

  4. carribeiro

    Couple that with the sad state of the public market – driven by short term interests – and negative tax rates, and the incentive to chase unicorns for anyone thinking long term suddenly makes more sense.

    1. pointsnfigures

      Negative interest rates. Taxes aren’t negative.

      1. carribeiro

        Sorry! Of course I meant negative interest rates. Just a case of bad translation on my, “taxa” in Portuguese can also meant “rate” and I messed up.Curiously, there are negative tax rates though, as in minimum income systems… But that’s not the same thing.

        1. pointsnfigures

          Negative tax rates are a great idea for people that don’t make that much money. Milton Friedman’s “earned income tax credit” is an example.

  5. William Mougayar

    This was particularly evident in the blockchain space in the sector of companies that were going after the capital markets, seen as a “quadrillion” dollar opportunity. Some of these “startups” are raising the stakes and swinging for fences big time, so they go and attract non-VCs who want in on the action, and are more easily persuaded by assiduous entrepreneurs who are great sales people. Maybe these new investors have different optics on the situation, but these approaches are taking a non-traditional path. Also, several Chinese investors coming to North America are overpaying in my opinion. Time will tell who was right, but corrections typically have a price.

    1. yranchere

      The relationship between brogrammers and outside capital is not often discussed. Seems like pure tech geeks are not as valued as they were before.

      1. William Mougayar

        Do you mind elaborating on that? or email me in private [email protected]

    2. Richard

      Foreign investors have over paid in almost every asset class investing cycle

  6. obarthelemy

    “L’enfer, c’est les autres”. Hell is the others. Damn others ! They always mess up my tidy little business / neighbourhood / life.

    1. William Mougayar

      Jean-Paul Sartre was right 😉

  7. William Mougayar

    If you look at this just as a math problem, over paying on valuations just means that the return multiples are lower, in the best case scenarios. But most of these non-VCs don’t have a portfolio approach to investing. They are placing strategic bets on some companies, and see it as such. So maybe it’s the philosophy of “the portfolio” vs. “the strategic investment” that is at the root of this situation.

  8. lostdiaspora

    While they are two very interesting and contradictory views and the debate is worthwhile it does also draw parallels to a discussion on how to catch a falling knife, until you catch it, the outcome is academic. We are where we are and understanding the players on the field helps figure out what our possible responses might be but no more.

  9. JimHirshfield

    Where do corporations, and by that I mean startups, get their production capital? Doesn’t seem like Uber is raising production capital… Just cashing in on financial capital frenzy.

    1. LE

      Academics will always try to find one theory to explain behavior. When in fact there are multiple factors that come together to cause something to happen (success or failure). [1][1] However these are often given as “to be sures” in news articles that write about subjects. But they aren’t the “lead” to the story. So they are often ignored.

    2. fredwilson

      Don’t think about Uber. Think about Apple and Google and now Amazon. Tech is the new oil

      1. awaldstein


        1. Richard

          Literally as well. Oil has just 2 of the top 10 of the mist valuable companies, tech has 5.

        1. SubstrateUndertow

          Just curious about your handle “thebigmix”does it have a conceptual subtext for you or is it just serendipitous ??

          1. Chimpwithcans

            Just saw your question now – to try to answer – It has a bit of a subtext in that I am, and always have been, such a generalist – Not to get too deep on you but for many reasons my life is a big mix of influences – And I am a huge proponent of curiosity – dipping ones toe into “the big mix” of life :).I am also curious about your handle – I just had to google what substrate means – are you a chemist?

      2. JimHirshfield

        “Tech is the new oil” – economic lubrication never felt so good.

      3. jason wright

        techdollar begins to flow.

      4. pointsnfigures

        I can’t speak for Marc or Jerry, but I think their posts were in reference to later stage valuations of companies like Uber, Snapchat etc. Apple etc are all in the public domain, and their prices are efficient.

      5. Girish Mehta

        Production capital – Alphabet, Facebook, Apple, Amazon, and…. yes, don’t discount Microsoft.BTW, Jerry Neumann posted an elaboration / update to that yesterday.http://reactionwheel.net/20…Excerpt -“…Predictions falsify themselves when they are widely known and widely feared. Convincing you that she is correct, or even that there is the possibility that she is correct is my contribution to subverting the process she describes. “I was thinking about this idea of the “ANTI -Self fullfilling prophecy” earlier today after reading that. There are examples in the history of public markets.

        1. SubstrateUndertow

          Isn’t that kind of”ANTI -Self fullfilling prophecy”just incumbents kicking and screaming as they are inevitably dragged into the future ???

          1. Girish Mehta

            No, Something else.
Enough people are convinced that something WILL happen and therefore they act in a certain manner, as a result of which it does NOT happen. (Contingency – the prediction should be something which can be acted upon after discounting into the present).

Throws up an opportunity to be Not only Contrarian (which is easy), but to be Contrarian and Right.

p.s. The Yogi Berra Version of it would be the one about a place that is so crowded that nobody goes there any more :-).

          2. SubstrateUndertow

            now I get it 🙂

      6. iggyfanlo

        I like the analogy from the perspective of these companies’ market caps and their supposed dominance of the future. However, I would also point out a key difference. Big Oil was needed for financial capital exactly because the capital needs were SO large; which is not true in information revolution where WhatsApp, Instagram and others are proving that they are remarkably small.So, I’d posit that the new “Big Oil” are great marketing and BD machines with power to distribute to business, but innovation can come from anywhere and scale quickly without their sizable capital

      7. thinkdisruptive

        Or the new tulip bulb?

        1. Richard

          Facebook has displaced walmart in the top 10 most valuable companies, this is no tulip

          1. thinkdisruptive

            For a short time, tulip bulbs displaced every other source of stored value, with a single bulb valued at more than 10x the annual income of a skilled craftsman. At the time, everyone believed this was a permanent state change, until it suddenly wasn’t.The value of any single company is both irrelevant and debatable. The data that Facebook is collecting about a few billion people could well justify their current value, if they don’t run seriously afoul of privacy concerns when the pendulum starts swinging the other way, and they aren’t really a tech company anyway, unless holding a lot of consumer data makes you a tech company (is Dun & Bradstreet a tech company?). A sizable (and protectable) network brand is worth a lot of money. That will always be true.But, companies can also be among the “most valuable” while either being simultaneously grossly over-valued or under-valued. It’s entirely possible that most tech companies are over-valued today.

    3. SubstrateUndertow

      If you zoom out does Uber really create that much new value or does it just rearrange the deck chairs on who captures the same old value ???

      1. JimHirshfield

        Good question. Seems to me they must be taking share (revenue) from taxis, private car service companies, maybe public transport (to a minor degree)…where else? We’re not traveling more, are we? So it’s all the same transportation expenditure shifting over to Uber, right? In which case, are there stats showing the decline in revenues to taxis, car services, etc?

        1. LE

          Because of ease of use there is almost certainly an increase in total ridership. But the majority is just coming out of someone elses pocket I am sure.They just launched a program in a town in south jersey where drunk bar patrons get free uber rides:http://www.nytimes.com/2015…This of course is totally absurd and a moral hazard. “Go ahead and get drunk” and you can have Uber drive you home. For free. So we will have a decrease in drunk driving arrests but an increase in fatty liver disease or people hungover at work the next day (with lost productivity).

          1. JimHirshfield

            Yeah, I see that producing a few horror stories. My first thought was “Uber drivers gone wild” on their drunken patrons, more so than it encouraging over consumption…but now that you mention it, you’re right…that too.

          2. LE

            By the way the mayor of that town in NJ is a total cowboy. There have been all sorts of stories of things that he has done. He is a former kicking coach for the Baltimore Ravens. The police in that township are on the prowl for anything they can write tickets for. It’s like a police state there.https://en.wikipedia.org/wihttp://articles.philly.com/…Holy shit. Ok it now makes sense. This guy is always getting into the news locally and seemed to have an agenda that reached beyond “helping the township”. His mouth was just to loud.The wikipedia article states he wants to run for Governor in 2017! So as expected there is a back story to explain his actions.I gotta hand it to the guy for using the drunk driving take Uber as a publicity stunt to raise his state profile.

          3. Richard

            Makes good business sense if you are a resort town

          4. James Ferguson @kWIQly

            @domainregistry:disqus where i wholly disagreed with you yesterday – today I find I agree with you more than you agree with yourself – @JLM would be proud

          5. LE

            All roads eventually lead to mr wonderful.

        2. thinkdisruptive

          Much of the value is not because of supplanting taxis or black car or private car service businesses. Those are the obvious things. The future growth value comes from creation of new markets and Uber becoming a reasonable substitute service in many non-obvious markets, such as overflow delivery service at Christmas. Remember that Uber’s real innovation is not an app that hails you a car, but a dynamic pricing model to match supply and demand, and a universal hub to maximize the efficiency of connecting someone who wants a service with someone who’s willing to provide it. Those things have general applicability in a lot of other markets that have nothing to do with taxi service.

          1. JimHirshfield

            OK, good point. However, those are, IMHO, the things that typically get dropped (i.e. back to basics) if there’s a market adjustment, aka bursting of a bubble.

          2. thinkdisruptive

            They may get dropped if the bubble bursts. So what. Amazon’s value dropped tremendously (from about 107 to 7 in the dotcom bubble prick circa 2000), but now trades 6x its peak value before the implosion. That’s because they eventually did become the world’s online supermarket/department store/flea market/virtual real estate developer and retail services provider. A bursting bubble hurts everyone in the short term, but it does rationalize markets, allowing the cream to rise to the top.At this point in time, the surplus of risk capital is funding a lot of dumb ideas and the 20th me-too companies, but it is also funding a few great ones who will become tomorrow’s Amazons, Alphabets and Netflixes. The influx of new capital sources (especially crowdfunding) simply stretches out the pie a little in the long run, and maybe funds a few good things that wouldn’t have got money in the short term. I don’t see this as a bad thing, nor do I feel sympathy for VCs who have to share the spoils more thinly. it will correct itself, and we’ll be left with a better overall system for funding startups.There was a time when all the things Mark says about the “outsiders” were said about VCs by banks, and said about angels by VCs. The new guys change the game a little, and that’s usually a good thing. Nothing wrong with competition to sort things out.

        3. Mike O'Horo

          I think we’re not traveling more, but we’re maybe traveling differently as a result of new options. One of the transportation “services” that Uber takes share from is one’s personal vehicle. For example, when there was no Uber here in Las Vegas, we’d drive to the Strip to go out. That requires us to be careful about alcohol intake, fatigue, etc. If we take Uber, though, that dynamic changes. So, with Uber available now, might I go to the Strip more frequently, now that the DUI risks have been eliminated? If the answer is “yes,” that’s incremental value created, not just for Uber, but for the hospitality merchants, too.

          1. JimHirshfield

            I don’t doubt your use case, but there have always been taxis and car services to take people to/from the strip. What’s changed? The convenience of an app to hail a car? It would seem that if I wanted the convenience of getting blotto without the risk of DUI, I would have used car services long ago.

      2. Matt Zagaja

        The new value is that people had idle assets (their cars) they can now turn into productive ones. Same as AirBnb (people had empty rooms now they can make money when they aren’t using them). However if Uber ends up being a company where most people are purchasing cars specifically to Uber then yes it starts to seem like a rearranging of where the value is captured.

        1. LE

          Well you have to also look at the “cat for NYC woman makes her less likely to seek out a mate” theory that I have. Cat provides companionship so there is less loneliness and less desire to end the loneliness by taking a chance and meeting someone.If someone is satisficing their need for income and a stable “real” job by picking up extra cash driving for Uber, then they are in theory less likely to find a real solution to their pain. (You know how people have to hit rock bottom to get motivated? It’s kind of close to that). Not for everyone but statistical over a large group would be my guess.

        2. Rob Larson

          Exactly. Also remember, the fact that they don’t have to buy taxi medallions which in many instances cost more than the cars.So that + some increased usage due to customer convenience = the value

      3. kidmercury

        fares have gone down considerably with uber, so there is a price innovation. it’s unclear how much this is a genuine price innovation or simply an unsustainably subsidy to gain market share.but beyond that, there are many promises. a promise to automate cars, to uncover new modes of shipping, to predict traffic jams and traffic demands. whether or not these promises are empty is another story…..

  10. LE

    Note that I’m not absolving my industry, venture capital, from bad behavior. I’m merely pointing out that price drivers are more strongly correlated with outsiders.The “insiders” are therefore forced to act accordingly as a result of the behavior of other market participants. This is totally predictable and expected. The phrase that I often say to describe this applies (which I won’t repeat).When everybody and their brother gets involved in any business all of the sudden the dynamics change and it’s every-man for himself.

    1. Mike O'Horo

      In many markets, when everybody and their brother get in, it’s often a sign that it’s time to get out. In any gold-rush scenario, the last ones in finance the exit of the first ones in. Then, the last ones in are left holding a bag of declining value.

      1. James Ferguson @kWIQly

        “It worked for me” – analogy of chain letter or Ponzi scheme.Beggars the assumption -” Because it worked for me – it should for you””Your mileage may vary ” – a healthy bucket of ice water to restore realityThe best ice-water is a simple question:Why are you telling me ? and What have you to gain?

  11. LE

    If “the market” is driving up prices beyond intrinsic value the main new entrants to the market that have taken a less rational view of historical prices are a series of “non VCs” including corporate investors, hedge funds, mutual funds and crowdsourcing.”Less rational view” = “the shoeshine boy”.

  12. Tom Labus

    Does it take a NASDAQ event like in 2000 to make Uber a ride sharing company again. They’re not going turn down this kind of cash and still be in “grade school” as Kalanick said.

    1. pointsnfigures

      if the buffet is open, why not eat?

  13. Twain Twain

    Re-read http://avc.com/2015/10/winn… for context on the moats the Production Capitalists have relative to the Financial Capitalists.Now… please see two images.Are new market entrants stupid? They would be if they were going to compete with incumbents based on the DATA parameters the incumbents already have an oligopolistic lockdown on and can readily commoditize (and sell on as data services).Maybe, instead, new entrants do the smart thing and invent.

    1. Stephen Voris

      Welcome back, Twain.I don’t know that the quantum aspect is entirely unknown, though; Google at least – Alphabet at this point, I suppose – has brought on at least a couple of quantum computing teams. What they’re doing with those teams, or whether the wisdom is going to diffuse at all into the larger organization, is another matter.And agreed, probability isn’t the same as the ‘amplitudes’ quantum mechanics are based on – but neither is probability the same as bits in the first place! The numerical portions of modern computing are, so far as I can tell, based on either modular arithmetic or “floating-point” operations; this is understandable given that memory is necessarily finite, but the end result is that there’s not quite room for the rational numbers, let alone the real or complex ones that correspond to probabilities and amplitudes respectively.

      1. Twain Twain

        Google’s Quantum servers from D-Wave is about technical hardware and still x-y plane vectors.However, not a single one of the Production Capital players (Alphabet, Facebook, Intel, IBM, Qualcomm, Baidu et al) have solved for the technical software, biological hardware and biological software piece of the Quantum Intelligence puzzle yet. It’s not x-y plane and goes beyond x-y-z amplitude too.Computing memory need not be necessarily finite at all — not with Blockchain. The only finite part is 21 million Bitcoins which is an example limitation of Hopfield theory and probability-based cryptography.@fredwilson:disqus @wmoug:disqus — that’s right! Quantum means more than 21 million Bitcoins are possible!!! And 21 device may even play a part!

        1. Stephen Voris

          D-Wave’s the one that gets all the press, but what little I picked up from the site that led me here suggested that they’re not the ones to look out for.By “memory is necessarily finite” I just mean that you can’t represent, say, “1/3” exactly under either of the current systems for handling numbers in computers: you get 0.01010101… until you’ve run out of disk space. Qubits solve a somewhat different problem.

  14. ZekeV

    Competition. It ruins things for everyone.

  15. Sebastian Wain

    I am curious about “..in the innovation cycle now that it is well understood. Think Alphabet”. What do we know about innovation now that was ignored before?

  16. pointsnfigures

    Untraditional new players/money coming in late to the VC funding cycle makes the market more competitive. Theoretically, it should make it more efficient. However, because of other factors like zero interest rates and traditional risk/reward ratios being out of kilter, it’s pumped up valuations that are probably unsustainable in public markets.The Fed isn’t going to move off zero interest rates anytime soon. Would be nice to see regulators and Congress act to make it easier and cheaper for firms to go public. Don’t see that happening anytime soon either.I think the public markets are mostly beneficial for firms. They bring about discipline.

    1. Tom Labus

      Yes, for going Public but can you get there from Uber’s valuation. The market reaction to tech earnings on Thursday seems to be the same hunt.

  17. James Ferguson @kWIQly

    Is the question about “ability to understand” a theme or some disruptive change ?So – VC is needed in bitcoin / blockchain because the bigger markets do not understand it / it scares them.Network effects / consumer apps – VC has done its job – the bigger markets understand itThe new is where something is happening that few people get (“What do you believe that nobody else does” – ie the Peter Thiel “Secrets”) – Here VC has a role to play.Bigger markets will always outperform VC pricing when the decision making data and the conceptual framework for evaluation become clear.So where is today’s “new” – ?IoT – perhapsfrom my experience the biggest IoT proponents themselves are just throwing money at it – they know its big but have no commercialisation models and are just hunting for enablers (eg device tracking, transaction frameworks, asset management, legal frameworks, security solutions, protocols, ontologies etc)- decentralisation generally – perhapsAny industry that has “insiders” that has not been commoditisied through tech.So It may be a long time before IT can out-recommend @disqus_Awy3Cl8ObF:disqus on Jura wines -but is it a market ? – Thats why the word Venture is in there -Its an adventure while there are no package tours offering participants “safe access”Renting a bed to a stranger was once an adventure – inconceivable to some – but not to winners.

    1. SubstrateUndertow

      Beautifully clear summary with fidelity !So where is today’s “new” – ?IoT – perhapsMaybe “the-new” is in brining the organic-organizing-dynamic reusables to the network-effect party in order to elevate the IoT to a living-organism analogue status ???Which is not as pedantically abstract as it may sounds given James G. Millers “Living Systems” overview work.

      1. James Ferguson @kWIQly

        TY :)All re-cycling is affected by critical mass (no point everyone driving a coke-can to some central collection point) – It is therefore network effect driven.This means it is about clustering (and thus optimisations of de-centralisation).The self-organising bit gets interestiing – rules can be very simple – eg to mimick ant colony search behaviour http://www.sciencedaily.com… but in these settings the real value is the insight of domain knowledge – this is generally true of say pattern recognition (particulalry optimal feature extraction)I think this means that deep domain experience rather than very young entrepreneurialism may be a meme for future VC – It implies in turn that startups will be more regional (where the experience hub is) – more evenly distributed (expertise fills gaps rather than clustering) and less IT tech oriented (SV is not so attractive)Naturally as an old fart with deep domain knoweldge of IoT related industries I may be baised 😉

  18. msuster

    It’s a rare day indeed where I find myself reading a post on AVC and disagreeing but I enjoy the healthy debate so I appreciate your taking this on.You and I are both “insiders” meaning we both “know the game and the players” and we see the shifts taking place.As such I would ask:- In watching “production capital” enter our market en masse is it not reminiscent to you of the behavior of the last major tech boom cycle (1997-2001)?- Have you not watched “irrational” (from an insider view) pricing and round sizes whereby the person we see writing the check is a corporate who had a different day job 3 years ago and now has a large balance sheet with the assignment to “innovate?”- Do you not think that many of these people will be given a new assignment when the next pricing correction comes? In my experience their correction assignment is “cut costs and cancel projects” which includes investment activities- When the insiders hit this correction phase it sucks because it’s triage but it’s still our assignment to fix things, stick around and make things work. That is in stark contrast to outsiders who have a new assignmentI haven’t been a VC my whole career so I certainly don’t have a “protectionist view” of our species. But having watched the role of VC as an entrepreneur and now as a player I have to say that I think there is a very important role the VCs play in shepherding teams through this irrational phase of a business called startup & growth. I don’t believe production capital will bring the same skills, attention & patiences so I believe there will always be a market for both investor types.Anyway, thanks for taking on the topic! It will certainly force me to go back and at least think harder about my POV.

    1. LE

      that I think there is a very important role the VCs play in shepherding teams through this irrational phase of a business called startup & growth. I don’t believe production capital will bring the same skills, attention & patiences so I believe there will always be a market for both investor types.Exactly. It won’t. Money can’t duplicate connections, knowledge, contacts and the skills that a VC bring to the table.

    2. Donna Brewington White

      Tremendous opportunity for VC to differentiate. And a marketing challenge.

      1. LE

        Maybe more VC’s will be forced to even blog that didn’t consider that in the past as a marketing edge.

    3. PhilipSugar

      I have to take your side on this beef as they say here. I have never been a VC, but having worked with VC’s I don’t discount what they do and the value that they bring for a select few companies.

    4. Salt Shaker

      Doesn’t production capital come to the table w/ a different and (perhaps) complementary set of valuable disciplines and financial expertise? Certainly can’t discount them outright. Further, if one is concerned that institutional/corporate investors lack certain “skills, attention and patience,” then don’t take their money. After all, it’s a risk/reward choice, isn’t it?

    5. Twain Twain

      The opportunity path for Financial Capital is in these slides. They are indeed needed to shepherd in innovation because the motivation of Production Capital is mostly in R&D either for incremental improvements of its cashcow model or buying out innovation from the market to kill competition.Andy Rubin, creator of Android, said something informative when he left GOOG: “What am I going to do for the next 10 years of my life? Am I going to fight for 1% market share, or am I going to make 10 more Androids.”That tells us something about how Production Capital works vs how Financial Capital works.Andy Rubin created… A NEW VC FIRM.

      1. LE

        “What am I going to do for the next 10 years of my life? Am I going to fight for 1% market share, or am I going to make 10 more Androids.”It’s easier to get lucky when spreading the risk and having others do the heavy lifting than it is to come up with another winner and have all bets on that. It’s no accident that so many entrepreneurs decide to go into investing rather than take a shot at another win. A good way to cash in that ticket that just got punched with the big payday. Makes total sense. Very little not to like.My point is this. It’s not about “not wanting to fight over 1% market share” that he says.

        1. Twain Twain

          Totally get what you’re saying. Heavy-lifting is hard.My point is that Financial Capitalists like @msuster:disqus and @fredwilson:disqus can look beyond what’s currently defined as “Information Revolution” (messaging apps, on-demand apps, search engines, eCommerce/mCommerce etc.) and see that there’s Materials Science, IoT and Machine Intelligence innovation emerging from the labs that will completely re-write the Information Revolution of the last 50-60 years…And that’s why the work of the Financial Capitalists is not yet done. Those entrepreneurs will need shepherding. Just as Xerox PARC Production Capital did not spot Apple, Google, Amazon so Alpha Production Capital will not spot the future Disruptors.Also, maybe those Disruptors don’t want Production Capital because independence is something they value and the strategic fit isn’t as good with Production Capital as it is with Financial Capital.That’s the opportunity for Financial Capital to figure out!

    6. JamesHRH

      Alchemy of Growth authors – http://www.amazon.ca/The-Al… totally agree with you.They see 3 roles: Research / Commercialization / Operations.No corporate firm manages all three phases well (their thesis, they manage all 3 the way they manage the role that created their success (3M & research, GE & Ops, etc.).The least corporate phase is Commercialization. The only corporates that come to mind who have even short term success in this area are people like P&G, who use their understanding of a specific – albeit huge – market, to make smart bets.VC is the largest player in the most critical commercialization role – industry agnostic risk capital. The idea that BSD’s from Wall St can do it is laughable. The idea that Alphabet can do it is also laughable – they have shown no ability corporately, as they are still, fundamentally, a one-trick pony (but man, that’s some pony).This guy – http://techcrunch.com/2015/… – however, could be a headache.

    7. Semil Shah

      Right or wrong, last 5-7 years seem to be marked by the ethos that most investors won’t really help founders in material ways. Of course, there are those who will and most of them are well known. But if that ethos held is directionally correct, a founder can take the early money for dilution and then use the market forces to keep raising (assuming there’s traction). Sure, some will stumble, but some will also make it without traditional VC. It will likely take another 5-7 years to determine whether that was the right ethos to hold. I definitely don’t have the answer but I think this is the right lens to analyze the disconnect with.

      1. awaldstein

        A great comment and to me, the takeaway from this string.

    8. fredwilson

      I agree completely on the symptoms. But maybe not on the disease. It’s so tempting to see this as 99/00 all over again and I’m reminded that while history may rhyme it rarely repeats itself

      1. Twain Twain

        Thanks, I’m borrowing “While history may rhyme it rarely repeats itself” liberally and adding it to JLM’s “When good ideas wrestle, better ideas result.”The thing about history per Financial Capital is that the observed data is put into expedient Probability distribution curves, line graphs, candlesticks, stacks, boxes, clusters as part of “pattern recognition” techniques.However, innovation (and Black Swan-type disruptors) doesn’t conform to those neat little charts and boxes.Innovation happens at genetic, fractal, quantum levels in odd shapes and sizes, informed by the emotional and perceptual PASSIONS of the Disruptors…And none of that data ever gets measured (and it can’t be modeled by Logic, Probability and Vector Spaces anyway) so there is no way for Production Capital or Financial Capital to measure for it, to account for it or to make predictions about how the market will move and change because this is the DATA BLINDSPOT all of us have.Sure, the processes of capital are arguably more efficient and vertically integrated (incubators, accelerators, crowd-funding, angel through to IPO and secondaries).Still…as long as there are “mad” people with “mad passions” who look at incumbents and go, “Hey, WHY aren’t they making this for people?” we will have new waves of Apples, Googles, Amazons, Facebooks, Blockchain startups that will become the next financial data provider etc.The biggest risk for Financial Capital is two-fold:(1.) Defaulting to complacent “pattern recognition” instead of being open to innovation; and(2.) Believing Disruptors will choose Production Capital over Financial Capital. The strategic incentives, motives and flexibility of execution are different between PC and FC.The constraints often inform the choices innovators make.For example, if a condition of getting Production Capital is that the innovator has to use the exact same supply chain as the Production Capitalist but the innovator has issues with that supply chain (perhaps for ethical reasons), then that’s the opportunity space for the Financial Capitalist to step into.That’s one of the many little variations in the genetic, fractal and quantum DNA of innovation which Production Capital and Financial Capital need to solve for.———Ok, returning to my little bunker to be OCD on Blockchain and IoT. I discovered some innovation happening in the Nordic countries and Asia Pacific which Valley investors have zero visibility on which will also change the nature of “Information Revolution”.We’re not done with that by quantum miles to Mars and back!

      2. James Ferguson @kWIQly

        Innovation will be a machine when spontaneity can be planned by committee.Bottling lightning never worked and never will – Yes incubators can nurture cloned results as commodities – they do not create the underlying genetic material.I sense Fred is looking outside the bottling plants

      3. Sean Hull

        History may rhyme, but it rarely repeats itself. That’s a great point.

    9. sigmaalgebra

      I don’t believe production capital will bring the same skills, attention & patiences so I believe there will always be a market for both investor types. In the field of business, especially finance, Darwin is hard at work.One of the most powerful ways to learn what not to do is to lose a lot of money doing it. A cat may jump on a hot stove, but he will never do it again. Investors writing checks $10 millions at a time should be able to learn as fast as a cat.If the outsiders lose money, then they will stop. Even Hitler learned this way: He lost a lot of planes and pilots over England, and then, …, then he stopped.The outsiders are investing mostly in late stages. Their investing in, say, whole YC classes is different. Then, nearly all of the seed and series A, B investing is still left to the VCs.There maybe each VC can look for a startup exploiting technology, to solve a problem in a large market, with traction significant and growing rapidly, and needing cash.

  19. Stephen Voris

    Does it have to be one or the other? Some succumb to the herd mentality, some use the herd as cover. Arguably the ‘herd’ is large enough that you can assume the existence of both sorts.Anywhere you go, there are subtleties that take time to pick up and internalize – and sometimes, the ground realities that create those subtleties change faster than our instincts about them. An outsider – who hasn’t developed that localized instinct – is necessarily disruptive, but not necessarily correct (or incorrect).

    1. thinkdisruptive

      A disruptive innovator, which is what Fred is referring to has a precise definition that differs from the common use of the term ‘disruptive’ as you’ve used it. Unruly children are also disruptive, as is anything that upsets the normal course of things. In an economic sense, disruptive (innovation) is a good thing that we almost always want to protect, even if, or especially because, it’s uncomfortable for incumbents.

  20. thinkdisruptive

    Disruptors are generally outsiders, although outsiders can just be outsiders.The question is whether the outsiders are serving new markets that were unserved or poorly served before. If the outsiders are willing to put money in places that other classes of investors aren’t, and they are happy with the outcome, does it matter? If they place money at a lower cost, is that bad? If they make VCs offer a fairer valuation to entrepreneurs, is that wrong? We probably are in a bubble with over-inflated valuations even for the best companies. That’s happened before without so-called outsiders, and it will happen again.Outsiders will only join the fray when they perceive a large economic surplus (someone is earning too much profit) that they feel they can capture a piece of with a different or better service and value proposition. That is exactly what every entrepreneur that VCs fund is trying to do. Is Mark simply crying crocodile tears?The market place will sort it out, as it should.

  21. Peng Jin

    It is a good question to think about indeed. Production Capital today represents huge advantages in traffic and customer base and therefore is much better positioned to reap the benefits of any innovations applicable to their existing customer base. In my opinion, this means Financial Capital needs to be deployed to grow a differentiated customer segment or breed disruptive technologies that would definite completely different customer engagement. Either way, the idea is to find something that throws Production Capital off balance. With companies like Alphabet out there which enjoy massive engineering capabilities and visionary ideas, it will get harder and harder. One advantage Financial Capital will always enjoy is the creative experience of starting something new that entrepreneurs enjoy. In other words, where Financial Capital wins is where culture fails at Production Capital. In essence, we are competing for more efficient ways to organize human talents and resources. So far, entrepreneurship has had the upper hand. But smart, aggressive companies are catching up fast.

    1. James Ferguson @kWIQly

      I like this but believe that the simple “being your own boss” aspect ( at least very early stage) in search for product market fit gives a lead to companies who embrace slightly anarchistic thinkers and can guide (without smothering) them towards growth and conventionalism (which as un-sexy as it sounds is really what scaling is ALL about).If this is the case – openness to cultural change is a pre-requisite culture for success, because it must happen before the replication of scale (which otherwise breaks things)A good culture in this landscape might be – “we aim to find what we must become !” – it throws certain pre-conceptions and values out of the window. And the VC skill is to decide which mix works (or might).

  22. Martin Hoffmann

    There clearly is an interesting dynamic happening! What tends to have a huge impact on prices is different types of investors having different agendas. It is my impression that many corporate investors are pursuing investments as defensive moves (either through acquisitions, accelerators, corporate vc’s, …) as they see their core business endangered. Thus I would not say that they act irrational. They just have a strategic and note purely financial agenda. Similar as Facebook’s acquisition of Whatsapp might not make sense from a financial perspective but from a strategic perspective.

  23. Kirsten Lambertsen

    Off topic, but I thought of you and USV.Just got a letter from Experian that their servers were breached and my data was likely accessed. The credit bureau cabal is basically the Eye of Sauron and knows *everything* about everyone.I hope startups are coming to USV who plan to disrupt this centralization of *all* of everyone’s financial data (via blockchain, presumably). That old dinosaur needs to meet its meteor.

  24. Stephen Palmer

    I think guys like you and Suster invest early enough in the cycle where there is still a huge role for you. Other VCs may have a more difficult time.

  25. stefano zorzi

    Guess both positions can be reconciled by thinking Amazon and Google/Alphabet as production capital instead of e.g. fidelity. As usual, it is difficult to clearly name things in times of transition.

  26. sigmaalgebra

    As my dinner cooks, I’ll try to respond:Why the pattern of slowly some sudden innovation and then long exploitation?Well, the economy is a system, and commonly if give a system a shock, then it responds. E.g., hit a bell, and it rings. In electronic engineering, the system has an impulse response.For the economic system, sure: The innovations come along but it takes time, step by step, to work all the way to exploitation.So, net: For innovation and the economy, we should not be surprised that there is a pattern. The pattern stands to remain until there are some large changes in how the economy works, and we can guess that such changes will come slowly.For more:To effect the economy, we need to deliver some economic value. So, to try to predict the future, we can ask where could the economy use some more economic value?A biggie is the old and famous and in just one word answer, more.So, we want more health, learning, productivity, free time, exercise, family, friends, community, entertainment, art, science, …. For another list, there’s also that guy, what’s his name — I will look it up — right, Maslow and his hierarchy.So, for getting the universally coveted more, what new ideas might suddenly become be a biggies?(1) Energy.Energy from nuclear fission/fusion safe enough for people not to worry and too cheap to meter.Then do a thought experiment: What would the changes be if energy were too cheap to meter?So, could heat houses. For cars, need a concentrated form of energy, and the leader is liquid fuel and the leader there is gasoline. To make gasoline, just coal, water, and electric energy are sufficient.Instead of coal? Use other sources of carbon — to do that, just need energy.For the water? Can get all the clean water could want just from seawater — just need energy.Mideast? Smart people are working on nuclear energy to make electric power too cheap to meter. So, we might tell the Mideast, sell your oil and buy other assets while your oil is still valuable!(2) Quantum ComputingWe’d be able to do a lot of computations too slow to do on present computers.Consequences:(A) Do a great job at, say, scheduling planes and pilots for airlines. And other scheduling problems.(B) Crack current approaches at encryption; then, right, would need new approaches to encryption.(C) Do detailed simulations and, then, optimization, of physical systems at the level of the nucleus, the atom, the molecule, chemistry, biochemistry, the cell, and the organism. Thus make progress in health, materials, agricultural productivity.(D) Do much better planning, say, over time and under uncertainty.(E) According to some informed views, quantum computing would trivialize math research: Type in a math conjecture and have the computer respond with either a proof or counterexample. Really, then, just let the computer find all the theorems, proofs, and counterexamples it can and, thus, cause math and its applications to explode.(F) Automate the creative parts of most of planning and engineering. That is, starting with just some simple algorithms and basic data, have the computer just chase down the possibilities. Some of the basic algorithms are for optimization, graph manipulations, stochastic optimal control — all well known and long applied effectively one case at a time but with current computers too inefficient apply in a massive way.Ah, can stir up more such futurism!But, maybe mostly people are interested in such patterns so that they can identify, catch, and ride a wave. But another approach is to create valuable projects, likely one at a time, or at least to evaluate projects one at a time.Or, there’s no stock on the NYSE for waves, stone, bronze, iron, steel, open ocean sailing, colonialism, steam, electricity, … the industrial revolution, information technology, the Internet, the social networks, mobile computing, etc. or even an IPO. So, whatever large waves there might be, still have to do/evaluate projects one at a time.Also, consequences of big waves are tough to see: Sure, digital communications via packets goes way back. Then DARPA funded the work for internets. Then research institutions had the Internet; NSF gave funding; IBM ran the Internet; ….But who saw the threats to print and TV and the opportunities for Intel, Microsoft, Cisco, Corning, Apple, Google, Facebook, Amazon at anything like their present scale?So, for a wave, some of the best business opportunities can be in second and later effects really tough to see at first.Ah, dinner’s ready!

  27. george

    How quickly viewpoints are changing about valuations; now it’s not just the hubris rationale of VC’s that are driving up market values, it’s main street…interesting!

  28. Douglas Crets

    Constituents who are nervous about the state of their entities normally will accuse “outsiders” of being de-stabilizers to a norm. I respect Mark Suster, but he often believes in things that I think are themselves disruptive (in a negative way) to the industry.One is that he seems to believe growth hacking is a real practice and that it’s valuable. I disagree on the basis that growth is not as important to an early stage company as nurturing a strong customer base who can afford to pay for the product or service at a level that brings revenue growth to a company. Growth hacking seems to be the search for numbers to justify the need for a higher valuation of a company.This is just my opinion. I think growth hacking has brought a negative impact to startup growth and innovation because it’s lured people away from real skills in marketing, customer development and market research.

  29. Alfon Macia

    this is nice to say

  30. Ari Isaacs

    There is an important factor in the comparative overheads and terms of success.Over a 7 year investment term, in order to come up with a positive result given the same outcome – A pension fund charging 1% and looking to make 8% annually can pay 260% the price a VC taking 2+20 and looking to return 3X .At early stages “outsiders” are guessing, but at late rounds with proper downside protection in place, when a good VC has set a price for a round the price will almost by definition be cheap to an investment firm with less overheads and more modest goals.

  31. awaldstein