Just a bunch of thoughts(occurred while reading actively) about the blog post here.
Does that mean investors will make less money? Not necessarily, because there will be more good startups. The total amount of desirable startup stock available to investors will probably increase, because the number of desirable startups will probably grow faster than the percentage they sell to investors shrinks.
There’s a rule of thumb in the VC business that there are about 15 companies a year that will be really successful. Although a lot of investors unconsciously treat this number as if it were some sort of cosmological constant, I’m certain it isn’t. There are probably limits on the rate at which technology can develop, but that’s not the limiting factor now. If it were, each successful startup would be founded the month it became possible, and that is not the case. Right now the limiting factor on the number of big hits is the number of sufficiently good founders starting companies, and that number can and will increase. There are still a lot of people who’d make great founders who never end up starting a company. You can see that from how randomly some of the most successful startups got started. So many of the biggest startups almost didn’t happen that there must be a lot of equally good startups that actually didn’t happen.
There might be 10x or even 50x more good founders out there. As more of them go ahead and start startups, those 15 big hits a year could easily become 50 or even 100.
paul graham is an optimist and believes total economic activity(productive output??) will only grow in the future.. hmm..
Am reading his post on trends in startups. and i still think his optimism is closer to the truth.
the reasoning he gives for his conclusion is via negativa, but most likely i like optimism is why i agree, any case.
I also realize the reason i like his posts so much, he knows the basic math of stats and calculus,
and better can express his opinions and ideas about trends in reasonably simple words, though,
i think his avoidance of equations makes his posts a little verbose, but it is perhaps justified(nay pragmatic), given the math hate/fear that prevails and topics he writes on.
Right now, VCs often knowingly invest too much money at the series A stage. They do it because they feel they need to get a big chunk of each series A company to compensate for the opportunity cost of the board seat it consumes. Which means when there is a lot of competition for a deal, the number that moves is the valuation (and thus amount invested) rather than the percentage of the company being sold. Which means, especially in the case of more promising startups, that series A investors often make companies take more money than they want. Like a lot of bad things, this didn’t happen intentionally.
He’s definitely an optimist :-P,
I would have interpreted,Series A investors wanting to invest a minimal amount of the company stock’s worth as definitely malicious planning, but then i have no real experience.
<blockquote> You can’t fight market forces forever.</blockquote>, That’s a great quote for any article on economy.