Ok, here’s the thing. The “is this another bubble?” conversation has been going on for a while, and everyone was able to agree that there hasn’t been a bust imminent so far. It might have been dragged out by the sluggish economy, it might have been a function of a lot of effort going in to building actual technology and less going in to building companies, I don’t know.
But it is clear now that a change has taken place. I no longer talk to breathless and frustrated entrepreneurs who can’t find anyone to do their deal, instead I am hearing from frustrated and excited VCs who are trying to get in to the next hot deal. Personally, I LOVE it. Some really great deals are going to get done that SHOULD get done, but might not have just a few years ago.
Fred wilson put the stake in the ground today and his post will go down in history as the first one to truly call the bubble.
Things are going to get wild very soon. This is a great time to be raising capital as a startup. A lot of fundamentals are now either stable or rapidly moving up. From economic indicators (and their relation to the Web) to the creation of new funds. From consumer to enterprise. Things are good, all good. Get out there and build build build!
NOBODY MOVE
This is where we can easily start to make mistakes as a community. I have written about our need to think differently about the Canadian startup ecosystem and that feels more important than ever now.
The first DemoCamps, which were started at the lowest point of the trough between the last bubble and today, were focused on finding the most innovative, interesting and valuable ideas/companies and there was very little focus on anything other than a few fundamentals. Who would pay for this? Why is it valuable? Will you be able to scale it?
Let’s keep asking those questions and lets make sure we build STRONG startups in the next 5 years. Valuations will rise and the volume of startups will continue to increase, but I believe we can do it in a healthy and sustainable way.
LPs need to focus on backing funds that can create value in their portfolio, not just the ones that can get them the sexiest deals (at the highest valuations no doubt).
VCs need to avoid acting like every deal is the deal of a lifetime. We are JUST getting to a place where we can create startups in some quantity here in Canada. Overfeeding the newborns will just mean there is less for the kids who come later.
Startups need to remember that valuation isn’t everything. A VC who understands your business, your customers and who can stick with you for longer than a few years is going to be critical. Don’t just jump at the first goofball who gives you the valuation you want. They’ll be coming out of the woodwork.
Chances that anyone will listen to this? Zero.
I’m listening :)
I’m listening :)
Great post. The last line is the takeaway for entrepreneurs…
Great post. The last line is the takeaway for entrepreneurs…
It’s a critical point for the space here in Canada. We’re just, barely, starting to ramp up. What we have to fight is the Canadian urge to pull back because the bubble might bust. We need the Canadian sector to keep going to finally build up a head of steam that gets some good Canadian successes done here at home. Only then will we have a community of people that can be seeding what’s next in the deadzone after the bubble does burst in the US.
“Nobody Move” is key to that. Good startups: stay anchored here. Good talent: make our startups great. The window will be open long enough for some big wins still. Stay put and make it happen.
If we don’t, our startup community won’t have a chance until the next bubble.
It’s a critical point for the space here in Canada. We’re just, barely, starting to ramp up. What we have to fight is the Canadian urge to pull back because the bubble might bust. We need the Canadian sector to keep going to finally build up a head of steam that gets some good Canadian successes done here at home. Only then will we have a community of people that can be seeding what’s next in the deadzone after the bubble does burst in the US.
“Nobody Move” is key to that. Good startups: stay anchored here. Good talent: make our startups great. The window will be open long enough for some big wins still. Stay put and make it happen.
If we don’t, our startup community won’t have a chance until the next bubble.
Yes, focus on the fundamentals and keep building.
“Only then will we have a community of people that can be seeding what’s next in the deadzone after the bubble does burst in the US. ” — This is huge, exactly what I was trying to articulate
Yep! Energy, dynamics, opportunity, momentum – all within manageable expectations and execution is good/great, yet that is usually always right on the fine-line of being out-of-wack and breaking the model! Buold, build, build!
Yes, focus on the fundamentals and keep building.
“Only then will we have a community of people that can be seeding what’s next in the deadzone after the bubble does burst in the US. ” — This is huge, exactly what I was trying to articulate
Yep! Energy, dynamics, opportunity, momentum – all within manageable expectations and execution is good/great, yet that is usually always right on the fine-line of being out-of-wack and breaking the model! Buold, build, build!
That positive vibe is pretty exciting! Opened question: You can read a lot about entrepreneurs raising crazy rounds at the height of the dotcom era with bad consequences after the bust. Given the high level of people commenting I’d be curious to hear thoughts on how this time can be different.
That positive vibe is pretty exciting! Opened question: You can read a lot about entrepreneurs raising crazy rounds at the height of the dotcom era with bad consequences after the bust. Given the high level of people commenting I’d be curious to hear thoughts on how this time can be different.
That positive vibe is pretty exciting! Opened question: You can read a lot about entrepreneurs raising crazy rounds at the height of the dotcom era with bad consequences after the bust. Given the high level of people commenting I’d be curious to hear thoughts on how this time can be different.
Also taking too much money at too high a valuation is bad. It makes raising the B very difficult unless you hit a complete home run.
Also taking too much money at too high a valuation is bad. It makes raising the B very difficult unless you hit a complete home run.
Really? Those are not the comments heard from start-ups that I know, or what was said by Angels and VCs last month at the OVS. What makes you think it is a bubble?
Read Mark McQueen’s analysis –> http://www.wellingtonfund.com/blog/2010/10/15/mass-confusion-in-ventureland/
Re-echoed by Howard Gwin – Nearly 40 firms not investing in Canada going forward. –> http://digitalpuck.ca/canadian-tech-news/mentor-monday-helping-great-companies-overcome-canadas-funding-gap/
Really? Those are not the comments heard from start-ups that I know, or what was said by Angels and VCs last month at the OVS. What makes you think it is a bubble?
Read Mark McQueen’s analysis –> http://www.wellingtonfund.com/blog/2010/10/15/mass-confusion-in-ventureland/
Re-echoed by Howard Gwin – Nearly 40 firms not investing in Canada going forward. –> http://digitalpuck.ca/canadian-tech-news/mentor-monday-helping-great-companies-overcome-canadas-funding-gap/
Believe me, I have read Mark and Howard and I have written my own thoughts: http://www.startupnorth.ca/2010/10/28/what-do-canadas-vcs-really-think/
Things are happening though and believe me, there are some deals in Canada right now that are on fire.
Believe me, I have read Mark and Howard and I have written my own thoughts: http://www.startupnorth.ca/2010/10/28/what-do-canadas-vcs-really-think/
Things are happening though and believe me, there are some deals in Canada right now that are on fire.
In the same way as Canada did not get hit so hard in the Fall of 2008, I don’t think we see the craziness that Fred describes in his post. Valuations move in a narrower range and while there is a shortage of great talent, paying over market to get them happens less.
There is definitely more capital coming online. But, there has been a consistent median exit price for Canadian startups one that needs to be higher. And until that changes, prudent investors will not overpay.
I hear US investors are falling over themselves to meet Kik and invest. I was in their hometown this week and didn’t even ask for a meeting. Our fund is seed focused and needs to take big risks. Still, we need to see real businesses with real direct business models. Not sure the World needed another IM platform, no matter how cool or viral.
So, I am sure that Fred is right, as always. But not ready to raise the alarm bells up here.
In the same way as Canada did not get hit so hard in the Fall of 2008, I don’t think we see the craziness that Fred describes in his post. Valuations move in a narrower range and while there is a shortage of great talent, paying over market to get them happens less.
There is definitely more capital coming online. But, there has been a consistent median exit price for Canadian startups one that needs to be higher. And until that changes, prudent investors will not overpay.
I hear US investors are falling over themselves to meet Kik and invest. I was in their hometown this week and didn’t even ask for a meeting. Our fund is seed focused and needs to take big risks. Still, we need to see real businesses with real direct business models. Not sure the World needed another IM platform, no matter how cool or viral.
So, I am sure that Fred is right, as always. But not ready to raise the alarm bells up here.
I actually think there is a legitimate investment thesis that could make sense for Kik beyond the “omg they have 2million users!” gold rush.
Mobile investing to-date is where web investing was 5 years ago in terms of thesis: It is about volume and impressions. Mobile investors need to start thinking about network effects and growth opportunities.
Kik is building the social graph for mobile, which is very distinct from the social graph for the web (facebook). There are opportunities to turn kik in to a mobile social graph platform for developers in the long term, but the short term focus needs to be squarely on the user experience and reliable messaging.
Perhaps kik will end up being just another IM, but it can be more than just another IM if you start thinking about where mobile is going to go in the next few years.
I actually think there is a legitimate investment thesis that could make sense for Kik beyond the “omg they have 2million users!” gold rush.
Mobile investing to-date is where web investing was 5 years ago in terms of thesis: It is about volume and impressions. Mobile investors need to start thinking about network effects and growth opportunities.
Kik is building the social graph for mobile, which is very distinct from the social graph for the web (facebook). There are opportunities to turn kik in to a mobile social graph platform for developers in the long term, but the short term focus needs to be squarely on the user experience and reliable messaging.
Perhaps kik will end up being just another IM, but it can be more than just another IM if you start thinking about where mobile is going to go in the next few years.
Definitely agree that mobile is the new growth opportunity. Mobile 1st, web 2nd. There are quite a few contenders for building the mobile, social graph. Not sure Kik will be one of them
Definitely agree that mobile is the new growth opportunity. Mobile 1st, web 2nd. There are quite a few contenders for building the mobile, social graph. Not sure Kik will be one of them
Perhaps yes, perhaps no. At the right valuation it might be a bet worth placing,. at the wrong valuation not worth it.
Perhaps yes, perhaps no. At the right valuation it might be a bet worth placing,. at the wrong valuation not worth it.