Venturing out with capital
The New York Times said something that I've been thinking lately--that VCs are up to their old tricks again, hyping companies.
The Times discusses a couple of recent cases of excess, notably Facebook, which was started for $12m and is now apparently trying to get $2billion.
The biggest story that was never told from the dot com bubble in the '90s was the role of the VCs. I have a secret--it was their fault. They bid companies up, then sneered at the valuations. They insisted that young CEOs spend money lavishly on pet monkey consultants and advertising, yet pointed to that spending later as a sign of failure. And after all that, and bad investment judgement too, they made money. In fact, they're the only class of people (other than investment bankers) who did. That's why they're doing it again.
So where does the money come from? Normal people. People who get in on a hype way after the fact when it's too late. People who invest in companies when the valuation is over $100 million or worse, buy the stock post IPO, post run-up. They are the fuel for our industries fire.
I wonder if it's happening again.
Posted on May 19, 2006
