Optimistic vs pessimistic case for entrepreneurs

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I gave this presentation recently after debating David Sacks on Bloomberg on whether we should be optimistic vs. pessimistic about startups.

I gave this presentation recently after debating David Sacks on Bloomberg on whether we should be optimistic vs. pessimistic about startups.

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  • 1. “End of Silicon Valley” vs. “Morning in VC” Which Is It?Mark Suster @msuster
  • 2. Want to Cover Where We’re at in the Cycle …. Plus the Stuff People Always Ask About VC Funding Environment Valuations Status of Los Angeles Are There Too Many Fucking Accelerators?
  • 3. The Set Up
  • 4. David Sacks Mark Suster watch http://bloom.bg/TLP1IA watch http://bloom.bg/TJZ5h Just sold Yammer to Microsoft  IE vs. Netscape, AOL/TW for $1.2bn merger, Google monopoly, FB / Twitter / Instagram Facebook, Google, Apple, Microsoft will dominate  Edge is smart Only succeed at edge of forest  But Box.net, Dropbox, Yammer
  • 5. 1. The Case for Doomsday
  • 6. David Sackssilicon valley may be coming to an end .. You haveto find an idea that(1) Escaped attention of major Internet companies,which are better run than ever before(2) Capable of being launched and proven out for~$5M(3) Protectable from the onslaught of those bigcompaniesHow many ideas like that are left?
  • 7. Steve BlankSobering that most of true disruption:•Tesla Motors,•SpaceX,•Google driverless cars,•Google GlassesCreated by just 2 people Elon Musk &Sebastian Thrun
  • 8. Founders Fund“…shift away from … transformationaltechnologies & toward more cynical,incrementalist investments broke venturecapital.”
  • 9. Peter ThielThere won’t be a “Facebook of mobile” or a“Google of mobile”There will be Facebook & Google.
  • 10. Facebook has lost more value in market cap than Lehman did through the whole financial crisis Down •$52 billion •54% And Price / Earnings is still 115
  • 11. 2. The Case for Optimism
  • 12. A. Many More Startups Being Created Lower Costs The Social Network Movie
  • 13. This has led to a boom in seed-stage deals through accelerators, angels & seed funds Seed Deals / Incubation
  • 14. Text
  • 15. B. There are 20x More Consumers Online
  • 16. 20x Users Online. 3.1 Hours / Day
  • 17. C. We’re Online All TheTime & at High Speeds
  • 18. D. Mobile Really Does Change Everything Ubiquity Personal Geo Located Bottom of Sales Funnel
  • 19. Text
  • 20. E. Everybody is Payment Ready
  • 21. Text
  • 22. F. We’re All Socially Linked
  • 23. G. “Software is Eating the World.” (Marc Andreessen)
  • 24. The Opportunities for “Hacking” Industries Not Traditionally Thought of as Tech OpportunitiesEducation  Khan Academy, Code Academy, General Assembly, TreehouseHealthcare  HealthDataInsights, GoodRXTransportation  Tesla, Uber, LyftFinance  Square, ZestCash, Simple
  • 25. So What is the Status of Venture Capital?
  • 26. The VC market has been right-sized – only 98 first invested $1 million per quarter in 2011
  • 27. The majority of LP money still going to seed & mega funds Market Gap $25-75m $200-300m $500m-$1bn A, B A, B C-E C-E Seed Seed Round Round Round Round 29
  • 28. And the Market Not Sure About LA Venture Capital•Ad-Tech & eCommerce (low margins, low multiples)•Won’t Silicon Valley VCs just fly down and fund bestcompanies?•Regional funds never worked•Marketing muscle of NYCBut perception is starting to change
  • 29. A, B Round Crunch Has Already Begun Seed Deals A, B Round VCs 31
  • 30. There’s a Narrative of Haves & Have Nots Valuation Meh Insensitive•“10 million users isthe new 1 million”•“They haven’t reallyreached ‘escapevelocity’” 32
  • 31. And People Privately (and Publicly) Calling Bullshit YC Vinod Khosla•Uncapped Notes “I Feel Sad For Y Combinator•$12m Pre Money Companies That Get So Much•Party Rounds Hype” 33
  • 32. On Los Angeles
  • 33. Now that we’re out of the “infrastructure phase” of the Internet,more big startups being created outside of Silicon Valley Recent Non-Silicon Valley Successes Quattro Quattro Groupon Groupon Gilt Groupe Gilt Groupe Admeld Admeld HDI HDI Foursquare Foursquare LivingSocial Etsy LivingSocial Etsy TrueCar TrueCar KickStarter KickStarter Maker Studios Maker Studios StackExchange StackExchange Demand Media Demand Media ShoeDazzle ShoeDazzle Beachmint Beachmint NastyGal NastyGal
  • 34. We Are Unique … Necessity is the Mother of All Invention We Invented the Incubator Model – Idealab We created monetization on the web o Overture o Applied Semantics o Affiliate Marketing o Lead Generation We are poised for the big Internet video boom o Maker Studios o Machinima o Big Frame o Movie Clips o Fullscreen
  • 35. But Local Venture Money Remains an Issue
  • 36. New Pool of Talented Entrepreneurs Driving Up Exit Events / Returns. This Should Help
  • 37. And About all These Incubators / Accelerators• Amplify• Idealab• Launchpad• Mucker• Science• Start Engine• 10 I’m forgetting
  • 38. 3. The Tie Breaker(wild cards / Black Swans)
  • 39. Iran & Middle East Conflicts
  • 40. Consumer Debt
  • 41. US Baby Boomer Retirement• 46% < $10,000 saved• 29% < $1,000 saved• 17% of senior citizens live below the poverty line• 1950 retiree / worker = 16. Today =1.75
  • 42. Euro Crisis (PIIGS) / Globally Connected World
  • 43. On the other hand … aren’tthese all just opportunities for entrepreneurs?
  • 44. I rest my case
  • 45. </end>@msuster