The document discusses differing views on the current state of Silicon Valley and venture capital funding. It outlines arguments that Silicon Valley may be coming to an end due to dominance by large tech companies, as well as counter arguments that there are more opportunities now due to more users online, ubiquity of mobile, and new industries being disrupted. While seed funding is up, later stage funding is more difficult to obtain. Los Angeles is emerging as a new startup hub but still lacks local venture funding. The future remains uncertain due to various "wild cards" globally.

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 Sacks
silicon valley may be coming to an end .. You have
to 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 big
companies
How many ideas like that are left?

7. Steve Blank
Sobering that most of true disruption:
•Tesla Motors,
•SpaceX,
•Google driverless cars,
•Google Glasses
Created by just 2 people Elon Musk &
Sebastian Thrun

8. Founders Fund
“…shift away from … transformational
technologies & toward more cynical,
incrementalist investments broke venture
capital.”

9. Peter Thiel
There 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

14. This has led to a boom in seed-stage deals through
accelerators, angels & seed funds
Seed
Deals /
Incubation

15. Text

16. B. There are 20x More
Consumers Online

17. 20x Users Online. 3.1 Hours / Day

18. C. We’re Online All The
Time & at High Speeds

19. D. Mobile Really Does
Change Everything
 Ubiquity
 Personal
 Geo Located
 Bottom of Sales Funnel

20. Text

21. E. Everybody is Payment
Ready

22. Text

23. F. We’re All Socially Linked

24. G. “Software is Eating the
World.”
(Marc Andreessen)

25. 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

26. So What is the Status of
Venture Capital?

28. The VC market has been right-sized – only 98 first invested
$1 million per quarter in 2011

29. 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

30. 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 best
companies?
•Regional funds never worked
•Marketing muscle of NYC
But perception is starting to change

31. A, B Round Crunch Has Already Begun
Seed
Deals
A, B
Round
VCs
31

32. There’s a Narrative of Haves & Have Nots
Valuation
Meh Insensitive
•“10 million users is
the new 1 million”
•“They haven’t really
reached ‘escape
velocity’”
32

33. 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

34. On Los Angeles

35. 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

36. 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

37. But Local Venture Money Remains an Issue

38. New Pool of Talented Entrepreneurs Driving
Up Exit Events / Returns. This Should Help

39. And About all These Incubators / Accelerators
• Amplify
• Idealab
• Launchpad
• Mucker
• Science
• Start Engine
• 10 I’m forgetting

40. 3. The Tie Breaker
(wild cards / Black Swans)

41. Iran & Middle East Conflicts

42. Consumer Debt

43. 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

44. Euro Crisis (PIIGS) / Globally Connected World

45. On the other hand … aren’t
these all just opportunities
for entrepreneurs?

46. I rest my case

47. </end>
@msuster