By on June 28, 2011
"Venture capital is in the process of its own creative destruction with new market entrants and new models of innovation at the precise moment that our industry itself is contracting.
I will argue that when the dust settles, although we will have fewer firms, each type well end up more focused on traditional stage segments that cater to the core competencies of that firm."
Editors Note:
Story Warrants A More Comprehensive Treatment, More that just the usual snippet:
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The trend of funding anything from the first $25k to funding $50 million at a billion+ valuation is unlikely to last as the skills and style to be effective at all stages are diverse enough to warrant focus.Original Article Edited For Concise "Digest Type Summary"
Publisher's Note: Nice Find- Today- This Could be some of the Paradigm-Shift Info we have all been looking for. Keep moving forward with this we might pull it out and enlarge upon with our feature!
Okay...Thanks for the two thumbs up, I be careful not to just copy and past the whole thing, and be sure to include liberal link backs and a follow up about piece on the author and the websites which the original piece came from. Editor.
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Rewind
When I built my first company starting in 1999 it cost $2.5 million in infrastructure just to get started and another $2.5 million in team costs to code, launch, manage, market & sell our software. So it’s unsurprising that typical “A rounds” of venture capital were $5-10 million. We had to buy Oracle database licenses, UNIX servers, a Sun Solaris operating system, web servers, load balancers, EMC storage, disk mirrors for redundancy and had to commit to a year-long hosting agreement at places such as Exodus.
Readers interested in more about Mark Suster-Mark Suster
2x startup Founder & CEO who has gone to the Dark Side of VC. His first company, BuildOnline was sold in 2005, his second, Koral was acquired by Salesforce.com and became known as Salesforce Content, while Mark served as VP Product Management. In 2007 Mark joined GRP Partners in 2007 as a General Partner. He focuses on early-stage technology companies, usually looking at Series A investment, and blogs at the aptly titled Both Sides of the Table.
BothSidesoftheTable.com/Mark Suster
Mark Suster's article: Understanding Changes in the Software & Venture Capital Industries continues;
Editors Note: Our Blog will complete our highlights of this excellent commentary as mark starts moving into his commentary on cloud computing as an essential component effectively reducing development costs. We had been seeking out this paradigm-shift information, for we new that open source and cloud computing were part of the equation which Mark Suster ties together very well. I'll just include a both links to the "Two Part Series" and start looking around for the final piece bringing in social media and the changes in how advertising dollars get spent.Open-Source Software & Horizontal Computing
The first major change in our industry was imperceptible to us as an industry. It was driven by the introduction of open-source software, most notably what was called theLAMP stack. Linux (instead of UNIX), Apache (web server software), MySQL (instead of Oracle) and PHP. Of course there were variants – we preferred PostGres to MySQL and many people used other programming languages than PHP.Open source became a movement – a mentality. Suddenly infrastructure software was nearly free. We paid 10% of the normal costs for the software and that money was for software support. A 90% disruption in cost spawns innovation – believe me.We also benefitted economically from a move to “horizontal computing.” What this meant was that rather than buying really expensive UNIX servers (and multiple machines in order to handle redundancy) we could buy cheap, replaceable servers for compute resources.
Publishers Note: Ok.
These two trends had a major impact on the computing industry from 2000-2005 but the effects weren’t yet felt by the VC industry.The Emergence of “Open Cloud” Infrastructure
The biggest change in the software industry beyond open-source was “open cloud.”When we talk about cloud computing we have to be careful to differentiate between open cloud (services the are provided solely to for the economic purpose of building a cloud business) and the “platform cloud” where certain service providers offer cloud services wrapped around their core product. These are very different.Platform cloud players like Salesforce.com provide compute resources so that third parties can build applications that integrate with its core product. That’s awesome for users of Salesforce.com or companies that want to cater to them but less awesome for pure startups that want independence and are really just looking for cloud infrastructure.
Facebook is a “platform cloud” provider, too. That makes both of these amazing companies great channels for startups.
CloudAve.com/Changes-in-the-Software-Venture-Capital-Industries
The link above will take you to the complete:
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Understanding Changes in the Software & Venture Capital Industries
By on June 28, 2011
(part 1) of this article that we found on CloudAve.com
There is a also link to the final piece there which is called:
The Coming Brick Wall in Venture Capital & Why This is Good for US Innovation
The link should be embedded in the title.
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