You bet I am studying the start-up ecosystem closely.
Great article by Bill Burnham recently. His thesis: It is hard to swing for the fences when investors won’t put a lot of money into an idea prior to finding out if it has traction. Every business idea has to be based on a quick launch scheme that demonstrates near instant traction. Something that actually requires rocket science is hard to do in a funding environment where people feel a lot of pressure to put more capital to work in deals.
The second I read this article, I thought of Fred Wilson. He recently wrote about how he rarely invests in services that are not launched. Venture Capitalists don’t get much earlier than Union Square. Charlie O’Donnell, previously an associate at USV and now an EIR at First Round, recently wrote about First Round that he wants to write checks before people even have decks. This is an interesting tension, because I suspect that Charlie would not think that First Round is trying to be earlier than USV. But anyway, if the earliest of early stage guys, Union Square, doesn’t do deals until a site is launched, what is someone to do if an idea takes more than a few hundred thousand dollars to get to launch.
I imagine the rejoinder is that people that can’t raise millions before launch have no business starting companies that require millions to launch. At least, that was the gist of the comments on Bill’s article. But that really isn’t true. That is simply a circular and self-fulfilling prophecy. Certainly, rapid iterations and the inexpensive architecture of Web 2.0 theoretically allow products to get to market faster, but hearing that the market to raise capital for companies that are pre-launch has basically been left to angels for all but the most savvy and experienced serial entrepreneurs is a bad message for East Coast entrepreneurs.
On the one hand, this isn’t entirely accurate, but as both Bill and Fred seem to agree, it isn’t far from the case either.