Interesting piece. But speaking as someone who was formerly a very junior VC through the dot-com era, there most certainly can be a negative spiral.
The public and private markets aren't as distinct as they might appear to be. A VC buying shares in a private company at valuation X must believe that a sale is possible at a big multiple of X, and soon. Some VC will be the last investor before the company goes public or is acquired. And that last private investor has to sell to another buyer, either a strategic acquirer with cash (or highly-valued stock) or an investor making a purchase in an IPO. And if those exits don't look as rosy as they used to (seen the share price movements of publicly-traded tech stocks lately?), the whole thing runs in reverse.
Worse, if the companies needing financing aren't cash-flow positive or profitable (and few are), existing investors' stakes will be diluted as prices drop. Investors might want to slow the pace of investments to reserve cash to fund the needs of their existing companies, rather than take bets on additional companies needing cash.
Also, while speed is good for startups, "time diversification" used to be considered a good thing for VC investors, who really are playing a portfolio game. The worst-performing funds from the dot-com era were those raised and invested in 2000, just before the peak of the bubble. Of course, at the time, no one knew it was the peak.
Almost no one working in VC now would remember it, but there was a short recession in the early 90s that greatly affected the VC industry. The fund I worked for had been founded in the mid-80s, and reading the old investor letters was fascinating. Admittedly early stage tech was a far smaller industry back then (the dollars thrown around now make the deals I worked on in the dot-com era look positively quaint), but so were the burn rates.
Patterns on the most effective teams I’ve worked on:
- high degree of trust and emotional safety between team members. The team can safely share feedback and risk sharing our crazy ideas
- high degree of care for the craft. We hold each other accountable to quality
- ships, regularly, to real customers
- little status seeking - goes with emotional safety - few individuals on the team need to be “in charge” or hold arbitrary titles.
- the individuals are more than fairly compensated and the company shows their love for the team in big and small ways
- the team talks to their customer and has a lot of empathy for their problems. They want to be accountable to them
- the team has a lot of empathy for new team members and works hard to make on boarding easier
- some willingness to “get in trouble” with the broader org because you know what you’re doing is right ultimately for the customer
- high self starters: instead of complaining, people feel empowered to solve problems or prototype ideas without a permission structure
- not too much catering to “super stars”. 1-2 heros does not a team make, the senior people make it their job to lift everyone up. The team doesn’t obsess over their high performers.
There’s a lot more emphasis on emotional intelligence and empathy in an effective team than on any specific process.
The same reason why the last Price is Right bidder will sometimes bid $1 more than the existing highest bid in the qualifying round.[0] It takes out one of the three other competitors, unless their guess was exactly correct.
The first ice cream vendor sets up in the center of the boardwalk, to minimize walking distance to all available customers. The second vendor sets up immediately adjacent, to take half the customers, who will stop at the nearest cart instead of walking another 2m. The third vendor, sets up on the opposite side from the 2nd, and then the first loses all their customers. So the first relocates to the other side of the 2nd, and they lose all their customers. Then the 2nd relocates to the other side of the 3rd.
The vendors should really cartelize, divide up exclusive territories, and collude to drive out newer competitors. But whenever the cartel breaks down, or none is active, the individual vendors are constantly trying to cut each others' throats by taking market share from the others. Each ice cream vendor cart needs a certain length of boardwalk territory to remain in business, so any two colluding vendors could force another to move by bracketing the target on either side. The game gets increasingly complex as you add more players, and more so when adding a second dimension, such that the vendors have a territory area, rather than a length.
Secoma is pursuing a strategy of claiming territories too small to support a greedier store, such that 7-11 can't carve away pieces of it without destroying itself and making no gains, whereas 7-11 is pursuing a strategy of sacrificing some of its stores to destroy all of its competitor stores, so that the survivors can divide the secured territories amongst themselves.
The game is like Go, but in real life. Instead of a grid on a board, the moves are putting a franchise store location down on a map. Pieces that are surrounded are removed. Scoring is by profit rather than by territory.
[0] In the qualifying round of Price is Right, 4 contestants try to guess the retail price of an advertised product, as closely as possible, without bidding greater than the actual retail price. The winner is then allowed to play one of the prize-awarding games.
Unofficially they were already excluded as early as about four years ago by shady government visits to telcos implying covert monitoring of infrastructure related tender processes.
This sort of thing no doubt came from US pressure or practice and could be argued to represent direct, covert, cross-border intelligence agency influence on 'free market' capitalism.
I was told the "five eyes" required this, and that no government agency in any of the five eyes economies will confirm or deny what evidence justified it.
The ironies here are supreme: We know within limits, Cisco and Juniper do backdoors. What we don't know, is who reads the backdoors Huawei do, but we can assume its not the US government.
What I am also told, is that the only established proven concern is about state-company governance structures: Huawei were insufficiently transparent about the stock holdings of former Peoples-Army board members and the relationship of the state and the party to the company. I can believe there is a governance issue, but c'mon: we buy oil from countries which want to execute human rights workers, and this is the issue?
I think we all know, this is "belt and road" vs "soft diplomancy" -China is being excluded for economic strategic reasons which have nothing to do with snooping risks.
The Australian Huawei board includes former Australian politicians. Senior ones. Ex-cabinet ones.
I interact with Huawei staff at IETF, and see them frequently at meetings in Asia. I don't view any of them as an existential threat, I think this is bullshit. Many of the Huawei staff at IETF are ex-Cisco, US and Canadian.
The public and private markets aren't as distinct as they might appear to be. A VC buying shares in a private company at valuation X must believe that a sale is possible at a big multiple of X, and soon. Some VC will be the last investor before the company goes public or is acquired. And that last private investor has to sell to another buyer, either a strategic acquirer with cash (or highly-valued stock) or an investor making a purchase in an IPO. And if those exits don't look as rosy as they used to (seen the share price movements of publicly-traded tech stocks lately?), the whole thing runs in reverse.
Worse, if the companies needing financing aren't cash-flow positive or profitable (and few are), existing investors' stakes will be diluted as prices drop. Investors might want to slow the pace of investments to reserve cash to fund the needs of their existing companies, rather than take bets on additional companies needing cash.
Also, while speed is good for startups, "time diversification" used to be considered a good thing for VC investors, who really are playing a portfolio game. The worst-performing funds from the dot-com era were those raised and invested in 2000, just before the peak of the bubble. Of course, at the time, no one knew it was the peak.
Almost no one working in VC now would remember it, but there was a short recession in the early 90s that greatly affected the VC industry. The fund I worked for had been founded in the mid-80s, and reading the old investor letters was fascinating. Admittedly early stage tech was a far smaller industry back then (the dollars thrown around now make the deals I worked on in the dot-com era look positively quaint), but so were the burn rates.