Through the first six months of 2014, VCs have raised about as much as all of 2013. If this pace of fund raising continues, 2014 would mark the biggest year for VCs since 2001, when the industry raised about $38B. This new money hasn't yet hit the startup fundraising market in earnest, as the chart above shows. The second quarter of 2014 is the sixteenth largest by capital deployed sinced 1995, making it a top quartile quarter, but to break into the top five, that figure would need to triple. Nevertheless, we will see a spike in the next six months as firms begin investing from new funds. Which startup sectors should expect to benefit from this surfeit of capital?
In 2008, when I started working at Redpoint I knew very little about how the venture business worked, and before I started at the firm, I wanted to prepare by learning as much as I could about the industry. Unfortunately, not much was written about VC at the time. In fact, I found only two books: a textbook on private equity and venture capital by HBS professor Joshua Lerner, and an out-of-print collection of 32 VC interviews called "Done Deals," published in September 2000. I bought a second-hand copy on Amazon and read it cover to cover.
Last week, Twitter released a feature enabling users to download organic tweet data. Naturally, I put my data through its paces to see if I could find any best practices for this blog. Here are the conclusions along with the code to replicate them for your user base, which are tested to 95% confidence.
Vik Singh wrote a great post in VentureBeat last week titled "Why Salesforce Needed to Buy RelateIQ" in which he talks about a new era in SaaS, the Predictive Era, the era of intelligent software. We've just seen one of the first acquisitions in the category with RelateIQ*, but I believe we will see many, many more for a few reasons. First and most importantly, prediction provides competitive differentiation in an increasingly competitive market.
Listening is hard, as my friend once said, because you run the risk of having to change the way you see the world. That line stopped me cold when I was reading In the Light of What We Know because it's so true. To set aside the way we've thought about an idea in the past and consider it as if it were a totally new concept is what a Buddhist might call Beginner's Mind. It means taking the time to reflect and consider new perspectives. Consequently, listening is one of the greatest opportunities to learn.
The venture-backed startup IPO market has remained strong over the past five quarters, with 20 or more IPOs in each of those quarters. I was curious how the strength of the IPO market has impacted the acquisition market. In particular, how the number and value of startup acquisitions has changed, and more specifically, whether there are any trends in the sizes of acquisitions.
It would seem hardware startups are booming. First, the amazing success of the GoPro business and IPO, which set a 23-year highwater mark for a consumer hardware company. Second, there seems to be a growing number of hardware startups bubbling in incubators like Lemnos Labs and Highway1. Third, Kickstarter and other crowdfunding sites have enabled hardware startups to mitigate one of the biggest risks in starting out: obtaining a reliable proxy for consumer demand. But do the data support the idea that the hardware ecosystem is as vibrant as it seems?
According to the WSJ, GoPro is the largest consumer hardware IPO in 23 years, though like most entrepreneurs, I don't remember the Duracell IPO. The last consumer hardware company IPO I remember is Tivo, which was in 1999. Because GoPro is the first sizable consumer hardware IPO in eons and because the startup world has a blossoming hardware segment, I thought it would be interesting to compare and contrast a top consumer hardware startup with the benchmarks of public SaaS companies. I have three goals with this analysis. First, to understand GoPro's business better. Second, to benchmark GoPro's capital needs, capital efficiency and attractiveness to investors. Third, to draw conclusions for other hardware startups.
Benjamin Morris, a writer for arguably the best computational journalism publication, fivethirtyeight, published "Lionel Messi is Impossible" which describes in words, statistics and charts why Lionel Messi is one of the greatest players in the world. Even if you're not a soccer/football fan, the article is worth reading because it's one of the finest examples of synthesizing data and a story to convey a point I've read a very long time.
Hometown investors, the local group of angels and VCs within a startup community, are an essential part of startup ecosystems. They can be great connectors, providers of advice and most importantly, suppliers of the venture capital to enable startups to grow. I was curious if hometown investment patterns differ across the 10 major cities in the US.