$100M Was Once Big Money for a Startup. Now, It’s Common

From my consumer's perspective, the most annoying part is when a company provides a service I like, they look like they could be reasonably profitable for an investment of x but not for 10x, and then they suddenly raise to 10x or more. It's inevitable then that they will eventually ruin the existing service in search (usually futile) for some mythical product/market fit that was somehow projected be appropriately profitable for that 10x investment.

It's particularly irritating with paid services, where all of a sudden paying customers turn from highly valued into a legacy nuisance.

Many of these rounds are replacements for what would otherwise be IPOs or other public financing rounds.

Flywire was founded in 2009 and in 2017 processed over $2B in payments. [1] Gusto was founded in 2011 with a rumored valuation of over a billion and $100M+ in revenues. Convene was founded in 2009 and was doing $18.6M in revenue in 2015 [2]. All of them have acquired other companies.

Before 2000 these would be public companies; hell, before 2000 there were public companies that were barely 2 years old and had virtually no revenue. The investors for these rounds are largely the same firms who would be playing in the public markets.

[1] https://www.flywire.com/pT/articles/how-two-boston-startups-...

[2] https://www.forbes.com/companies/convene/

50% of all this money is being captured by Bay Area landowners.

In biotech (by which I mean therapeutics), out of ~150 "major"* VC investments from 1/2018 to 7/2018, 14% of deals have been over $100M. Many of these have been Series A deals [0].

Many of these rounds are tranched (ie you only get a certain amount upfront, then get the rest if you hit milestones), but I think I saw data suggesting only 30-40% were tranched.

I think this phenomenon is largely due to 1) more money going into biotech VC but 2) very little increase in the number of good startups. Many startups are created in house by 5-10 VCs (though this is changing, especially with increasing number of well funded Chinese startups), so there's limited bandwidth. Therapeutics is so different from any other type of startup that pretty much all the incubators / educational materials don't apply, and the only ppl who know how to start startups are those who've developed drugs at big companies or have started successful companies before

* Announced Series A through later deals, and some large seed deals ($5m+)

[0] source is a website where i've been tracking major biotech VC investments. i'm a hobbyist programmer and its on a free heroku plan, and i'm in the early stages of turning what was a personal project into a product so expect bugs and not-ideal performance. but deal coverage is comparable to other biotech databases.

https://bio-vc-tracker.herokuapp.com/

Pretty ironic that a couple days ago there was some article claiming that China was about to collapse because it was going through "an orgy of investment" in an attempt to grow whilst its recent projects did not generate any actual revenue.

I am surprised that the NYTimes doesn’t see it as a positive sign: the structures around start-up (accelerators, investors, hosting, third party tools, etc.) have grown in maturity and relevance quite considerably. I certainly expect people familiar with YCombinator to agree.

More funding like that means more companies trusted to spend that money into creating something profitable. If this goes into people who have grown companies into a unicorn a couple of times; scaling faster local operations lead by managers with relevant experience; AWS, GCP, Twilio & Square bills, it’s certainly expensive but overall sensical.

I don’t know of an investor who, since 2000 has said: “This is silly, I can’t invest anymore.” and left, so I don’t think the game got non-sensical overall. Real-estate in SF certainly has, but high valuations proved when they made sense and gave investors confidence. There certainly has been cases where the value wasn’t justified, but very few at that level of money raised. Certainly less in proportion than the rounds with crazy valuations in 2000

The inflation due to quantitative easing has already happened at the higher economic levels. It just has not reached the main street yet.

Yeah, this is insanity. It's not common. Its still the 1% of startups, at best.

At a personal level - being a millionaire was a big deal once. Apparently not, anymore.

These trends and actions aren't arbitrary. It's a reaction to the fact that the world is becoming increasingly "Winner take All". VCs, having enough information to recognize this fact, are now shoveling more and more money into fewer and fewer investments.

On the plus side, I hope that means we'll get more companies that are truely taking on Moon Shot problems and not just building another useless app we don't need.

The danger on the other side, is companies that use those large funds for rent seeking behaviors that hurt consumers in the long run.