Brad's Books and Organizations

Books

Books

Organizations

Organizations

Hi, I’m Brad Feld, a managing director at the Foundry Group who lives in Boulder, Colorado. I invest in software and Internet companies around the US, run marathons and read a lot.

« swipe left for tags/categories

swipe right to go back »

Top, Bottom, Middle, or Who Cares?

Comments (5)

Having been an entrepreneur and VC for over 20 years, I’ve now seen plenty of economic cycles – both at a macro level and specifically in the areas I invest in.  As a result, I smiled when I received three conflicting pieces of information today from two people I know and like and one person that I don’t know but know is respected.

Matt McCall at DFJ Portage calls the current VC cycle "dead" as of Q2 2008 in Rough Ride Ahead: Buckle Up & Get Your Money Now (if you can).  He says it with conviction, although he does acknowledge that he hopes he is Peter the Wolf.

Fred Wilson at Union Square Ventures asks (and answers) the question Am I Bored With “Web 2.0”?  Fred is heading off to Europe for a month with his family "to see how the web is changing the world and I want to see how entrepreneurs who are operating with a different worldview are thinking about the power and potential of the web. I could do the same thing in Asia or some other part of the world, but Europe is particularly easy place to do this because of the range of cultures and countries within a couple hours plane ride from each other."

Merrill Lynch’s chief strategist Richard Bernstein in "Some thoughts on alternative investments (6/23/08)" says "The growth in alternative investments seems linked to the growth of the credit crisis" but then goes on to say "There may be two areas of alternative investments that seem relatively attractive in the current financial environment.  In both cases, these are areas that might benefit from the tightening of global credit.  The first is early-stage venture capital.  … If return-on-investment does indeed tend to be higher when capital is scarce, the significant tightening of traditional credit funding to smaller companies seems to make early-stage venture capital strategies more attractive."

While Bernstein’s definition of "early stage venture capital" is mostly likely different than mine (given my interpretation of his assertion), knowing how sound bites work, the three tag lines are "VC is dead", "I’m bored of Web 2.0 and need more meaning in my investments", and "early-stage VC is attractive again."

Like Fred, I also am about to embark on a month outside of my normal context.  Amy and I are about to head to our house in Homer, Alaska for the month of July.  I’m looking forward to going to a place where the Supreme Court rules Homer voter initiative invalid and thinking big (but not big box) thoughts.

  • Matt McCall

    Happy travels (and fishing) Brad. Downturns, while hard on existing companies, are usually good investing times so we are looking forward to the next couple of years :-)

    • http://www.feld.com Brad Feld

      Indeed – this is true.

  • http://500hats.typepad.com dave mcclure

    strangely all 3 are correct. in general, i think mid-tier VCs are going to be challenged over the next few years. top-tier firms will probably do fine — and in particular, clean-tech / green-tech have lots of room to blossom, altho the space may be topping out now. and early-stage (which i'd define as Series A and angel / seed) i think will also do well.

    however Fred may be correct that Web 2.0 VC may not be changing the world as much as the later-stage green / clean funds… but i think he'll come back from vacation refreshed and ready to throw more money at “useless” web 2.0 investments ;)

    may we all live in interesting times, eh?

  • http://fromthemarket.blogspot.com bsm

    The comments make a lot of sense to me in the general context, but especially when you look into the Spanish market. In Spain, you can see a stron reduction from 2006 to 2007 in early stage investments.____Whilst overall VC investment raises from 3,108 MM EUR in 2006 to 4,329 MM EUR in 2007, seed and start-up investments not only loose weight in overall investments (from 1% seed/total in 2006 to 0,6% in 2007 and from 8,1% start-up/total in 2006 to 4% in 2007).____The worst thing is that overall net investment in early stage decreases in an overall increasing investment scenario (seed investment go down from 30,1 MM EUR 2006 to 25,3 MM 2007, and startup goes down from 250,5 MM in 2006 to 174,8 MM in 2007).____With reagrd to start-ups that are worth investing, I guess taht it is just a matter of being selective, but with current large number of initiatives being started, somit will be more likely to find worth-investing opportunities.____The fact that IPO market is stopped now, as far as it gets reactivated in 2-3 years, would be a fair option, and probably a good moment to invest now, to exit when the cake is baked and ready to serve.__

  • Nari Kannan

    As long as they don't bunch up VC investments and create a new investment vehicle for foreign funds like they did for Mortgage Backed Securities for really loust mortgages, VC investing should be safe I guess. It's tempting! That way they can claim that since risk is so distributed, there is no risk! :-) :-)

    Have fun in Homer! Just saw episodes of Norhern Exposure on DVD. Still funny!

  • http://intensedebate.com/people/bfeld bfeld

    Indeed – this is true.

  • bsm

    The comments make a lot of sense to me in the general context, but especially when you look into the Spanish market. In Spain, you can see a stron reduction from 2006 to 2007 in early stage investments.____Whilst overall VC investment raises from 3,108 MM EUR in 2006 to 4,329 MM EUR in 2007, seed and start-up investments not only loose weight in overall investments (from 1% seed/total in 2006 to 0,6% in 2007 and from 8,1% start-up/total in 2006 to 4% in 2007).____The worst thing is that overall net investment in early stage decreases in an overall increasing investment scenario (seed investment go down from 30,1 MM EUR 2006 to 25,3 MM 2007, and startup goes down from 250,5 MM in 2006 to 174,8 MM in 2007).____With reagrd to start-ups that are worth investing, I guess taht it is just a matter of being selective, but with current large number of initiatives being started, somit will be more likely to find worth-investing opportunities.____The fact that IPO market is stopped now, as far as it gets reactivated in 2-3 years, would be a fair option, and probably a good moment to invest now, to exit when the cake is baked and ready to serve.__

  • Matt McCall

    Happy travels (and fishing) Brad. Downturns, while hard on existing companies, are usually good investing times so we are looking forward to the next couple of years :-)

  • dave mcclure

    strangely all 3 are correct. in general, i think mid-tier VCs are going to be challenged over the next few years. top-tier firms will probably do fine — and in particular, clean-tech / green-tech have lots of room to blossom, altho the space may be topping out now. and early-stage (which i'd define as Series A and angel / seed) i think will also do well.

    however Fred may be correct that Web 2.0 VC may not be changing the world as much as the later-stage green / clean funds… but i think he'll come back from vacation refreshed and ready to throw more money at "useless" web 2.0 investments ;)

    may we all live in interesting times, eh?

  • Nari Kannan

    As long as they don't bunch up VC investments and create a new investment vehicle for foreign funds like they did for Mortgage Backed Securities for really loust mortgages, VC investing should be safe I guess. It's tempting! That way they can claim that since risk is so distributed, there is no risk! :-) :-)

    Have fun in Homer! Just saw episodes of Norhern Exposure on DVD. Still funny!

Build something great with me