“End of Silicon Valley” vs.
“Morning in VC” Which Is It? Mark Suster @msuster

Want to Cover Where We’re
at in the Cycle …. Plus the Stuff People Always Ask About  VC Funding Environment  Valuations  Status of Los Angeles  Are There Too Many Fucking Accelerators?

The Set Up

David Sacks Mark Suster watch
http://bloom.bg/TLP1IA watch http://bloom.bg/TJZ5h  Just sold Yammer to Microsoft  IE vs. Netscape, AOL/TW for $1.2bn merger, Google monopoly, FB / Twitter / Instagram  Facebook, Google, Apple, Microsoft will dominate  Edge is smart  Only succeed at edge of forest  But Box.net, Dropbox, Yammer

1. The Case for Doomsday

David Sacks silicon valley may
be coming to an end .. You have to find an idea that (1) Escaped attention of major Internet companies, which are better run than ever before (2) Capable of being launched and proven out for ~$5M (3) Protectable from the onslaught of those big companies How many ideas like that are left?

Steve Blank Sobering that most
of true disruption: •Tesla Motors, •SpaceX, •Google driverless cars, •Google Glasses Created by just 2 people Elon Musk & Sebastian Thrun

Founders Fund “…shift away from
… transformational technologies & toward more cynical, incrementalist investments broke venture capital.”

Peter Thiel There won’t be
a “Facebook of mobile” or a “Google of mobile” There will be Facebook & Google.

Facebook has lost more value
in market cap than Lehman did through the whole financial crisis Down •$52 billion •54% And Price / Earnings is still 115

2. The Case for Optimism

A. Many More Startups Being
Created  Lower Costs  The Social Network Movie

This has led to a
boom in seed-stage deals through accelerators, angels & seed funds Seed Deals / Incubation

Text

B. There are 20x More
Consumers Online

20x Users Online. 3.1 Hours
/ Day

C. We’re Online All The
Time & at High Speeds

D. Mobile Really Does Change
Everything  Ubiquity  Personal  Geo Located  Bottom of Sales Funnel

Text

E. Everybody is Payment
Ready

Text

F. We’re All Socially Linked

G. “Software is Eating the
World.” (Marc Andreessen)

The Opportunities for “Hacking” Industries
Not Traditionally Thought of as Tech Opportunities Education  Khan Academy, Code Academy, General Assembly, Treehouse Healthcare  HealthDataInsights, GoodRX Transportation  Tesla, Uber, Lyft Finance  Square, ZestCash, Simple

So What is the Status
of Venture Capital?

The VC market has been
right-sized – only 98 first invested $1 million per quarter in 2011

The majority of LP money
still going to seed & mega funds Market Gap $25-75m $200-300m $500m-$1bn A, B A, B C-E C-E Seed Seed Round Round Round Round 29

And the Market Not Sure
About LA Venture Capital •Ad-Tech & eCommerce (low margins, low multiples) •Won’t Silicon Valley VCs just fly down and fund best companies? •Regional funds never worked •Marketing muscle of NYC But perception is starting to change

A, B Round Crunch Has
Already Begun Seed Deals A, B Round VCs 31

There’s a Narrative of Haves
& Have Nots Valuation Meh Insensitive •“10 million users is the new 1 million” •“They haven’t really reached ‘escape velocity’” 32

And People Privately (and Publicly)
Calling Bullshit YC Vinod Khosla •Uncapped Notes “I Feel Sad For Y Combinator •$12m Pre Money Companies That Get So Much •Party Rounds Hype” 33

On Los Angeles

Now that we’re out of
the “infrastructure phase” of the Internet, more big startups being created outside of Silicon Valley Recent Non-Silicon Valley Successes Quattro Quattro Groupon Groupon Gilt Groupe Gilt Groupe Admeld Admeld HDI HDI Foursquare Foursquare LivingSocial Etsy LivingSocial Etsy TrueCar TrueCar KickStarter KickStarter Maker Studios Maker Studios StackExchange StackExchange Demand Media Demand Media ShoeDazzle ShoeDazzle Beachmint Beachmint NastyGal NastyGal

We Are Unique … Necessity
is the Mother of All Invention  We Invented the Incubator Model – Idealab  We created monetization on the web o Overture o Applied Semantics o Affiliate Marketing o Lead Generation  We are poised for the big Internet video boom o Maker Studios o Machinima o Big Frame o Movie Clips o Fullscreen

But Local Venture Money Remains
an Issue

New Pool of Talented Entrepreneurs
Driving Up Exit Events / Returns. This Should Help

And About all These Incubators
/ Accelerators • Amplify • Idealab • Launchpad • Mucker • Science • Start Engine • 10 I’m forgetting

3. The Tie Breaker (wild
cards / Black Swans)

Iran & Middle East Conflicts

Consumer Debt

US Baby Boomer Retirement •
46% < $10,000 saved • 29% < $1,000 saved • 17% of senior citizens live below the poverty line • 1950 retiree / worker = 16. Today =1.75

Euro Crisis (PIIGS) / Globally
Connected World

On the other hand …
aren’t these all just opportunities for entrepreneurs?

I rest my case

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@msuster