Wednesday, October 15, 2008

VC's Voracious Capitalism

My last post was about the voraraciously capitalistic entrepreneur.  Just to be agnostic to both sides of the table, I might as well talk about our dear voracious capitalists at Sequoia Capital.  I'm not trying to mock them or anything.  Trust me.  I have such tremendous respect for the folks at Sequoia for finding and growing some of the best companies in the world.  Moving on....

Q3 this year was just an ominous time for the VCs in the fundraising cycle.  Subprime, banking system meltdown, LP backing out of capital calls, Harvard trying to sell PE asset to secondary buyers, etc.  All these hit the VC fundraising really really hard..... except for Sequoia.  Valleywag (yes, yes, I waste some time here) reports that Sequoia raised almost 11% of the total $8.1b raised by VCs in Q3.  That's north of $1b... probably too excessive for a traditional early-stage venture firms.  The new fund will be used to make new investments in their new focus area.  This is problematic.

Imagine the situation here.  You used to be very handsome and hang out with another very good-looking friend.  One day, a very very formidable car accident hit you.  You are crippled and psychologically devasted.  You also fear what will happen in the future.  Then, your friend says... "you are ugly.  I'm moving on with new friends".  Man, this will piss the heck out of me.

Back to our buddies on Sand Hill Road.... The flashy "R.I.P. Good Times" scared off the startup community.  CEOs are told to cut costs, downsize workforce, survive, etc.  If I may summarize the whole situation, what they are saying is... "you are ugly, I don't want to sink more money, and I need sexy friends who can generate returns to my portfolio".  Yes, they are just doing their job.....

But... whatever happened to "The Entrepreneurs Behind The Entrepreneurs"?  That's right.  They are still behind the entrepreneurs.  Time to change the tag line?  :)

Maybe I'm just being overly emotional here.  Seriously, if they act like they knew the whole economic downturn was imminent, they really should've figured out Plan B with their LPs.  At macro-scale, the new fund will hopefully make contributions to economic recovery and continuing innovations (not just tech but financial also since they also do hedge fund now).  

No need to blame anyone here.... I agree .... cut cost and survive!  The world is not over until 2029.