Thursday, May 11, 2006

Why VC's are bad

I had the pleasure the other day to attend a start-up bootcamp on campus. Lots of Venture Capitalists (VC) were talking in little discussion groups and sharing their wisdom. Where with bio or nano companies the technology is perceived as difficult in software there is still the idea that if you spend enough money anything can be done and the idea and/or the market is the limiting factor. That is outright stupid!

If you have ever been in a software project you know the technology isn't easy like in we write a specification, ship it offshore, and get a great product back. And if you look at badly engineered systems like orkut or even myspace you understand why they come to that conclusion.

But in order to push the envelope to make really great software there is a technical challenge and it isn't easy. How many tried to do search engines -- and only some Stanford PhD's put it into the reality. Sure everybody can cut&paste together some social networking page (like myspace or orkut) but for the real big one you encounter technical challenges (how to automatically bring the right people together -- what kind of AI could do that?)

I believe that's where the value is and funding some click&paste operations might make you some money but the real big money is done with technical difficult and risky endeavours. But they don't get funded because the market is everything: If there isn't a market you don't have a product. But most companies kind of evolve. Google didn't have advertising back in the day -- they had this great technology but no business model -- that came later. So disregarding the technological challenge and hence not funding it is stupid.


Anonymous Anonymous said...

I think VC's are great! how many people hand out money as though it were candy and don't even expect to be paid back?

11:01 PM


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