Through the early stages of building Propel, we have been hypothesis driven. One of our early positions as a firm was that, in the tech space, there is not a need for large amounts of VC dollars. At this time and date,you may say that this is now obvious, and even go so far as to term it ‘non-ground breaking’; to which I would agree. However, the contrary position to the idea that tech is no longer capital intensive remains widely embedded across tech entrepreneurs.
This is of course not to say ‘all’ entrepreneurs think they need a million dollars to start building there company; simply a surprisingly high number. The fact of the matter is that tech start-ups don’t need to be heavily funded. There does have to be a vibrant seed, and early stage community - and we think that’s beginning to happen in earnest (see y-combinator & spark capital)
[This low capital thesis doesn't hold across all sectors, such as biotech or clean tech. ]
Those who understand that the tools to create an internet company are now mature, and in being so have significantly been reduced in cost, will continue to flourish - even if/when VC funds get trimmed from the space. This is a good thing, for both companies and VC’s. If a company isn’t heavily funded, then they don’t have ridiculous growth curves to live up to. If VC’s get trimmed then, quite frankly, the limited parnters won’t have to put up with low returns on the sector. This space had it’s bubble in the 90’s - is probably still a little bloated as of now, but will soon enough be a lean sector - and that will be good for everyone.
You can still win in the tech space, and win big - it just takes the right thinking, like getting to revenue early, like embracing change as a position of strength and like creating very short experiment/feedback loops as you develop product. Many already know this- and I’m not here to sell this as ground breaking - simply to state that we get it too, and we’re here to help.
This post was sparked after I read Fred Wilson’s post. You can do the same here - I encourage you to check it out.
be good.
stephen
