Highlighting excerpts from my five most recent premium newsletters, powered by letter.ly. If you like these or want to read more about early-stage venture capital and entrepreneurship, you should subscribe now.
A peek behind the fence, New York, NY.
#20 – Is Silicon Valley selling out its future? Knowledge flows follow capital flows. (i.e. DST and Yuri Milner)
If Milner is buying stakes in Facebook, Groupon and Spotify simply to make money, that’s one thing. But if Milner and DST is using it to buy experience, relationships and access to talented engineers and companies, then that’s something to worry about. If Milner and DST exploit the externalities from starting the Start Fund or buying into Facebook and tying into the Silicon Valley community, those might be the cheapest deals Milner’s ever made.
#19 – Venture capital and private markets: Investing in posters, betting on trend lines.
Fred points out the issue with the concentration of tech wealth, and then parallels my thoughts around the Goldman / Facebook transaction to point out that the SEC should address the sizable gap between the VC market and the IPO market by stimulating and regulating a middle layer “low cap public market.” This is the key. Right now, VCs are the most active investors on secondary markets trading in private tech companies; more active than angels on Angel List, more active than everyone on SecondMarket.
Secondary markets serve a valuable purpose, and it’s quite obvious that they are filling a need in the early-stage investment marketplace, bringing risk capital and entrepreneur liquidity together in a more efficient way than other liquidity strategies (acquisitions, IPOs, etc.).
But they are massively opaque and illiquid. The ordinary investor has no access. US investors have a more difficult time investing in growing tech companies than foreign investors, and thus the fastest-growing, most-innovative companies in the US are selling off significant stakes to investors outside the US. A transfer of wealth from the many to the few, and from the US to the world?
#18 – No more Australias? No more big innovations? Hardly. Always trust the unknown unknown.
Humans stress systems up to their breaking points. And then we adapt, and the cycle begins anew. (tweet). That’s how humans grow. We follow trend lines to their natural conclusions, until an unknown unknown forces us to re-evaluate our conclusions.
The rich invest in the private, and cash out to the public. How is this good for the US?
2011 could be the year of massive private investment in US technology companies by wealthy private investors (through private investments) and companies (through acquisitions).
2012 could be the year of massive initial public offerings to a public that has been cut out from the early-stage investing market, at valuations even more heated than 2011.
The few, cashing out to the many.
The concentration of wealth and polarization of society, increasing.
How does that sound?
Innovation and entrepreneurship aren’t the same. I hope Startup America realizes that.
… Startup America needs to focus less on supporting startups and more on the institutional innovation that startups need. Instead of promoting entrepreneurship, Startup America could have a far more valuable and enduring impact by focusing on the structures entrepreneurs need: a simplified personal and corporate taxation system. Better education at all levels of schools to teach technology, critical thinking, and an appreciation for science. Easier ways to attract and keep innovative people, regardless of where they are from. A more efficient health care system for freelancers and small companies. Better, cheaper and more efficient capital markets for early-stage companies.
Institutional innovation is the key to directing attention, time and money towards things that matter. If all the effort in entrepreneurship results in a better photo-sharing or music-sharing app, then the time, energy and passion of a lot of passionate people that could have worked on issues in health care, financial services, agriculture, transportation or government will have been horribly misspent.
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