Silicon Valley Firms Having Cash Showers

Carl Bialik from WSJ writes "'The market for high-technology start-up businesses is so intense in Silicon Valley that some companies are being showered with millions of dollars from investors -- without even asking for it,' the Wall Street Journal reports. The home-improvement website Done Right received an email from a well-known investment firm inquiring about putting cash into the company. 'Paul Ryan, Done Right's chief executive officer, says the missive wasn't sent to him or to his executives -- it landed in a general corporate email inbox,' the WSJ reports. 'Mr. Ryan wasn't put off by the impersonal plea: "We're having very good discussions with [the firm] right now," he says, declining to name the potential investor.' The Journal notes that 'pre-emptive' funding is, of course, risky, and harkens back to bubble-year investment trends."

Comments

Re:It's actually a pretty good deal

[Coeurderoy]

Actually the maths are weak but not "really false".
Typically a VC does not win all or nothing.
It is more like in 20 deals:
          1 is a big success: *10 and most real (effectivelly freed money) was
                          done here.
          5 deals are huge flop, one of them hurts (it looked good and then failed, so more than seed money was spent).
          10 deals fail and the VC is only recouping 1/3rd of their investment
          4 deals work quite well but not stellar, so the VC gets *2

At the end the VC gets 30% more per year than what they invested.