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Silicon Valley Firms Having Cash Showers

Posted by ryuzaki0 on from the i'm-open-i'm-open dept.

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."

7 of 123 comments (clear)

  1. The great thing about reason.... by svunt · · Score: 4, Interesting

    Using pure economic reasoning to guide your decisions does of course leave history, or memory, out of the equation. Something that looked like a good idea and failed can still be a good idea five, ten or twenty years down the track, when you're armed only with analysis and a set of rules. Perhaps one history elective during that MBA would've helped cut down of this sort of tomfoolery.

  2. Re:It's actually a pretty good deal by CountBrass · · Score: 3, Interesting
    Since when has having remedial level math skills considered "insightful"?

    5% (or 1 in 20) make it giving a 10 fold return = bankruptcy for the venture capitalist.

    Perhaps you should spend more time in your math class and less time karma-whoring here?

    --
    Bad analogies are like waxing a monkey with a rainbow.
  3. Why not... by William+Robinson · · Score: 3, Interesting
    The question is whether venture capitalists are moving too quickly, funding risky, untested start-up businesses

    Depends upon VC's vision about technology whether it is in phase A or phase C of the famous Hype Cycle

    --
    hilarious
  4. 419 scam? by ItsIllak · · Score: 4, Interesting

    Sounds to me like the CEO is being taken by a 419 variant scam -

    "Hi, we am interesting in investing to your company, the money will arrive from my dead uncles account of [insert country here]. We will just be needing $10k to release those funds please thank you. Did I mention that I am a civil servant..?"

  5. About time too.. by onion2k · · Score: 5, Interesting

    I reckon we're at about the right time for internet investments to start up again. Technology has caught up with the ideas. If Google's payment gateway plans live up to the rumours then the possibility of micropayment subscriptions for premium content is very real. Add to that the fact internet users are a much more clued up and savvy bunch with good, fast access and, critically, a willingness to spend money online there's a real opportunity here. The problem however is that investors are buying into (IMHO) the wrong thing. The biggest chunks of capital are going on things like social networking sites .. basically people are buying premium ad space. Online advertising is the old model .. the one that didn't work. It works for Google because they're not in the business of displaying adverts. They sell the distribution. Actually displaying the adverts doesn't yield much profit (a million here or there maybe, but not the hundreds of millions the venture capitalists want). I believe the future is in charging lots of users small sums for things the want .. like iTunes.

    --
    http://twitter.com/onion2k
  6. Constrains eventually allow the company to prosper by RunFatBoy.net · · Score: 3, Interesting

    Being showered with money isn't much of a blessing. Before you know the investors are knocking on your door wanting to know where their ROI is, and why you haven't spent the X millions given (apparently spending the money is a sign of progress).

    The money is a burden; a HUGE burden.

    When in this situation, be honest with yourself. What will you spend the money on. If you cite PR, furniture, company stationary, etc, run the other way. If you cite "more employees", triple-check your logic to see if they are really needed before taking the money.

    "Pigs get fatter, hogs get slaughtered."

    -- Jim http://www.runfatboy.net/

  7. Cingely calls it? by _Sprocket_ · · Score: 4, Interesting
    Was Cringely right on this one?

    Right now, there is in the U.S. venture capital community about $25 billion that remains uninvested from funds that will end their lifespans in the next 12-18 months. If the VCs return those funds to investors they'll also have to return $3 billion in already-spent management fees. Alternately, they can invest the money -- even if they invest it in bad deals -- and NOT have to cough-up that $3 billion. So the VCs have to find in the next few months places to throw that $25 billion. They waited this long in hopes that the economy would improve and that technical trends would become clear so they could do their typical lemming-like jump off the same investment cliff as all the other VCs. Well, we're at the edge of the cliff, so get ready for the most furious venture investing cycle in history.