November 8, 2005

The Venture Capital Squeeze

Filed under: Start-up First Aid — Administrator @ 6:34 pm

Paul Graham wrote an interesting bit on the four reasons why venture capital funds are going to get squeezed in the coming years. Basically, he say what few quality deals are out there now want less and less money, because it’s getting so cheap to start a startup. The four causes of this are:

1. Open Source: which makes software free
2. Moore’s Law: which makes hardware geometrically closer to free
3. the Web: which makes promotions free if you’re good
4. Better Language: which makes development a lot cheaper

It is funny because there are just too many good deal in China to get involved in, the problem is too many VCs are looking for the perfect deal but a lot of new entrants seem to forget that we are in a developing country and not in SV; and thus, you either get your hands dirty and pulled together the “best of” or roll-up the fund and head home…

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