VCs Only Invest in Winners, a Dozen at a Time posted: 16/07/2016
The United States Penal System sends me the worst of the worst. Lets just say Mr. Ames that the life term youve joined us for may be a lot shorter than you think.
I was recently told that I obviously don't understand the big picture.
It happened when I was discussing Apple's latest earnings report where they made a helluva' lot of money but not as much as some young MBA on Wall Street (who never designed/manufactured anything) thought they should make.
The Apple stock went down while a Unicorn's - great free-for-now service - stock went up even though it lost a ton of money and was light years away from making money.
I asked a VC (venture capital) MBA how a new company -- or for that matter, any of the nearly 230 Unicorns (firms valued in excess of $1B by someone's fuzzy logic) - that had received $175 M from his and other VC firms could be valued at $5B.
Better yet, why were they any different from Bernie Madoff's Ponzi scheme?
Seriously?
These Unicorns came up with ideas on how to quickly make huge dollars for the VC firms as long as they spent (invested) money even faster so they could get other people to invest even more money to fund the added losses.
Bernie went to jail for his efforts.
The Unicorn founders get celebrated at parties and are speakers at SXSW (South by Southwest).
All because they have even higher paper valuations, even better burn rates (spending).
One Begets Copies - It wasn't until early 2000 that the rare Unicorn appeared and it was marveled at because here was a start-up already valued at a whopping $1B. So, more folks followed suit, insisting that their start-up was worth far more than the previous. Investors believed them, even though they seldom had a track record of success or failure.
O.K., is the Unicorn, or any of the other first-in-the-marketplace Unicorns, in danger?
Probably not; but what about the other very similar 10 knock-off ideas that the same young MBA VCs invested in? I dunno.
However, if they reduce their burn rate (the rate at which they are spending/losing the invested money), it would be a sign of a fundamental weakness in the idea. The start-up MBAs would be sending signals to the VC MBAs that they were in deep pucky.
The VCs don't worry because they have an exit plan - IPO (initial public offering) or have the company merged or acquired.
In other words, Don't let them see you sweat.
Never in the history of venture capital have early stage startups had such easy access to so much capital.
Back in 1999, if a company raised $30M before its IPO, it was obvious the founders were great sales people or had an idea that would change the world.
Today, you're a wimp if you don't raise 10x that or more.
Fast-Track - Despite the fact that the new firms had massive losses with little concern about when or how they would turn a profit, Unicorns have just kept coming, to the point that there's no room in the barn for yet another similar - but different - new company with a well-painted, rosy future someday.
The Unicorn (with worth in excess of $1B) has become part of a growing herd and all of them need to be regularly fed (more infusions of capital).
Unlike 1999, in this go-around they are able to find food with remarkable ease.
You simply pick a new valuation that's a lot higher than the last one; say from $6B to $10B.
Prepare a new presentation deck, make the rounds with your solicitation offer and watch the hundreds of millions of dollars flow into your bank account.
Twelve to eighteen months later, it's time to fly around the country and do it again.
New Presentation - While the burn rate (spending) is high for many of the Unicorns, it is almost too easy to draw another picture of all of the potential (growth, not profit) that is out there for them as long as VCs keep pumping in more and more funds.
It's much better than conning your friends!
Yes, just as folks ultimately caught onto Bernie's book-cooking scheme, there could be an adjustment for incremental investments in Unicorns.
The very enamorment with Unicorns is putting the herds and their participants (founders, employees, investors and limited partners) at financial risk.
As they reduce the valuation multiples from 10-20 down to 4-6, investors are suddenly less willing to participate in yet another round of financing. Even when they do, it costs the company/management/employees much more.
That's when the sharks begin to circle.
As the startups burn through cash, they are suddenly in a position where they have to accept new rounds of financing under less-than-ideal conditions; or what ticked off people call dirty terms - guaranteed IPO terms, liquidity rights, etc.
Most of these entrepreneurs haven't learned how to deal with the idea of failure or layoffs.
Growth at all cost has been replaced with cautious investment and a realistic goal of turning a profit, even if it's a very small profit.
Success on paper just doesn't count for much when there's no real cash-on-cash return!
It's time for the Unicorn riders to focus on the long-term valuation of the shares and minimize the chances that the thing will die in the middle of the race.
The fundamental rule of a start-up should be -- become profitable so you aren't at the mercy of the sharks.
Hundreds of thousands of small- to medium-sized firm CEOs who are in business for the customer (rather than the fast buck) have a firm grasp on the concept.
To grow, they spend (invest) gross margin dollars rather than dilute their equity in the firm.
They survive they thrive.
If they decide to go public or sell the company, they do it on their terms--not because VCs want to move their money to something that is newer, sexier and/or hot
Most recent headlines
05/01/2027
Worlds first 802.15.4ab-UWB chip verified by Calterah and Rohde & Schwarz to be ...
04/08/2026
Dalet, a leading technology and service provider for media-rich organizations, t...
04/07/2026
April 7 2026, 19:00 (PDT) Detective Conan: Fallen Angel of the Highway Opens in...
01/06/2026
January 6 2026, 05:30 (PST) Dolby Sets the New Standard for Premium Entertainment at CES 2026
Throughout the week, Dolby brings to life the latest innovatio...
13/05/2026
New Adobe Premiere Color Grading Mode Accelerated on NVIDIA GPUs
Joel Pennington May 13, 2026
0 Comments
New NVIDIA RTX-accelerated features streamlin...
13/05/2026
Grass Valley announced that dB Broadcast has delivered new IP-based outside broadcast (OB) trucks for Cloudbass, featuring Grass Valley LDX 100 Series cameras a...
13/05/2026
Ikegami will exhibit the latest additions to its wide range of broadcast production cameras, control units, viewfinders and monitors on stand 5D3-1 at Broadcast...
13/05/2026
FISE, working with the founding members of the XR Sports Alliance (XRSA), Accedo, Qualcomm Technologies, Inc. and HBS, have collaborated to develop an immersive...
13/05/2026
Canon Unveils New EOS R6 V Full-Frame EOS Camera and RF20-50mm F4 L IS USM PZ Bu...
13/05/2026
Boston Conservatory at Berklee Honors Beth Morrison and Moses Pendleton at Comme...
13/05/2026
Share
Copy link
Facebook
X
Linkedin
Bluesky
Email...
13/05/2026
Share
Copy link
Facebook
X
Linkedin
Bluesky
Email...
13/05/2026
Share
Copy link
Facebook
X
Linkedin
Bluesky
Email...
13/05/2026
Share
Copy link
Facebook
X
Linkedin
Bluesky
Email...
13/05/2026
Share
Copy link
Facebook
X
Linkedin
Bluesky
Email...
13/05/2026
Creative software developer Foundry today announced the latest developments on Nuke Stage. A purpose-built application for end-to-end virtual production and in-...
13/05/2026
A definitive portrait of one of Ireland's most influential musicians
New TV documentary airs Monday 18 May on RT One and RT Player at 9.35pm
Watch the...
13/05/2026
Agentic AI is changing the way users get work done. Following the success of OpenClaw, the community is embracing new open source agentic frameworks. The latest...
13/05/2026
Reinforcement-learning agents - AI systems that learn by trial and error - can c...
12/05/2026
Beyond the Hype: A Strategic Post-Hoc Analysis of NAB 2026 If NAB Show 2026 had an underlying theme, it was a quiet, industry-wide pivot from the high-energy sp...
12/05/2026
Guntermann and Drunck (G&D), a Panoptec Technologies Group company, and CT Square, led by Chandresh Shah, have announced a joint venture to distribute G&D and V...
12/05/2026
With 30 days until the start of the FIFA World Cup 2026, Telemundo, the exclusive Spanish-language home of the tournament in the United States, has announced th...
12/05/2026
The NHL has announced the return of Stanley Pup for its third consecutive year, a 90-minute special featuring adoptable rescue dogs competing on a miniature rin...
12/05/2026
NBCUniversal presented its 2026 Upfront to advertisers at Radio City Music Hall, detailing upcoming programming across NBC, Peacock, Bravo, and Versant properti...
12/05/2026
FOX Sports has announced funding for the Fandom and Social Connection Initiative at Harvard Kennedy School's Shorenstein Center on Media, Politics, and Publ...
12/05/2026
TNDV and Live Media, both divisions of Live Media Group, supported live broadcast coverage around NCAA Final Four weekend in Indianapolis, including the March M...
12/05/2026
The European Football Alliance (EFA) has announced a content distribution agreement with Fubo Sports Network, the free ad-supported streaming TV (FAST) channel ...
12/05/2026
For the first time, Spanish-speaking fans in the U.S. will have two separate tel...
12/05/2026
CP Communications led a comprehensive spectrum management initiative on behalf of Churchill Downs during Kentucky Derby week, coordinating RF assets across the ...
12/05/2026
LiveU has announced a strategic partnership with DRONERESPONDERS, a 501(c)3 non-...
12/05/2026
Open Broadcast Systems has announced that BMC TV, a specialist in IP transport of broadcast content, has selected the Open Broadcast Systems 5G Flyaway solution...
12/05/2026
NEP Europe, part of NEP Group, has announced it will deliver broadcast solutions...
12/05/2026
Grass Valley has announced continued collaboration with Ravensbourne University ...
12/05/2026
Stats Perform has announced the launch of Opta Pulse, an AI-assisted video creation and distribution platform for leagues, rights holders, and broadcasters. The...
12/05/2026
FOX Sports has announced a collaboration with Sesame Workshop to integrate Sesame Street characters into FOX Sports' FIFA World Cup 2026 programming. Conten...
12/05/2026
To date, NHL Productions has produced 19 broadcasts with commentary in American Sign Language
NHL in ASL (American Sign Language) may be just one show, but the...
12/05/2026
Google's Brian Albert: creators, athletes, highlights, nostalgia, second-scr...
12/05/2026
A still from Past Lives by Celine Song, an official selection of the Premieres program at the 2023 Sundance Film Festival. (Courtesy of Sundance Institute | p...
12/05/2026
Spotify is where fans and artists come together, turning discovery into somethin...
12/05/2026
Features patented Marco-MMC clocking technology
Black Lion Audio's latest release combines the company's expertise in clocking with their renowned p...
12/05/2026
New Track Panel, sequencer upgrades & more
Following their recent public beta release, Reason Studios have announced the full release of Reason 14. With the...
12/05/2026
One month to go! SBS reveals expansive FIFA World Cup 2026 lineup beyond the pi...
12/05/2026
Rohde & Schwarz presents its advanced solutions for power electronics testing at...
12/05/2026
aconnic AG (ISIN: DE000A0LBKW6), Munich, has developed a modified fund raising p...
12/05/2026
Share
Copy link
Facebook
X
Linkedin
Bluesky
Email...
12/05/2026
Tyrell Corporation, specialists in high-end live sports and entertainment broadcasts, was tasked with delivering compelling broadcast coverage of premier equest...
12/05/2026
Registration is now open for IBC2026 as the global media, entertainment and technology community prepares to converge on the RAI Amsterdam from 11 14 September ...
12/05/2026
Ross Video, a global leader in live video production technology, will present its latest innovations and integrated production workflows at BroadcastAsia 2026, ...
12/05/2026
500 selected leaders from around the world across start-ups, corporates, and venture capital. Over 50bn in assets under management among attending investors, a...
VCs Only Invest in Winners, a Dozen at a Time posted: 16/07/2016 
