{"id":286,"date":"2010-07-07T21:57:04","date_gmt":"2010-07-08T01:57:04","guid":{"rendered":"http:\/\/blog.payne.org\/?p=286"},"modified":"2019-05-24T21:06:26","modified_gmt":"2019-05-24T21:06:26","slug":"more-on-the-seed-fund-crash","status":"publish","type":"post","link":"https:\/\/payne.org\/blog\/more-on-the-seed-fund-crash\/","title":{"rendered":"More on the &#8220;Seed Fund Crash&#8221;"},"content":{"rendered":"<p>Following up on the <a href=\"http:\/\/blog.payne.org\/2010\/06\/30\/coming-seed-crash\/\">&#8220;seed fund crash&#8221; meme that I commented on<\/a> last week, Chris Dixon wrote a <a href=\"http:\/\/cdixon.org\/2010\/07\/05\/its-not-that-seed-investors-are-smarter-its-that-entrepreneurs-are\/\">thoughtful blog post<\/a>. \u00a0His main point:<\/p>\n<blockquote><p><em>It\u2019s not the seed investors who are smarter \u2013 it\u2019s the\u00a0entrepreneurs<\/em><\/p><\/blockquote>\n<p>He makes a fine argument about how entrepreneurs today are more informed, with new seed funding options available. \u00a0And he cites a key seed fund advantage: \u00a0they&#8217;re in early, at lower valuations, before the VCs.<\/p>\n<p>However, my issue is not about entrepreneurs (or investors!) being &#8220;smarter&#8221;, it&#8217;s about the overall ecosystem. \u00a0From a <strong>macro <\/strong>viewpoint, I&#8217;m feeling a replay of Bubble 1.0:<\/p>\n<ul>\n<li>Many new investment entities and professionals (e.g. new angel investors, new seed funds, existing VCs that want to do seed investing, etc.)<\/li>\n<li>Excess of capital (most investors will tell you there are too few projects, and the ones that are\u00a0investable, are too competitive)<\/li>\n<li>Follow-on financing rounds driven by bid-ups, not by business fundamentals<\/li>\n<\/ul>\n<p>Capital efficiency amplifies these issues, because small amounts of capital quickly make things very crowded. \u00a0I&#8217;ve written before about the &#8220;weedy ecosystem&#8221;. \u00a0Being just smart is not sufficient, because\u00a0entrepreneurship\u00a0is ultimately zero-sum: \u00a0a dumb, poorly funded set of competitors will still steal mind-share, confuse customers, confuse investors, dilute your brand, and make it harder to build your business. \u00a0 I see evidence of this every day: \u00a0 ever narrower ideas, because it&#8217;s just so insanely crowded.<\/p>\n<p>In the limit, the ecosystem becomes a lottery. \u00a0 We&#8217;ll see a few nice exits, I&#8217;m sure, but it will be (mostly) because of luck, not skill. \u00a0For an entrepreneur, that&#8217;s a very tough game to play, I prefer the <a href=\"https:\/\/www.slotzo.com\/slot-games\">Slotzo<\/a> games.<\/p>\n<p>(Note: \u00a0these comments apply to the most crowded, most capital-efficient technology projects: \u00a0such as software pure-plays, consumer Internet, &#8220;new&#8221; mobile, etc. \u00a0 For ideas that have real technology, real IP, or some other non-replicable component, things get a lot more interesting, for both entrepreneurs and investors).<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Following up on the &#8220;seed fund crash&#8221; meme that I commented on last week, Chris Dixon wrote a thoughtful blog post. \u00a0His main point: It\u2019s not the seed investors who are smarter \u2013 it\u2019s the\u00a0entrepreneurs He makes a fine argument &hellip; <a href=\"https:\/\/payne.org\/blog\/more-on-the-seed-fund-crash\/\">Continue reading <span class=\"meta-nav\">&rarr;<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[4,7],"tags":[],"class_list":["post-286","post","type-post","status-publish","format-standard","hentry","category-entrepreneurship","category-ramblings"],"_links":{"self":[{"href":"https:\/\/payne.org\/blog\/wp-json\/wp\/v2\/posts\/286","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/payne.org\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/payne.org\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/payne.org\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/payne.org\/blog\/wp-json\/wp\/v2\/comments?post=286"}],"version-history":[{"count":1,"href":"https:\/\/payne.org\/blog\/wp-json\/wp\/v2\/posts\/286\/revisions"}],"predecessor-version":[{"id":741,"href":"https:\/\/payne.org\/blog\/wp-json\/wp\/v2\/posts\/286\/revisions\/741"}],"wp:attachment":[{"href":"https:\/\/payne.org\/blog\/wp-json\/wp\/v2\/media?parent=286"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/payne.org\/blog\/wp-json\/wp\/v2\/categories?post=286"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/payne.org\/blog\/wp-json\/wp\/v2\/tags?post=286"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}