Y Combo's Paul Graham: Luring fund herd without being stampeded
- Cromwell Schubarth
- Senior Technology Reporter- Silicon Valley Business Journal
- Email | Twitter | Google+
"Lots of startups that cause stampedes end up flaming out," Graham warned, adding that many very successful startups were only moderately appealing to investors when they first hit the scene.
Graham's warning comes a week before Y Combinator's latest startup class faces a herd of potential investors at Demo Day on Tuesday, August 20.
Investors tend to form herds, Graham wrote, because many of them are just bad at judging startups.
"Judging startups is hard even for the best investors," he said. " The mediocre ones might as well be flipping coins. So when mediocre investors see that lots of other people want to invest in you, they assume there must be a reason. This leads to the phenomenon known in the Valley as the 'hot deal,' where you have more interest from investors than you can handle."
The best investors would rather avoid the herd but sometimes find they have to jump in when it starts heading towards a good startup.
"If you start to get far along the track toward an offer with one firm, it will sometimes provoke other firms, even good ones, to make up their minds, lest they lose the deal," Graham wrote.
For all of that, investor stampedes are rare and most startups will be faced with the opposite problem, he concludes.
"While few startups will experience a stampede of interest, almost all will at least initially experience the other side of this phenomenon, where the herd remains clumped together at a distance," he wrote.
Click here to read the full blog by Paul Graham on herd dynamics in startup funding.
Click here to subscribe to TechFlash Silicon Valley, the free daily email newsletter about founders and funders in the region.
Cromwell Schubarth is the Senior Technology Reporter at the Business Journal. His phone number is 408.299.1823.
Comments
If you are commenting using a Facebook account, your profile
information may be displayed with your comment depending on your privacy
settings. By leaving the 'Post to Facebook' box selected, your comment will be
published to your Facebook profile in addition to the space below.
Most Popular
- Most popular
- Emailed
- Mobile
- Google, Facebook among toughest interviewers: Their questions revealed
- Silicon Valley's 10 hottest car models - does your car make the list?
- Hyperloop plans revealed: 4X faster than high-speed rail, 10X less expensive
- Apple board to Tim Cook: Do something fast
- 49ers construction chief on stadium-top garden, economic impact (new details!)
- Could Pebble open your Bentley? Inside Volkswagen's Silicon Valley lab
- Silicon Valley's 6 hottest auto tech trends - check out your ride of the future
- Google scientist Jeff Dean on how neural networks are improving everything Google does
- EBay's retail Big Data play tells clerks your bra size and inseam
- YouTube founders launch Vine competitor
Deloitte
Growth Enterprise Services:
Economic Perspectives webcast: Learn how U.S., global trends impact mid-market companies. Register today.
Economic Perspectives webcast: Learn how U.S., global trends impact mid-market companies. Register today.
- Careers at Verizon Wireless Verizon Wireless | Local Opportunities
- Heavy Truck Sales executive Sacramento Truck Center | Sacramento, CA
- Senior Principal Clinical Engineer MAQUET Cardiovascular | San Jose, CA
- Events/Promotions Director The Creative Group | Palo Alto, CA
- Clinical Laboratory Technologist Becton Dickinson | San Jose, CA
Want a Raise?
Find out what your job should really pay with CareerBuilder’s Salary Insights
tool.
- Services
- Subscriptions
- Tools
© 2013 American City Business Journals. All rights reserved. Use of this Site
constitutes acceptance of our User
Agreement (updated 3/14/12) and Privacy Policy (updated 3/14/12).
Your California Privacy Rights.
The material on this site may not be reproduced, distributed, transmitted, cached or otherwise used, except with the prior written permission of American City Business Journals.
Ad Choices.
Your California Privacy Rights.
The material on this site may not be reproduced, distributed, transmitted, cached or otherwise used, except with the prior written permission of American City Business Journals.
Ad Choices.
bad credit installment loans is considered to be an easiest way for the applicant having stained credit ratings for availing the funds .individual for availing the funds through this are not require to go through any process of credit verification.
ReplyDelete6 month payday loans for people on benefits
12 month installment loans bad credit
500 Short Term Loans