Brilliance of the Bootstrap Enterprise

I borrowed and read the final part of Lian Hearn’s Otori trilogy the Brilliance of the Moon. It is as good as her other two books and well worth a read. Whilst not heavy reading, it shows that books can be easy to read and well written – something that people seem to think is an oxymoron with the rise of the DeVinci Code.

Moving on to new media has an interesting article about the changing roles of VCs on the west coast. In an interesting profile with Walden VC, Tom Foremski came up with some interesting points:

Valuations of startups in the online marketing/advertising sectors are going through the ceiling. Usually, private-company valuations tend to be 40 per cent below comparable public valuations, depending on the sector. Now, valuations of private companies are at a premium over the public valuations. [Ouch.]

Some startups in the online sector already have very healthy revenues and so they don’t need investment capital. But the founders are taking money off the table by selling stakes to VCs. [Interesting to see such liquidity events because no IPO or sale of company was involved]

Many young startup companies are seeing fantastic revenues – but they can’t collect what they are owed fast enough, so they are burning precious reserves between the time they invoice and when they get paid. The VCs can provide a float. For example, with a $5m monthly revenue it’s typical to take 60 days to collect payment from large companies, so it needs a float of $10m, which VCs can provide.

Foremski in his posting does not queston the supply-side factors in VCs that are driving these very different roles including the VC money glut.

The relative ease of bootstrapping a lot of the pieces together:

  • Online auction sites like eBay providing an easy way to get hold of IT equipment that would do the job. There is still a lot of old but servicable Cisco and Sun kit out there to be bought at knockdown prices
  • Virtual offices and teams through the Internet and broadband
  • The move away from capitial intensive product development to media creation