The revolution is happening at Garage Technology Ventures. Guy Kawasaki and Bill Reichert are making it happen. In speaking to Bill ..these guys get it and are inventing the future.
I can really feel it. Entrepreneurs are back. Like a warm "First Night" in Boston.
Garage is looking for special entrepreneurs who have big ideas who need seed capital to turn their ideas into action. They see the world for what it could be, not what it already is. They are not interested in companies that are creating the nth solution to the same old problems nor companies who are trying to improve things by only 10, 15, or 20 percent.
"The technical revolution is coming for several reasons, most of them having nothing to do with technology. The economy is improving somewhat, both people and businesses are looking for new things to buy, and more of the same just won't do. We need whole new categories of products and services and they are on the way. Big IP-centric businesses like music, video, movies, and publishing sense that they are imperiled and are looking for new ways to stretch their old strengths. But most importantly, the VCs are sitting on a boatload of uninvested cash that they simply must spend. Get ready for a return to 1998 because soon you will be able to get funding for almost any hare-brained scheme. And while this process of throwing money at the wall is grossly inefficient, it inevitably leads to rapid change.
You may recall that venture capitalists were asked, who weren't at that time funding much of anything, to start spending money if only to jump-start the economy. They didn't, of course. So why would they now start to fund every deal in sight? That's simply because their alternative is to give back the money and then some, which they will never do.
In 1999-2000 -- at the very peak of the dot-com boom -- venture capital firms were not only taking companies public at a furious pace, they were just as furiously raising new venture funds -- funds that will shortly be coming to the end of their lives. Throughout the fixed lifespan of these funds venture capitalists are typically paid 1-2 percent of the total fund per year as a management fee. If a VC raises $100 million for a fund with a six-year life, they'll take $2 million every year as a management fee, whether the money is actually invested or not. Any money that remains uninvested at the end of the fund must be returned to the investors ALONG WITH THE ASSOCIATED MANAGEMENT
Right now, there is in the U.S. venture capital community about $25 billion that remains uninvested from funds that will end their lifespans in the next 12-18 months. If the VCs return those funds to investors they’ll also have to return $3 billion in already-spent management fees. Alternately, they can invest the money – even if they invest it in bad deals – and NOT have to cough-up that $3 billion. So the VCs have to find in the next few months places to throw that $25 billion. They waited this long in hopes that the economy would improve and that technical trends would become clear so they could do their typical lemming-like jump off the same investment cliff as all the other VCs. Well, we’re at the edge of the cliff, so get ready for the most furious venture investing cycle in history. "
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