Songkick Secures Sequoia's First Ever UK Investment with a $10M B Round
techcrunch.com
techcrunch.com
Counting the PhDs at Songkick is interesting. Excessively smart people who are passionate about the problem domain (and luck) seems to be the only way to make up for the structural problems in the music industry.
I can't work out why jpdoctor is so down on this, but each to their own.
As I've said before: The fact that people "celebrate" a funding event is really bass-ackwards when you think about it.
It says that the company couldn't figure out how to grow without bringing in a bunch of financiers, who have a low hit rate (3 go north, 3 go south, 4 turn into the living dead), who provided negative 10 yr returns even with Google in the portfolio, and who take 2-3% + 20% of exit from their own investors.
Definitely an excuse to drink, but not for reasons of celebration.
Practically all the most successful tech companies have raised outside funding. If raising money is a sign of lameness, then for some strange reason the most successful startups all seem to be the lame ones.
Honestly, you should be ashamed of yourself. The Songkicks have worked hard. This is a big milestone for them. And you are pissing all over it without knowing anything about them, just because this news happened to trip some idee fixe you're in the grip of.
Did I get wrong 1. hit rate, 2. negative IRRs or 3. the take?
> Practically all
But not all.
Practically all is enough to falsify your claim.
Re 2: Linked elsewhere, but again here wrt negative IRRs
http://www.matrixpartners.com/site/press_detail/63/ And the lawsuit ISTR that resulted from that article: http://www.universityofcalifornia.edu/news/article/9917
Re 3: Please let us know the carry and take numbers.
The second does talk about final returns and says "UC investments in partnerships managed by Sequoia Capital (Funds III to X) have returned over $508 million on an investment of about $110 million for a 4.6-fold return."
It was the disclosure on negative IRRs that led to the first article that got them disinvited from Sequoia iirc. UC was just obeying disclosure laws. Do you remember differently?
Of course, VCs could just release their performance history numbers so that investors and prospective entrepreneurs know what the percentages are. Who does it serve that they don't release these numbers?
The challenge isn't to get funded. The challenge is to find a VC who can improve your valuation by more than the percentage they take. Finding that is worth celebrating.
And considering that their IRR's are negative (they're not even making money for their limiteds), which VCs would that be?
(I agree Sequoia, Benchmark, Accel, and a few others are ballers, and I'd love to someday be an LP in a few, but that's not really what we're discussing.)
If a fund has a way to raise money steadily based on past reputation, market irrationality, a large collection of compromising photographs of leaders of oil producing countries, or whatever, and invests that money in a bunch of bad-investment startups but also my going-to-be-successful startup, it's a win for me and my users.
And those "bad investment startups" might actually be amazing companies, producing wonderful products which make the world better -- just at a really high valuation. There is surely some price at which a good company is a bad investment.
Maybe there's an argument for sustainability, but that's more over the long term. In 1999, or if you believe 2007 or now is an overpriced period for startup valuations, it still makes sense to raise VC if it will help your business, even if it doesn't make a risk-weighted great return for the VC. I don't believe this is the case now, but it's irrelevant to the argument of whether a startup should take VC.
Edit: Sorry jfarmer, it doesn't let me reply below. As far as never having seen negative IRRs, this is old but is out in the open
Looking at the people who have responded to this thread, I see at least three people who do.
So, maybe check yourself? Wovon man nicht sprechen kann...
Out of curiosity, have you ever raised outside capital before?
But note that article is from 2004, and it's talking mostly about funds raised post-1999, i.e., immediately before the dot-com crash.
If you were sincerely interrogating the data, you'd ask yourself how Sequoia faired relative to other funds and asset classes in that same time period. For example, did it still beat the stock market?
You'd also admit that 2004 is right when the "internet sector" saw a huge upswing. Facebook (2004). YouTube (2005). Yelp (2004).
Instead it's clear you're just trying to find data to prove your inane point.
Anyhow, this is really pointless. Enjoy the feeling of internet vindication.
"Sequoia Capital, the earliest venture capital investor, are not selling any of their stakes of 21 per cent. Sequoia had paid $4.7m for its stake, now worth some $1.5bn."
Source: http://www.ft.com/cms/s/2/ded6de58-0fe4-11e1-a36b-00144feabd...
Series B investment is a lot different from "should I bootstrap or not" in the early stage. I think there are a whole lot more people who can work without salary for a year or two, and maybe dump a few hundred thousand of their own money into a business, getting it proven and to profitability, than there are people who can take a successful business, see great metrics, and decide to invest a spare $10mm in taking over the world.
It's useful to argue against VC financing as a "requirement" for early stage businesses (even though it helps a lot of businesses) mainly because it removes an excuse from people who can't raise money (by being in the wrong place, whatever) starting now.
There's very little point in arguing for or against Series B and later funding -- by that point, you either have a business or you don't.
That is completely false. The most common reason companies raise VC money is so they can grow at a faster rate than they could without funding. If you have a business where X dollars invested in customer acquisition equals X+Y dollars in revenue but your revenue lags your customer acquisition by 6-12 months then you should go raise all the money possible given the size of the opportunity you are pursuing. Focusing on near-term profitability is not always the right decision.