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VCs say Silicon Valley isn’t the gold mine it used to be

In the days leading up to TechCrunch Disrupt SF 2018, The Economist published the cover story, ‘Why Startups Are Leaving Silicon Valley.’ The author outlined reasons why the Valley has “peaked.” Venture capital investors are deploying capital outside the Bay Area more than ever before. High-profile entrepreneurs and investors, Peter Thiel, for example, have left. Rising rents are making it impossible for new blood to make a living, let alone build businesses. And according to a recent survey, 46 percent of Bay Area residents want to get the hell out, an increase from 34 percent two years ago. Needless to say, the future of Silicon Valley was top of mind on stage at Disrupt. “It’s hard to make a difference in San Francisco as a single entrepreneur,” said J.D. Vance, the author of ‘Hillbilly Elegy’ and a managing partner at Revolution’s Rise of the Rest Fund, which backs seed-stage companies based outside Silicon Valley. “It’s not as a hard to make a difference as a successful entrepreneur in Columbus, Ohio.” In conversation with Vance, Revolution CEO Steve Case said he’s noticed a “mega-trend” emerging. Founders from cities like Pittsburgh, Detroit or Portland are opting to stay in their hometowns instead of moving to U.S. innovation hubs like San Francisco. “The sense that you have to be here or you can’t play is going to start diminishing.” “We are seeing the beginnings of a slowing of what has been a brain drain the last 20 years,” Case said. “It’s not just watching where the capital flows, it’s watching where the talent flows. And the sense that you have to be here or you can’t play is going to start diminishing.” J.D. Vance says that most entrepreneurs don’t need to move to Silicon Valley. Here’s why. #TCDisrupt pic.twitter.com/0mFPeTuHLe — TechCrunch (@TechCrunch) September 6, 2018 Farewell, San Francisco “It’s too expensive to live here,” said Aileen Lee, the founder of seed-stage VC firm Cowboy Ventures, amid a conversation with leading venture capitalists Spark Capital general partner Megan Quinn and Benchmark general partner Sarah Tavel . “I know that there are a lot of people in the Bay…

In Bad Blood, a pedestrian tale of heuristics and lies

In a world where thousands and thousands of startups are started in the Bay Area every year, becoming a name that everyone recognizes is no small feat. Theranos reached that summit, and it all came crashing down. The story of the fraudulent rise and precipitous fall of the company and its entrepreneur, Elizabeth Holmes, is also the singular story of the journalist who chronicled the company. John Carreyrou’s tenacious and intrepid reporting at the Wall Street Journal would ultimately expose one of the largest frauds ever perpetrated in Silicon Valley. Bad Blood is the culmination of that investigative reporting. The swift decline of Theranos and its protective legal apparatus has done this story a lot of good: many of the anonymous sources that underpinned Carreyrou’s WSJ coverage are now public and visible, allowing the author to weave together the various articles he published into a holistic and complete story. And yet, what I found in the book was not all that thrilling or shocking, but rather astonishingly pedestrian. Part of the challenge is Carreyrou’s laconic WSJ tone, with its “just the facts” attitude that is punctuated only occasionally by brief interludes on the motivations and psychology of its characters. That style is appreciated by this subscriber of the paper daily, but the book-length treatment suffers a bit from a lack of charisma. The real challenge though is that the raw story — for all of its fraud — lacks the sort of verve that makes business thrillers like Barbarians at the Gate or Red Notice so engaging. The characters that Carreyrou has to work with just aren’t all that interesting. One could argue that perhaps the book is too early — with criminal charges filed and court trials coming, we may well learn much more about the conspiracy and its participants. But I don’t think so, mostly because the fraud seems so simple in its premise. At the heart of this story is the use of heuristics by investors and customers to make their largest decisions. Theranos is a story of the snowball effect blown up to an avalanche: a…

Boston-area startups are on pace to overtake NYC venture totals

Joanna Glasner Contributor More posts by this contributor Home run exits happen stealthily for biotech While tech waffles on going public, biotech IPOs boom Boston has regained its longstanding place as the second-largest U.S. startup funding hub. After years of trailing New York City in total annual venture investment, Massachusetts is taking the lead in 2018. Venture investment in the Boston metro area hit $5.2 billion so far this year, on track to be the highest annual total in years. The Massachusetts numbers year-to-date are about 15 percent higher than the New York City total. That puts Boston’s biotech-heavy venture haul apparently second only to Silicon Valley among domestic locales thus far this year. And for New England VCs, the latest numbers also confirm already well-ingrained opinions about the superior talents of local entrepreneurs. “Boston often gets dismissed as a has-been startup city. But the successes are often overlooked and don’t get the same attention as less successful, but more hypey companies in San Francisco,” Blake Bartlett, a partner at Boston-based venture firm OpenView, told Crunchbase News. He points to local success stories like online prescription service PillPack, which Amazon just snapped up for $1 billion, and online auto marketplace CarGurus, which went public in October and is now valued around $4.7 billion. Meanwhile, fresh capital is piling up in the coffers of local startups with all the intensity of a New England snowstorm. In the chart below, we look at funding totals since 2012, along with reported round counts. In the interest of rivalry, we are also showing how the Massachusetts startup ecosystem compares to New York over the past five years. Who’s getting funded? So what’s the reason for Boston’s 2018 successes? It’s impossible to pinpoint a single cause. The New England city’s startup scene is broad and has deep pockets of expertise in biotech, enterprise software, AI, consumer apps and other areas. Still, we’d be remiss not to give biotech the lion’s share of the credit. So far this year, biotech and healthcare have led the New England dealmaking surge, accounting for the majority of invested capital. Once again, local investors…

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