The maturing of start-up markets

Recently announced:

Uber (taxi rental) getting $360m investment plus rumoured access to significant debt financing
http://pandodaily.com/2013/08/25/will-uber-use-its-360m-war-chest-to-become-the-exact-thing-it-hates/

NumberFour in Berlin gets $38m seed financing (yet to launch) for small business productivity apps
http://indexventures.com/news/index/news_id/373

Smart investors are betting big

I suspect that this means they think well funded, well connected startups can dominate these sectors (Pandodaily speculates that’s why Uber wants this war chest). So it looks like these sectors are changing from emerging sectors to maturing sectors. These are investors who 3 or 4 years ago were saying that they see rapid change everywhere “its a great time to start a business”. What we’re seeing now is a logical follow on from that.

It’s worth watching to see if this trend picks up momentum. In which case I think it’s going to be difficult for regional or niche startups to convince investors that they’re be able to go big. Instead, these startups will have to seek out new sectors & ideas.

Update:

Kelblog has a good post http://kellblog.com/2013/10/21/thoughts-on-mongodbs-humongous-150m-round/ on this

In the 1980s and 1990s VCs used to fund categories and cage-fights.  A new category would be identified, 5-10 companies would get created around it, each might raise $20-$30M in venture capital and then there would be one heck of a cage-fight for market leadership.

Today that seems less true.  VCs seem to prefer funding companies to categories.  (Does anyone know what category Box is in?  Does anyone care about any other vendor in it?)  Today, it seems that VCs fund fewer players, create fewer cage-fights, and prefer to invest much more, much later in a company that appears to be a clear winner.

This, so-called “momentum investing” itself helps to anoint winners because if Box can raise $309M, then it doesn’t really matter how smart the folks at WatchDox are or how clever their technology.

One thought on “The maturing of start-up markets

  1. Pingback: The Silicon Valley seed-investing bubble deflates | HighTechFondue

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