How the venture industry is pivoting, Part 1

Bill Tai, early-stage investor, shares his views at AngelPad Demo Day

I caught up with Bill Tai, an early-stage investor, at AngelPad's Demo Day last week. We talked about the AngelPad class of startups (he liked them), and the upcoming angel-investing fallout and what that looks like (he thinks most startups getting seed funding will fail, as has always been the case, but fortunately there's not much money invested in them these days). 

But the question that got him really animated was "What's the biggest disruption in the venture industry today?"

Here's his response:

"It’s cloud infrastructure allowing the industry structure that exists today to exist. The job of an early-stage venture firm or individual is to fund the period between raw startup and product-market fit. And, in the environment of 10 years ago where that number was $50 to $100 million, you had to syndicate. You had to syndicate to diversify the capital sources to come up with that amount. Today, the syndication doesn’t happen to come up with the capital amount, the syndication happens because there’s a fragmented ecosystem and it doesn't pay you to make one little bet. The nature of the startup today, because that period from start to product-market fit is so small, there’s a complete shift in the seesaw of capital availability and capital need. If you looked at startup environment 15 years ago, the only individual who could fund the product market fit was Paul Allen. Today, because it only costs $100k, just counting people who were at Google at its IPO, that's several thousand (investors). You probably have 10k to 30k funding sources..."

This interview is part of a series of interviews with venture capitalists that I will be conducting, in preparation of Vator and BullPen's upcoming Venture Pivot conference. Save the date: July 20, 2011 in San Francisco.