Alfred Lin: start your fund, even if it's not the best time

Steven Loeb · December 4, 2015 · Short URL:

'It only gets more competitive. It never gets less competitive in this world,' he said

On Tuesday we hosted our second annual Post Seed (#postseedconf) event, co-hosted by Bullpen Capital and Venture51.

One of the keynote speakers who we were proud to welcome was Alfred Lin, Partner at Sequoia Capital. He was interviewed by Vator's founder and CEO Bambi Francisco.

Lin co-founded Venture Frogs, an incubator and investment firm, also with Tony Hsieh, which invested in 27 startups, including both Tellme networks and Zappos, as well as companies that included OpenTable, Ask Jeeves,  Entango, NeoPlanet and

Given his experience as a long-time entrepreneur and investor, it was natural for Lin to be asked about how investing now compares to years earlier. Is now a good time to start a venture firm? Francisco asked him.

"I think if you're starting anything, whether it's a venture fund or a seed fund or a company, if you're thinking about doing it for long term, it really doesn't matter. Is this the best time to start a fund? I don't know, probably not because valuations are high, but that doesn't matter if you're going for the long term," he said.

"I think I've learned to think about not one or two years, or a moment in time, if you’re building something enduring and it's going to last decades or generations, you're going to face lots of ups and down anyway, and you might as well start learning today, as opposed to kicking down the road. It only gets more competitive. It never gets less competitive in this world. So in some ways, in the the macro sense, is this the best time, in this one or two year period? Maybe it's not the best, but it you're going to wait three or four or five years, it's still going to more competitive three or four or five years down the line than it is today."

Is now harder or easier to be a seed stage investor than it was over 10 years ago? Francisco asked.

"It's both. I think it's the best of times, and the worst of times. I think that can't play the same game you were playing in 1999 or 2000, 2001 or 2002. I think game is just different, so if you're trying to intuitively figure out something, whether it's a market is going to take off, or an industry's going to take off, that doesn't work. Because there might be only five or 10 or 15 companies that you could see, and you'd see all of them and play with all their products. Today, there's probably five or 10 or 15 of them being introduced in a day," said Lin.

"The scope of innovation is much broader, so you can't do the same things that you used to do. You have to be smarter about it, and use different tools. Back then, was there any measurement ability for companies to figure out how do you rate traction? No, today, we have App Annie, and you can go look up public rankings, and you can go to App Annie to get even more detail about how well the app is doing. Whether its downloads or engagement, there's just a lot more information that you can absorb, that you can use in your decision making. Does that make it harder? In some ways that makes it harder, but the access to information is easier."

The other big difference that he noted is the number of people who are now online. Back then it was millions, now it's billions of people.

"That makes a huge difference, and it also allows you to be wrong with an app and still get to a soft landing, as opposed to back then, I think, where probably if it didn't work it probably just crashed and burned."

Francisco then asked him about the increased competition from other firms. According to First Republic Bank, since 2009, there have been 300 new VC firms or institutional funds focused on early stage, all of whom are now looking at the same spaces and even the same companies.

"So that requires you to potentially put in more money into that company so they can compete with the other companies. That seems to make it a lot harder, regardless of the opportunities and all of the transparency that you have," she said.

"I think you should ask people been in this business for long periods of time, and they probably would all say that every year, every decade, the amount of money back then seemed like an incredible amount of money that was invested at that time," said Lin.

"I think that's been true for the last 20 years, for both entrepreneurs and investors. I think you can thank the Fed for that. The Fed has kept interest rates over the last two decades at close to 0. So you can't really make money in the bond markets, and therefore people who used to invest in bonds, invest in corporate bonds. And because the corporate bonds don't have to pay as much, the corporate bond people now invested in stocks. The people who invest in stocks invest in private growth rounds, and private rounds, and private growth investors invest all the way to Series B companies that are just getting some good level of traction. And try to pick them off because that's where you make money as a growth investor. And then the traditional venture investors going to down all the way to the seed level. I think it's always been hard when see that happen, and it's going to continue."

Lin does predict more rationality coming back, though, as th Fed raises interest rates once a quarter.

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Sequoia Capital

Angel group/VC

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Sequoia Capital is a venture capital firm founded by Don Valentine in 1972. The Wall Street Journal has called Sequoia Capital “one of the highest-caliber venture firms” and noted that it is “one of Silicon Valley’s most influential venture-capital firms”. It invests between $100,000 and $1 million in seed stage, between $1 million and $10 million in early stage, and between $10 million and $100 million in growth stage.


Alfred Lin

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