Elvis Has Left the Building

Elvis Has Left the Building

In case you missed it, Investor Chris Sacca (announced that he) is retiring from venture capital. The Lowercase Capital founder, whose investments include Twitter and Uber, et al, blogged about his decision (Hanging up my spurs) and what he sees himself doing next, but forest through the trees, he did very famously tweet not too long ago his irritation about the fact that he has no control over decisions made at Uber, and we’d add one-time feather in his cap, Twitter, to that as well.

“That Sacca — who reportedly owned at least 4 percent of the company at once point (and may still) — has “zero say” in how Uber is run has been “frustrating,” he tweeted in February,” according to the Techcrunch article. “In recent years, Sacca has also distanced himself from Twitter, posting to his active Twitter account in March that, “I haven’t owned TWTR for almost a couple of years. When they failed to get Ev involved again, I lost hope. Love the service, hate the stock.”

In his announcement, Sacca said “startup investing is one of my things, but it is not my everything,” and that if he cannot dedicate all his time towards it, he cannot be part of it anymore.

With founders retaining more and more power over their companies these days and not needing or heeding input from their board or investors, Twitter, Uber and Snap being prime examples, could just be that Sacca sees the writing on the wall: the inmates are clearly running the asylum.

In case you haven’t noticed, investors aren’t as quick to write checks as they have been in the none-too-distant past. Crain’s reported back in July that Venture-capital funding in New York City plunges from a year ago (It’s not a bubble popping, says an expert, just investors growing cautious). Unicorns have lost their luster and IPOs are fewer and farther between. Despite the many problems and lawsuits, Travis Kalanick is still running Uber and Elizabeth Holmes, Theranos. It’s good to be the king: not everyone should be the boss.

“Despite many forecasting (hoping?) that herds of unicorns would enter the public market in 2016, the IPO market was lackluster at best,” said Techcrunch (Venture capital in 2017 is when the rubber hits the road for returns). “There were only 31 U.S. VC-backed IPOs, down from 76 in 2015 and 121 in 2014[2] (by far the highest number of offerings in recent history). For first time since 2008, not a single IPO in 2016 saw more than $250 million raised, and only four offerings raised more than $100 million[1]. M&A activity in tech, on the other hand, dwarfed IPO returns due to multiple mega deals thanks to PE and strategic investors. In 2016, of the 513 VC-backed tech exits in the United States, 499 were M&A events. These M&A exits represent $56.7 billion, versus the mere $9.6 billion exit value from the year’s 14 tech IPOs. [1]

“We believe non-traditional buyers will keep jumping into the game of acquiring mature startups in hopes of getting an edge on innovation (e.g. Walmart, GM, Unilever). In fact, at the end of 2016, non-tech acquirers became more common than tech companies in deals for $1 billion+ startups.”

Disrupting the corporates/established players is no easy task – not over the long haul, and certainly not one for the faint of heart, as both Jeff Bezos and Travis Kalanick have demonstrated in their own unique ways. Innovation, rather than disruption, may be the new order of the day. Something to consider, in this current climate, rather than to be just the latest acqui-hire. Bezos took the slow and steady approach, perhaps having learned something from the Web 1.0 bubble burst, while Kalanick is clearly a product of Web 2.0, whose mantra may as well be ‘Move fast and break things – and worry about the lawsuits later.’

Many of the VCs are out there raising new funds – and have been at it for quite some time. Funds are slower to close. LPs are being a bit more circumspect than they have been in the past. So if you’re finding that your rounds are more difficult to close, better make sure that your ‘T’s are crossed and your ‘Eye‘s dotted and wide open, and when you think ‘VC,’ don’t think ‘Venture Capitalist:’ think ‘Very Cautious.’

Chris Sacca’s rather abrupt exit may be a precursor to a different kind of bubble looming, and he may well have been simply the first one through the door. “Time to walk away,” said Sacca. Don’t be surprised if you see many more investors following suit and doing what they do best, when they see the right opportunity: run for the exits. Onward and forward.

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