so no idea on total stats, but even if there are 100,000 companies who pitch to vc’s each year and less than 1% get any backing the rest plus the tens of thousands who never seek funding or get it in other ways are the backbones, not vc funded companies. They are not bellweathers.

Interesting idea… but how does one explain the highly-rewarded corporate and banking leaders who got us all into this mess? Or the highly rewarded VCs who fund so many stupid ideas?

In small companies and startups it’s easy to see who is pulling his or her weight. However at bigger companies it becomes more difficult and leaders tend to reward people who tow the company line and those with different ideas aren’t rewarded.

Look at the demise of some pretty big companies in the area like eBay (despite their mediocre former CEO’s high profile and even higher personal financial rewards). The valley is littered with smart people who were pushed out of companies like this. They weren’t mediocre, they just may not have fit the corporate culture or perhaps didn’t play their political cards right.

My point is that one needs to be careful how “mediocrity” or “high performance” is defined or you’ll quickly squeeze out potentially valuable alternative viewpoints and skills and end up with a bunch of yes-men and a boardroom full of clones.

Let’s do some back-of the envelope calculations:

Assume they have raised 50m in rounds A-C (perhaps 3m in A, 7m in B, 40m in C). They now have about 30-60 employees each consuming $120,000/yr (with overheads), so the burn rate is somewhere around 5m/yr.

Naively, with this burn rate, they could last at least 5-7 years, assuming no revenue at all.

Now, I know that they will probably not last that long, judging by the 2001 fallout. But can you explain why? Is there a mechanism for VCs to take the remaining money out typically?

As far as I understand, founders in such a company would now hold about 20-35% common stock, employees 20%, and VCs about 40-50% preferred. The board would say have 3 VCs and 2 founders, so the company is VC-controlled. What are the mechanisms that will shorten the lifespan to 18 months?

While Washington has decided yesterday to grant a 25 billion dollars bailout to Car companies, I hope they will never imagine a bailout for VCs.

Nothing I wrote here sought validation from anyone. What validation is necessary? The situation is quite clear and it has been for some time, as I have pointed out for quite awhile. I simply find it amusing that people like Calacanis are rediscovering reality. Kapish?

As it relates to my self-indulgence, I guess you haven’t figured it out – when your entire economy is based on a fiat currency and a banking system that most closely resembles a ponzi scheme, the final outcome isn’t in question.

Right now, the only question is whether your government is going to let the system correct itself or whether it will sacrifice the dollar and its credit over the long term to perpetuate an inherently flawed system.

I’ll trade either for profit.

Finally, I think you missed my last paragraph:

Unfortunately, everyone will use the economy as an excuse for failure. But the reality is that the economy will have only sped the demise of these worthless startups and the fairweathered “entrepreneurs” behind them. Make no mistake about it: most of the VC-backed startups Calacanis believes will fail would have failed anyway.

In case you didn’t put two and two together, Calacanis’ email has a lot more to do with finding an excuse for the inevitable failure of the startups in the industry he’s hyped than it does with his concern over the economy.