Capital is flooding into Silicon Valley

DEALMAKERS ARE smooth talkers. They need to be. But which branch of finance has the slickest ones? Consider the polished, public-school manner of the City investment banker—or the high-velocity spiel of the Wall Street bank boss. Both have a strong claim. But the venture capitalists, or VCs, of Silicon Valley have a stronger one. They spend their time either being pitched to by, or pitching on behalf of, entrepreneurs who hope to be the next Zuck or Larry-and-Sergey. Peddlers of such extravagant dreams have to have silver tongues.

They certainly have some catchy phrases. They speak of “vanity metrics” (misleading measures of a startup’s progress); of the importance of “product-market fit” (how well a piece of software meets the customer’s needs); and “deal heat”, the fever that causes investors to overpay. After a while even a normally buttoned-up Buttonwood is asking to “double-click” on a topic when he wants more detail from a voluble VC.

A subject guaranteed to get them talking is the flood of capital into Silicon Valley. In the popular metaphor, the VC business used to consist of a flotilla of small boats fishing in a well-stocked lake. It was all very collegial. Now the lake is an ocean. Trawlers are out there—big institutions, such as sovereign-wealth funds and pension-fund managers, that increasingly invest...



via The Economist: Finance and economics Business Feeds

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