What on earth did the author say that conflated fundraising with revenues? All he did was compute an average and list some individual amounts raised.
Also, a 10x return is the sort of target a VC will have for a series A round. Investors in later stage rounds have lower expectations. And since later stage rounds are much bigger, that means most of the money invested in a successful startup is done with the expectations of way less than 10x returns.
From what I know, I would guess that the investor of the median dollar of that billion is happy with the way things are going so far.
Essentially, my complaint is exactly that: he just reported the numbers. In a more mainstream financial magazine, I would've expected the author to also do his best trying to find out what those investments are doing. Basically, what I find an interesting question is "Ok, so $1B has been invested in YC companies. How much are those worth now? Of those which exited, how much did they exit for?". Essentially: how healthy is the startup ecosystem economy?
Why can't TechCrunch ask and answer questions like these?
The impression I get from articles like these, which don't balance the equation but just say "investment, hooray!!", is that the common conception in Startupland is that you're already halfway done when you secured a large amount of funding. In other words, that getting investors implies success. Some other commenters in this thread called me bitter and even jealous for that, but I don't understand that. Sure, getting investment increases the chance for success. Admittedly, I'd go and share a few drinks if someone just gave me a few million dollars for me to spend on making my dream reality. But it's not success yet. I'm still very much in the red!
Now, what I find really interesting is the last line of your comment. Do you have any numbers about that? How much is that $1B worth right now? (and, why didn't TechCrunch ask?)
ps. I really believed that tenfold returns were expected in later rounds, too. Thanks for clearing that up.
Surely also the big question is how much real long term value has been created, versus how many photo-sharing apps aqui-hired.
I bet that $1b could do a lot of good finding cures for diseases, rather than pumping up web startups to be sold on. But I guess there's not so much profit in that.
Note that I'm not beating up on YC here, I'm just stating an opinion on web-startups in general and the ridiculous valuations of them lately.
A lot of $1b's are invested into finding cures for diseases, you just don't read about it on HN. It's nearly entirely done by the relatively small number of very large farmaceutical companies in the world.
I forgot the numbers, but getting a single new medicine on the market is frighteningly expensiv (and it's being done anyway).
Personally, I think it's fine that meanwhile some other people are investing in companies that allow me to easily sync my files across devices.
Wrong target populace for that kind of news I think. These investments are (without regarding the amount of it) are business as usual, in Start-Up land as well as in Big Pharma land.
What makes the one billion interessting for HN are 1. it quite a sum 2. from an investment point of view a good indicator for success (only since you can estimate the overall value of the portfolio, success for the individual companies is something completely different) and last but not least it's pg and YC companies.
Somewhere further down in this discussion raising money was called an interessting way to pay salaries (or something along these lines). And for me there lies some truth in it. For a certain growth rate one needs external funding to keep the business running in a pace that wouldn't be possible on income alone. The problem is, at least from my point of view, that it's a tempting idea to do all the growth on funding instead of income. And then it's only a small step to hold funding in a higher esteem than income and profits. A view I for my part I see kind of reinforced by the tone of the TC article.
Again I agree that to build the next Google or whatever funding is necessary. But focusing in funding as the only source of cash for a business and as an IPO as the only way to make a profit is equaly dangerous.
But I think you that's more or less in line with your essays on fund raising. If not I understood them wrong, so feel free to correct me!
Also, a 10x return is the sort of target a VC will have for a series A round. Investors in later stage rounds have lower expectations. And since later stage rounds are much bigger, that means most of the money invested in a successful startup is done with the expectations of way less than 10x returns.
From what I know, I would guess that the investor of the median dollar of that billion is happy with the way things are going so far.