Alphabet Soup

Jimmy Liu

Marilyn Patton

Critique Paper

17 October 2015

Fundraising Alphabet Soup When I was 17, I co-founded a social startup with a couple of friends from UC Berkeley. Over the course of developing our product, we met with investors, talked about raising money, eventually reaching a consensus that we did not want to raise money for expenses we did not have. Regardless, it has given me an inside look at the complicated process of fundraising in the Silicon Valley. In the article “To fly, to fall, to fly again” published in The Economist, the author claims that despite Silicon Valley’s exponential financial growth, a second dotcom boom is unlikely due to startups having better business models and providing more value. Using a variety of

The author of the article agrees, citing that “Starting a tech firm has never been easier. Not only does it cost less, but there are more ‘angel’ investors who are willing to write small cheques to breathe life into founders’ ideas” (Economist). To further this point, even angel investors are not necessary for startups looking to prove whether a market exists for their idea. Airbnb’s beginning is a prime example of this, the once three man team turned into an “unicorn” startup with over a billion dollars in valuation. Originally named “Air Bed and Breakfast”, the three proved their idea was worthy of investment during the yearly startup, music, and film festival South by Southwest (SXSW). Quickly creating a website for renting airbeds during the event, Airbnb was able to get their first customer and show market demand for their product. This model of using an minimum amount of funding to prove an idea, usually through personal savings or a “friends and family” round, is becoming increasingly popular in the valley. Due to the simplicity of testing startup ideas, investors are now able to focus their funds on ventures that have real demand, allowing them to have higher returns for their time and money. When compared to the dot-com bubble, where companies were first funded before ideas were proven, the new system has

This baseless prediction puts the Economist squarely into the group of “indefinite pessimists”; as Thiel puts it, “an indefinite pessimist looks out onto a bleak future, but he has no idea what to do about it” (Thiel et al.). Being an investor in the valley requires one to hold the exact opposite mindset, favoring a definite optimist view of the future, which could be a reason why the author is unable to see Silicon Valley’s continued growth. The fact is, regardless of one’s stance, whether optimist, pessimist, definite or indefinite, it’s hard to deny that the valley is and will continue to be the sprouting point for automating and digitizing the world. If there is one thing startups in the valley are good at, it is applying the powers of computation towards an conventional problem. Developing fields, such as medicine, has seen little computerization of their techniques, leading to the recent boom of “bio-tech” startups, which aim to make costs lower and results faster for medical professionals. Another example would be Google and Tesla, who are creating driverless cars, not only putting cutting edge car development back in the United States (more specifically Silicon Valley), but also creating manufacturing jobs in the surrounding areas (i.e. revitalization of NUMI in San Jose). There are so many