In the world of startups and venture capitalists, the goal is to get in on the ground level and then take the company to the top, with a hope of great returns on the initial investment. That process always includes scaling the startup company appropriately and eventually turning it into a larger, more successful company. It’s the scaling part that actually makes the difference. When a venture capitalist looks at potential companies in which to invest they always ask themselves how can we scale this company? That is the topic of one of the questions I asked Golden State Warriors owner and successful venture capitalist, Joe Lacob, when he visited with me on my weekly radio show American Dreams.
Less Money Available Than Before
Specifically, I asked Joe how have the ways companies scale changed over the past few years? Joe shared with me first and foremost that indeed, industries have changed. He said: “There’s less money right now in venture capital chasing opportunities than there was, although, up until around 2005 or so it was growing tremendously.” He also told me that these days, with the investment returns not being as significant as they used to be, that “we’re finally starting to see less money chasing some of these things, so that’s a little more positive I think for investors in entrepreneurial companies.”
Timing Is Essential
However, Joe also told me that when it comes to technology everyone knows that things change faster now than they ever have before. He said that means you can’t be passive, but rather you have to be very, very quick. Joe told me “You have to be noticing what is emerging and what is changing, and you have to try to get in early and be one of the first companies and back some of the best people.” Joe said if you don’t act quickly enough then you will miss out because some other company will swoop in and they will have technology that is better than yours. So you have to move fast because things can, and do, change so quickly. Joe said that is one of the biggest changes that he has noticed.
What About Silicon Valley?
Joe also addressed the state of entrepreneurialism in Silicon Valley and he pointed out that in his opinion “the Bay Area is not quite the center of the universe anymore with respect to entrepreneurial startups.” He told me that with the Internet and technologies the way they are – digital technologies in particular – people can start companies in any and all parts of the world, which people are doing every day. He said that is another one of the fundamental changes taking place that he has noticed. However, he did also tell me ”that doesn’t mean that there aren’t still great opportunities in the Bay Area because the truth is the culture here has been established over decades. It’s a very entrepreneurial culture and I think that you’ll continue to see great companies formed and succeed here.”