Jeff Bussgang wrote a great post about how VCs manage reserves. When a VC invests, they allocate (reserve) some additional amount for follow-on financing. For example, a company may raise $5m for Series A, but the fund will reserve $10m for Series B, C, etc.
In the current climate, many reserve models are at risk of blowing up: VCs that assumed additional investors for later rounds may find themselves doing all the funding themselves (the “inside round”). Jeff makes a good suggestion for every venture-funded entrepreneur: understand what your investor is carrying for reserves for your company.
For entrepreneurs raising new funding now (tough, but certainly possible), a closely related issue is the age (vintage) of the VC’s fund. Older funds are full of “reserve challenges”: companies readjusting their funding strategies, and becoming more dependent on inside rounds. In a newer funds, the bulk of the money is yet to be invested, and later investments from the fund will factor in current conditions and the realities of follow-on investors into the reserve model.
For entrepreneurs today fortunate enough to have multple funding options, fund vintage is a major factor to consider. Newer is much better.
Last Christmas, I got my daughter an Asus EEE PC netbook. We were one rev too early; the screen’s just slightly too small for Webkinz. But netbooks are great “first computers” for kids: small, light, and cheap enough it’s not a total disaster if it breaks. Plus, flash-drive models have no hard disk to fail, the leading cause of laptop destruction among kids.
Between discussions with Antonio, and blogosphere chatter, it’s been amusing to watch the marketers try to figure them out. Are netbooks a new “category” or just cheap laptops? And, why are both Intel and AMD on record dissing netbooks?
I’m not a market expert, but the analysis path seems straightforward. First, figure out who’s buying them and why, especially where the netbook purchase happens relative to other device ownership (e.g. smart phone and full-size laptop). Extrapolating from our own experience, I’d bet that the typical netbook purchase is a first-time computer, in many cases for kids. Then the question is: when (if at all) do those users outgrow their netbook? And: are we creating a “netbook” generation?
This seems like a replay of PCs vs workstations, back when PCs were viewed as toys. Over time, unit volume drove PC price/performance improvements much faster than workstations, causing PCs to overtake workstations and ultimately removing any category distinction. Now, “PCs are workstations”.
My bet: the exact same thing will happen with netbooks vs laptops.