Is this really true? seems like the early and late stage guys are doing pretty well raising funds. - Summit closed 2 funds with a combined 3.2bn in January - NEA is raising 2.5bn - AH raised 1.5bn - General Catalyst is raising around $500m - Accel has raised Big Data and India funds in the last year

Also from that article: "The dollars raised this year may equal or surpass 2011 levels – but the number of funds managing that capital will almost certainly be less. "

It may be true a lot of follow-on Sand Hill Series B and C guys are struggling, but a lot of them haven't generated returns in forever and should have been out of business years ago. Won't they just get replaced?

And don't founders tend to get the upper hand when capital is easiest to come by and optimism is at its highest?

Clearly there isn't just one reason, right? Can't all of these factors, and others, be contributing? I don't claim to know who's right, or how to weight the various factors, but big exits certainly do free up capital to be reinvested in more companies, don't they?

I'm curious in a broader sense what you (or anyone else who is experiencing it first hand) makes of the "bubble question." I'm sure it's unlikely but it would be great to have such people on the record with general predictions about the coming months and years.

No, the capital returned to a VC fund after an exit is not reinvested. It's distributed to the LPs. And while yes, strictly speaking, the LPs now have more money to invest than they had before, they are mostly giant endowments, pension funds, and foundations who only have a small fraction of their assets in VC funds, and whose future investment decisions are decided by asset allocation policies and not by recent returns.

The way big exits cause more money to be invested by VCs is not that capital is freed up thereby, but rather that news of them makes more people want to start or invest in VC funds. But that process is much slower.

Thanks! That makes sense. I just hear so many names of individuals being associated with these windfalls it's easy to imagine them continuing to invest on the basis of their holdings being liquidated.

Even if he's wrong on that point does it invalidate the basic premise that other businesses suffer at the expense of the companies which are overvalued?

(at least thats how I read it)

It could. When there is a lot of talk about startups in the press, that increases the supply of programmers, because it makes more people study CS. But as I pointed out in another comment, big companies could be responsible for more of the increased demand for hackers than startups. If so, "overvalued" startups could be net helping rather than hurting the job market.

I'm not saying this is the case. I don't know. If were going to write about this topic, I'd start by looking at the world and seeing what's actually happening.

Where is the money that's driving increased developer/designer demand coming from?

I don't think investor money is the main driver of increased demand for hackers. The biggest sources of demand are the big companies, like Google and Facebook, and they're paying the hackers' salaries out of revenues.

So conversely, more money is needed to compete with those who are already profitable.

It's the same money as before, but it's just being distributed towards higher salaries for developers/designs because the other infrastructure costs of starting a company have come down so much.

Even with the salaries being 20-40% higher, the initial costs for a startup are still at a historically low level, so more startups are being funded. As more players enter the ecosystem, they start competing for talent, hence driving the wages up even further.

Those data read like they're limited to VC firms big enough to join the NVCA, which requires funds to have at least one full-time employee to qualify for membership (see http://nvca.org/index.php?option=com_content&view=articl...). So angel investment wouldn't be included, and (anecdotally, I know) it feels like angel investment is where a lot of the big recent money has come from.

Not among companies we've funded. Most of the money comes from VCs, even in what used to be called angel rounds. VCs' funds are just so much larger. A single VC fund is hundreds of millions. It would take a lot of angels to invest that much.

With $2MM and $4MM seed rounds from "angels" doesn't it make sense to lump that money in with VC fundraising if you're looking for a benchmark of investment dollars? A lot more of that money used to take the form of LPs.