Responding to a popular request, we are now sharing transcripts of our investor podcast interviews in this new series. The following interview with David Blumberg, Blumberg Capital was recorded in September 2016.
David Blumberg, Founder and Managing Partner of Blumberg Capital, has been in the business for a long time, and we had a very interesting chat about the evolution of the venture business over the last 15 years. We also discussed some areas where there are opportunities to build new scalable businesses.
Sramana Mitra: Let’s start with your read of how the venture capital industry that we’ve been swimming in for
so many years have evolved over the last six years?
David Blumberg: I’m a history buff. I’d like to take a step back to 2000. Historical context is really important especially for young entrepreneurs who haven’t been through multiple cycles like we have. The first thing I would say is 2000 dawned with an incredible bubble in technology. There was a dot-com boom. We had too much money chasing a hype cycle. There were overinflated expectations, incomplete and naive business models where people were chasing, what they call, eyeballs. They were trying to get lots of users.
The theory in those days was to get big fast. If you were a leader in a number of users, somehow you’d magically find a way to monetize and establish a sustainable advantage. That was not true. It turned out that one actually needed to deliver real value and start to monetize so that you don’t run out of money along the way of the growth path. The tech crash caused a lot of dashed expectations, but it brought in much better realism to the entrepreneurial community in understanding that growth and profitability are necessary.
For the funding community, it brought the realization that a great team is just as important as a great idea. Execution is often the dividing line between success and failure. Then let’s talk about the technological realm since 2000. There has been enormous good news for entrepreneurs. Platforms and infrastructures have developed immensely to the benefit of consumers and young entrepreneurs. The 99% divide is being rectified, not necessarily by government but by technology and entrepreneurs by building the internet, social media, developing mobile phones, and internet of things.
All of this is benefiting average people who live in very destitute circumstances, and they are now able to connect. Mobile phones are about 10 years old. All this is new. It really has made the lives of venture capitalists easier because it makes the lives of my entrepreneurs easier. They can now start companies which much smaller amounts of capital. The cloud infrastructure makes it possible for them to start a company without owning, what we used to call, PBX or mainframe computers. All that is available in the cloud.
I don’t mean to be patronizing. A lot of your audience knows this already. Just from 15 years ago, all that changed to the benefit of the future world. In the last few years, there has been another hype and deflation. The main point is that opportunities for entrepreneurs are still very strong. Look at the development of the developing countries.
With just mobile phones and social networks, you can now have reach both ways. It’s not just a colonial export model. It’s a two-way street. You can buy and sell data. You can buy and sell software. We can develop things in rural India and sell them to Silicon Valley. We have companies in our portfolio that are eight years old and sell in 200 countries. That is astonishing to me.