The point is more or less, if VC invests (or plans to) in 20 software companies, investing additionally in something like GitHub or npm makes it more likely that the other 20 companies will succeed. They don't invest just in GitHub from the goodness of their hearts.
I know nothing about investing but I feel somewhat skeptical about these arguments. How many startups actually failed because they were using a poor package manager or source control host?
This sounds more like a spin-off of the old investment adage: "Buy stock in the products you actually use." If you spin that argument slightly as a proxy purchase, it makes sense that VCs would be investing in the products that their other startups are using heavily.
As an super-small-time investor who only owns stock in companies whose products that I use and enjoy, I can't knock them for it. For me, the logic is that whenever I tire of using something or no longer find it valuable, presumably I'll have early insight to sell the stock before the rest of the world catches on. I don't know if that same logic applies to proxy buying, but I suppose if you're intimate enough with your companies to know if they're abandoning Github for something else, as I don't know if pulling venture capital is as easy as selling the stock.
> as I don't know if pulling venture capital is as easy as selling the stock.
There's generally minimal liquidity. During a round, an existing investor may have the opportunity to sell some shares to new/other investors, but if she knows something that's not coming out during diligence, there's definitely something fishy going on. If the round is shaping up to be a major up-round, maybe an early investor wants to lock in a good return, but that's beside the point here. And then of course if things really aren't going well for the company, you're looking at the bad kind of liquidity event--a liquidation.
So if a VC wants to pull out based on a negative hunch, it's probably either impossible or the signal itself will doom the company if it wasn't already doomed.
A startup that can't iterate quickly enough will die by a thousand cuts, and it will be hard to say exactly what killed it. I'd certainly think using github can extend your runway by 5-10% (just in terms of how much time it saves we as a developer), and in a certain proportion of cases that will be the difference between success and failure.
To add, if Github goes into a death spiral they'll likely take a few of those 20 companies with them. In the same way if AWS goes down, so does half the Valley.
I'm actually curious how true is this. Most of the companies I talked to / read about use a very small set of services which are popular everywhere (compute + storage) or services which can be relatively easily distributed across other providers (for example outbound emails, event notifications, etc.) Projects that really use a lot of the AWS and are really tied up in that environment are much less common.
Is that a skewed view? Are there many big companies that would disappear without being able to move to a different platform in under 2 weeks?
I am hugely skeptical that this ever happens. Do you have any evidence?
I believe no VC is going to invest $50 million dollars purely in hope of vaguely helping the rest of their portfolio. While at the same time vaguely helping every other startup in existence, thus negating any advantage that might accrue to their own companies.
