However, New York City is awash in capital for early stage startups looking for smallish (under $1 million) sized rounds. There's a lot of "hedge fund guys" looking to invest in tech startups in New York right now, says one New York investor.
Brilliant! Hedgies' core skills lie in building trading algorithms, not mentoring executives in marketing and operations. How are they going to help with executing product roll-outs if all they know how to do is gamble at high speeds? I love answering my own questions: They can't. Startups measure their progress over years, not quarters, and the entry of hedge funds into their capital structure makes it more likely that inexperienced investors will force startups into early exits or shutdowns.
The anonymous NYC investor quoted in the article is undoubtedly as dismayed as I am that hedgies are rushing in where "quality capital" is absent. If we define quality capital as an investor class that is patient and focused on things like product delivery, operations, smart hiring, and the many other things needed to grow a company from zero to success.
Maybe the hedge fund folks have drunk the Swensen Model Kool-Aid too many times and are looking for another asset class to play with. They'd better look at how Silicon Valley does venture investing before they write one more check.