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VCs aren’t your friends

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Re: VCs aren’t your friends

#71

Post by benrutter »

YetAnotherNick wrote: post #32
keiferski wrote: post #21

The way VCs filter out potential investments seems fairly similar to the way Ivy League schools filter out potential students. (Probably because they are comprised of the same people.) It is not really about technical brilliance, or innovation, or anything that is written on their website as a core value. It's more about whether you're smart enough and can follow instructions and fit into the overarching institutiona…

Nikola Tesla received funds, in fact quite a bit of it. JP Morgan invested $150,000(~$5M in today terms) for just one project[1]. He died penniless because of his too much confidence in his ideas and he overused the money he got. Even with hindsight, funding Tesla was a bad decision for investors return wise. [1]: https://en.wikipedia.org/wiki/Wardenclyffe_Tower

Yeah I was going to say this- idiosyncratic geniuses like Tesla are behind some of the most important technogical advancement of the human species, but isn't what VCs are optimising for.

For sure, there's a wider question about how society can reward more than just the ability to return profit. That would help with a lot of today's issues, like climate change, but it's a much bigger issue than just one of where VCs put their money.

Re: VCs aren’t your friends

#73

Post by mef »

michaelt wrote: post #69
fsloth wrote: post #61

Earlier quoted context omitted.

In the tweet the wrong date was not a red flag due to lack of detail as such, but because it signaled: a) they had been raising for a while now b) the recipient was not their first choice (ouch, you can hear the ego taking a glancing hit) So ”the market” did not consider the startup investable, and they did not think about their sales pitch strategically enough … this VC would have liked to be sold to, not just a sou…

> the recipient was not their first choice (ouch, you can hear the ego taking a glancing hit) It baffles me that a person successful enough to get put in charge of an investment fund can have such incredibly thin skin. How would you even function in the real world if you were so easily offended?

consider that this is sending a negative signal to the VC that other VCs have already passed, rather than that it hurts their feelings

Re: VCs aren’t your friends

#74

Post by RACEWAR »

michaelt wrote: post #69
fsloth wrote: post #61

Earlier quoted context omitted.

In the tweet the wrong date was not a red flag due to lack of detail as such, but because it signaled: a) they had been raising for a while now b) the recipient was not their first choice (ouch, you can hear the ego taking a glancing hit) So ”the market” did not consider the startup investable, and they did not think about their sales pitch strategically enough … this VC would have liked to be sold to, not just a sou…

> the recipient was not their first choice (ouch, you can hear the ego taking a glancing hit) It baffles me that a person successful enough to get put in charge of an investment fund can have such incredibly thin skin. How would you even function in the real world if you were so easily offended?

They can’t function, Michael.

Re: VCs aren’t your friends

#75

Post by RACEWAR »

I may be betraying a certain level of cultural literacy for the bulk HN demographic but the original tweet reminds me of when popular online vixens (e.g., Instagram models) talk about “who slid into their DMs”.

Re: VCs aren’t your friends

#77

Post by wslh »

keiferski wrote: post #21

The way VCs filter out potential investments seems fairly similar to the way Ivy League schools filter out potential students. (Probably because they are comprised of the same people.) It is not really about technical brilliance, or innovation, or anything that is written on their website as a core value. It's more about whether you're smart enough and can follow instructions and fit into the overarching institutiona…

In my little experience, most of the deals I see closing with VCs are because they/we were already linked to VCs through strong trust networks or directly. I see more deals that are close just by phoning/messaging someone that following the typical startup funding round that is read on Internet.

Not saying that most of the cases are not hard work from the startup team but saying that if I would have to raise funds I will put laser focus in the people I know instead of trying to reach VCs that are not in my network.

I will repeat this a little bit differently: I see many yes that are related to the team links, not their product or market.

Finally, when I talk about the team, I don't talk about their real capacity to execute but to sell to a VC like selling to an important customer.

Re: VCs aren’t your friends

#78

Post by leashless »

Remember: if VCs believed in what they were doing they would not take a 2% annual management fee and 20% of the upside.

They’d take 40% of the upside and live on ramen noodles.

VCs make money by raising money from LPs.

They spend this money on investments which don’t look too bad if they fail, because nearly all of them fail. Looking good while losing all of your investors money on companies which go broke is the key VC skill.

Once in a while you get a huge hit. That’s a lottery win, there is no formula for finding that hit. Broad bets helps but that’s about it. The “VC thesis” is a fundraising tool, a pitch instrument, it makes no measurable difference to success. It’s a shtick.

Sympathy, however, for the VC: car dealership sized transactions paired with the diligence burdens of real finance. It’s a terrible job.

Once you understand that VC is one of the worst jobs in finance and they don’t believe most of their own story — it’s fundraising flimflam for their LPs - it’s a lot easier to negotiate.

1) we are a sound bet not to get you in trouble if we fail (good schools and track records)

2) we will work hard on things which your LPs and their lawyers understand, leaving evidence of a good effort on failure

3) we know how the game works and will play by the unwritten rules: keep up appearances

The kind of lunatics who actually stand to make money with a higher probability than average - the “Think Different” category - usually violate all of these rules.

1) they have no track record

2) they work on esoteric nonsense

3) they look weird in public

And they’re structurally uninvestable.

Once you get this it’s all a lot easier: the job of a VC is not to invest in winners, that’s a bonus.

The job of a VC is to look respectable while losing other people’s money at the roulette wheel, and taking a margin for doing so.

I hope that helps.

Re: VCs aren’t your friends

#80

Post by petesergeant »

michaelt wrote: post #69
fsloth wrote: post #61

Earlier quoted context omitted.

In the tweet the wrong date was not a red flag due to lack of detail as such, but because it signaled: a) they had been raising for a while now b) the recipient was not their first choice (ouch, you can hear the ego taking a glancing hit) So ”the market” did not consider the startup investable, and they did not think about their sales pitch strategically enough … this VC would have liked to be sold to, not just a sou…

> the recipient was not their first choice (ouch, you can hear the ego taking a glancing hit) It baffles me that a person successful enough to get put in charge of an investment fund can have such incredibly thin skin. How would you even function in the real world if you were so easily offended?

> successful enough to get put in charge of an investment fund

Is that how it works?

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