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VCs aren’t your friends

openvc.app

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Re: VCs aren’t your friends

#81

Post by threeseed »

caseyy wrote: post #20

Most business founders don’t need VC money and are worse off for taking VC money. I find the mindset “my pitch deck was 2 months old so I didn’t get funding” very out of touch of business realities. It is far more likely that that type of business doesn’t need VC funding. Your SaaS can probably be built with your daytime developer salary. No VC ever says “wow, what a great investment opportunity, one of the best, but…

> Your SaaS can probably be built with your daytime developer salary

Sure. But from experience it takes 3x as long.

After a long day of coding it’s not fun to come home and do another 8 hours.

Re: VCs aren’t your friends

#82

Post by tomnipotent »

caseyy wrote: post #47
__loam wrote: post #38

Earlier quoted context omitted.

Profitability is optional.

Profitable companies attract much more VC interest and even competition.

Doesn't a VC make money from valuation, not profitability. A profitable business has either reached market potential, or isn't spending enough on growth. Anecdotally I can think of many more examples of unprofitable businesses getting VC money.

Re: VCs aren’t your friends

#83

Post by threeseed »

EGreg wrote: post #10

I heard from Reid Hoffman himself that he approached 99 VCs before he got funded. He had two meetings in one day. The first he was asked whether it’s B2B or B2C. He said B2C and was told they only fund B2B. Then next one he said B2B but they said they only fund B2C. Meanwhile, some startups are funded by VCs piling on, and then go bankrupt quickly.

Average for pre-seed/seed is about 80.

And there was recently a guy who did 400 investor meeting to get a single yes.

Re: VCs aren’t your friends

#86

Post by YetAnotherNick »

keiferski wrote: post #39
YetAnotherNick wrote: post #32

Earlier quoted context omitted.

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

It sounds like he had to talk to a number of people first: Tesla made the rounds in New York trying to find investors for his system of wireless transmission, wining and dining them at the Waldorf-Astoria's Palm Garden (the hotel where he was living at the time), The Players Club and Delmonico's. Tesla first went to his old friend George Westinghouse for help. Westinghouse seemed like a natural fit for the project gi…

So? Everyone has to talk to multiple investors. Even if first investor you talk to agrees to invest on the first meeting, you need to talk to talk to many investors to come up with a fair valuation.

Re: VCs aren’t your friends

#87

Post by zarathustreal »

mef wrote: post #73
michaelt wrote: post #69

Earlier quoted context omitted.

> 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

Why not both? VCs are human, hurt feelings are probably a negative signal

Re: VCs aren’t your friends

#88

Post by tomp »

leashless wrote: post #78

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…

This doesn't make sense.

I worked in hedge funds, even there the management fee (2%) covers the fixed costs (legal, trading operations, treasury, IT operations, etc.) whereas the performance fee (20%) incentivises the alpha.

In VC it's even worse, because at least hedge funds are liquid. VC investments don't realize their value for 5-10 years! Are they supposed to work for free for 10 years? Even the support staff?

Re: VCs aren’t your friends

#89

Post by YetAnotherNick »

benrutter wrote: post #71
YetAnotherNick wrote: post #32

Earlier quoted context omitted.

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 p…

VCs put lot of money on solving climate change. I feel climate change is one of the most overinvested field, where companies like Helion are valued $3B not only without any working prototype, but also with an idea which many experts say is not feasible at all, and even in the case they could make the prototype work, it is highly unlikely it could compete with solar in terms of cost per unit energy.

But yeah we shouldn't put onus on VC to make society better. Government should invest more in research which benefits society.

Re: VCs aren’t your friends

#90

Post by leashless »

tomp wrote: post #88
leashless wrote: post #78

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…

This doesn't make sense. I worked in hedge funds, even there the management fee (2%) covers the fixed costs (legal, trading operations, treasury, IT operations, etc.) whereas the performance fee (20%) incentivises the alpha. In VC it's even worse, because at least hedge funds are liquid . VC investments don't realize their value for 5-10 years! Are they supposed to work for free for 10 years? Even the support staff?

Take 40% and raise capital for the VC operations as a separate transaction than from the LPs, of course.

Efficient markets.

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