Don’t do business with people who think putting the wrong date matters.
VCs aren’t your friends
181–190 of 383 posts
Re: VCs aren’t your friends
#182Remember: 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…
Paul Graham, Black Swan Farming: https://paulgraham.com/swan.html > "The two most important things to understand about startup investing, as a business, are (1) that effectively all the returns are concentrated in a few big winners, and (2) that the best ideas look initially like bad ideas." _initially look like bad ideas_ meaning "we can't pick them out of the crowd of other bad ideas" > "there is probably at most o…
> So it's not like this model is alien to Our Kind Hosts at YC. They understand that this is a crap shoot with a slightly tilted table, but they're optimising for staying out of the zones where everybody else is betting and not that much more.
Do you think this still applies, given recent waves of following the crowd in the last few years like crypto, and now AI? It seems that YC is actually in exactly the same hype zones as everyone else these days.
Re: VCs aren’t your friends
#183Earlier quoted context omitted.
> the VC becomes your boss Only if you give them board control.
… Or if you expect to ever raise money again.
Not exactly correct, you are now partners. You own X% of the company and they own Y%. If you want to continue raising you better not be that guy that is constantly fighting with their partners... but your partners are definitely not your bosses.
Re: VCs aren’t your friends
#184Remember: 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…
Cool description :)
Re: VCs aren’t your friends
#185The 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…
> can't imagine someone like Steve Jobs or Nikola Tesla passing these VC/Ivy League kinds of tests. My "favorite" "test" is the one more for soft studies (think law or public policy) rather than STEM: for example UN internships typically have no compensation and they often require you to relocate to extremely expensive CoL areas, meaning there is an automatic filter built in where only children of very well-off paren…
Unpaid internships in general are the same "people with rich parents only" filter, to a lesser extent.
Re: VCs aren’t your friends
#186Earlier quoted context omitted.
I'd say Jobs would have blown them away. He was a businessman and an obsessive who knew when to focus on the design versus the product versus the money. If investors in his era wanted a perfect pitch deck, his pitch deck would have been perfect. Tesla might have been more likely to focus on having the tech working at the expense of everything else.
Nah. I know a VC that passed on Apple because Steve was 20 min late to their meeting.
Honestly, I would have too, if I were in that VC's place. Hindsight is everything obviously but at that moment, if a founder were to arrive to an important meeting 20 minutes late without good reason, either the meeting was of little importance to the founder, or the lack of punctuality speaks volumes of his dedication to his company and his potential partners. Dave McClure once told me that he passed on Travis Kalanick for similar reasons.
Re: VCs aren’t your friends
#187Earlier quoted context omitted.
> If VCs had to work for free, where would you be meeting them? It's interesting you are pointing exactly at the OP point without realizing it. If you are assuming that the VCs will be doing this for "free", it means they simply don't believe they'll have any ROI, let alone one that beats the market.
What? That makes no sense. VC is a job like any other, it takes time and work/effort etc to produce output, it's also a job where you can improve with skill and experience. Just like writing code takes effort and skill, why would you spend 10 years writing code full-time for "free"? Just like no one would edit books full-time for free, or write code full-time for free, or teach kids full-time for free, VC's wouldn't…
> VC is a job like any other
No, it's not; or at least not supposed to. That's what communism is (regular plebs of the working class deciding how to allocate resources with no skin in the game).
It's funny that I heard a VC the other day claiming the US is turning into the Soviet Union...
Re: VCs aren’t your friends
#188Remember: 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 correctly describes bad VCs, but not good ones. In my experience, the vast majority of VCs from outside the Bay Area are bad in this way (particularly true in Europe).
Not all VCs from the Bay Area are good, but the good ones are far more common there than anywhere else. One reason "move to SF" is such common advice.
Re: VCs aren’t your friends
#189Remember: 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 is an incredible post for me. You need to have a marketable CV, you need to have a few growth metrics and you need to be in on the joke.
Yes.
I learned this the hard way. I'm glad to see people _getting it_!
Good luck!
Re: VCs aren’t your friends
#190The 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…
Also…
“Smart” and “brilliant” are all highly subjective.
Pride and ego lead to an amazing amount of bias when you start to think you know “smart” when you see it.
There are no “tests” for legacy admissions and for students whose parents have donated millions.