VCs aren’t your friends • Hacker News Board

Re: VCs aren’t your friends

#221

Post by sqeaky » Thu, May 16, 2024, 1:04 PM UTC

n2d4 wrote: post #163

pwillia7 wrote: post #143

Earlier quoted context omitted.

> If startup employees truly believe in their company they would also take no salary at all and just live on ramen noodles. Not if you have no capital -- You still have to eat and be housed and that costs a lot if you don't have family wealth or other income streams, even with a good salary. People also naturally have different levels of risk aversion. Not everyone can/should be putting it all on red every day. > Thi…

> Not if you have no capital -- You still have to eat and be housed and that costs a lot if you don't have family wealth or other income streams, even with a good salary. That's exactly their point; this exact same logic can be applied to VCs, too.

If startups had capital to coast on they wouldn't needs VCs. If VCs didn't have capital to invest they wouldn't be VCs.

One of these groups clearly has more money at the start of this arrangement and you seem to be ignoring the change in npower dynamic that creates.

Re: VCs aren’t your friends

#222

Post by brilee » Thu, May 16, 2024, 1:05 PM UTC

wbl wrote: post #133

tomp wrote: post #88

Earlier quoted context omitted.

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?

Strangely the 0.05% management fee I pay covers the fix costs of my mutual fund.

A market is very liquid and trading is cheap, and the relevant starts are publicly aggregated. Transactions for an index fund are probably billions a day in rebalancing, withdrawal, and purchases. Startup transactions take $x0,000+ in legal fees, travel costs, due diligence from domain experts, and weeks of labor for single or double digit million dollar deals. Are you seriously comparing the two?

Re: VCs aren’t your friends

#223

Post by data_maan » Thu, May 16, 2024, 1:06 PM UTC

MichaelZuo wrote: post #45

max_ wrote: post #29

Earlier quoted context omitted.

It is impossible for something in very early stages, that needs money to be "truly compelling". For VCs a compelling product means great traction but to get great traction you need initial funding so it's always a catch 22.

Not if they are a bonafide super genius, then it's entirely possible. That's the minimum bar without traction however. A regular genius isn't that impressive.

How about a stable genius?

Re: VCs aren’t your friends

#224

Post by data_maan » Thu, May 16, 2024, 1:09 PM UTC

YetAnotherNick wrote: post #89

benrutter wrote: post #71

Earlier quoted context omitted.

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 should…

Overinvested?

How is it overinvested if no one (government, companies, you name it) come even close to "solving" climate change??

There's a very clear benchmark (CO2 increase) and we're failing spectacularly year-on-year!

Re: VCs aren’t your friends

#225

Post by curious_cat_163 » Thu, May 16, 2024, 1:09 PM UTC

I wonder if any generalization as an attribute for all VCs is ever going to be a good enough. People call them “not friends” or “sheep” or whatever. But it has always felt like an unsatisfactory framing.

It is a marketplace. The equity of companies is for sale and VCs are buyers.

The buyers come with a variety of risk appetite, $ available to invest, personal histories and they all want very high ROI to justify staying in the business.

Companies also have their own variety in ambition (TAM), track record (growth rates) and level of conviction of people who work there.

Re: VCs aren’t your friends

#226

Post by wcarss » Thu, May 16, 2024, 1:11 PM UTC

openrisk wrote: post #191

In transactional financial markets "friends" is not the right word, but there is something to be said about more or less effective alignment of interests and that is purely a matter of design. There is more than enough money sloshing around, it all boils down to designing contracts and suitable information exchanges between parties. So anybody thinking that the current system is sub-obtimal can try their hand at disr…

To carve any niche in a space like this, one needs extensive personal connections, money of their own to apply and put in the game, time to spend on it, and the belief that this is the best use of all of it.

It may well be that far better arrangements exist, but how would a slumdog or a small time farmer or a stay at home parent ever get the ball rolling? Who would play ball with them?

It would pretty much require that an existing VC or an empowered member of their ecosystem have the idea and see a path to it enriching themselves in order for them to spend time on it.

This is a major issue with pure market maximalism like the above: not everyone has agency within and access to every market, and no agent within a market would just let it change unless they personally stand to gain. Many potential solutions pass through empowerment or enrichment of different groups than those currently holding the reins, and this may mean those solutions are impossible to explore.

Re: VCs aren’t your friends

#227

Post by fallingknife » Thu, May 16, 2024, 1:11 PM UTC

jordanb wrote: post #145

yard2010 wrote: post #60

Earlier quoted context omitted.

You can say a lot of shit about this person. But this is so inspiring. Like, this is a good example for young people out there. You don't have to change your ways for boomers even though they have a lot of money you need. The lesson I got here is just be you. Let others change for you. And do not fuck with the IRS in any circumstances.

SBF was able to fit the image of the boy genius that the partners at the VCs (who mostly were probably not boomers) were looking for, while still coming off as "one of them." They thought that the crazy hair and the video game stuff was an act meant to project an image to the world, and the real SBF was Stanford and Jane Street.

The real SBF was Stanford and Jane Street

Re: VCs aren’t your friends

#228

Post by ryanwaggoner » Thu, May 16, 2024, 1:14 PM UTC

renegade-otter wrote: post #194

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…

As someone who took more than a year off to build his SaaS - the days of stitching together a prototype at night are pretty much over. You need to be an incredible hustler and have a really good insight into a desperate business need. Customers today expect polish and few bugs right out of the gate. I spent months on polish alone. If you don't, your product is going to be savaged like this: "Former Yahoo CEO Marissa…

How’s your SaaS doing now, if you don’t mind my asking?

Re: VCs aren’t your friends

#229

Post by gwbas1c » Thu, May 16, 2024, 1:14 PM UTC

earnesti wrote: post #23

throwaway42668 wrote: post #18

The problem with the “signal” is that it’s based on pretty much nothing. It is just as valid or nuts as any other ad hoc random tea leaves & chicken bones “signal” someone decides to come up with a dubious justification for. Whether the deck said March, April, or May changed absolutely nothing about the underlying business and thus also nothing about the actual investment opportunity. Maybe they made the deck two mon…

The deck from March says that they have been sending the deck around since March, and are still looking for investments. It might be meaningful, but would have to measure how quickly the typical funding rounds are made for successful companies, to have an "academic" argument about it. However it doesn't really matter, a VC can invest for whatever reasons he wants.

> The deck from March says that they have been sending the deck around since March, and are still looking for investments

You're assuming that most businesses seeking VC money are fundraising full-time.

I read this and assumed that the founder was was working on building their business full-time and passively looking for VC. For example, they might not be ready to do active fundraising, but want to "dip their toe" into VC so they're much better prepared in 6-24 months when they are ready to actively raise money?

The attention that a business needs gives to fundraising really depends on what the business is, and how well organic growth helps them now.

Re: VCs aren’t your friends

#230

Post by wslh » Thu, May 16, 2024, 1:15 PM UTC

alephnerd wrote: post #209

wslh wrote: post #77

Earlier quoted context omitted.

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…

> 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 This is the most common piece of advice all VCs and Founders give. Even YC has called it out on multiple occasions

I don't think the message is clear in the startup industry (yes, industry). The startup industry gives a lot of noise to inexperienced founders (obviously the great majority) making them think the game is more even.

The corollary are the following questions:

- What a founder without VC connections should do?

- How long will it take?

Even if they have a super product in mind (not a time machine) they will have an annoying experience pitching VCs who doesn't have any idea of what you are talking about.