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VCs aren’t your friends

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Re: VCs aren’t your friends

#311

Post by vidarh »

earnesti wrote: post #295
vessenes wrote: post #282

Earlier quoted context omitted.

There's a lot of nuance here. A $100mm fund could be a single guy/gal working from her office, running money in an industry she knows with a little bit of admin support. In that world, $2mm a year in fees is plenty to keep the lights on. Some fund managers I know in this situation don't call all the fee; there may be social considerations / signaling the manager prefers to make. Some spend it all and then some of the…

> Absolutely none of them think that the fee is 'retirement money' You are sure you can speak for all of them? There are tons of VCs... To me the 2% running fee sounds pretty nice, combined with somewhat low pressure job compared to many others. Of course it is not nice if your fund doesn't make it but you are guaranteed somewhat cushy position for 5-10 years.

You've already spent a lot of time to raise the fund, unpaid or paid out of proceeds from a previous fund first. Then you have to put in a massive effort to find, sort through and vet investments. Either there are quite a few of you, or you have a nightmare work pressure for several years unless you already have a massive rep (and it's still work).

And most LP's will expect the GP's to have significant skin in the game. E.g. at my previous employer, every staff member was expected to have at a minimum the equivalent of 1x gross yearly salary committed within a few years.

VC salaries are not that great outside the top tier funds or unless you're one of the GP's.

It could be "retirement money" for a handful of the GP's at the top tier funds, but they're only in that position in the first place because they have a lengthy track record, and so their past earnings from carry etc. will still dwarf any operating fee from their current fund.

Re: VCs aren’t your friends

#312

Post by alephnerd »

ryandrake wrote: post #307
alephnerd wrote: post #267

Earlier quoted context omitted.

VC Internships are intense, and not every Stanford student can land one. While some advice might be a bit meh, a lot of it is information that has value. And, no offense, but there is a massive difference in calibre between a Stanford/Cal/MIT/T10 CS program (they tend to have 2-4% acceptance rates to either the college or the CS department) and other programs. This doesn't mean that there aren't high calibre candidat…

Does a low acceptance rate necessarily say anything about the calibre of the students? These schools can be filtering for a great many things that have nothing to do with intelligence or competence. Legacy admissions as an obvious example.

> Legacy admissions as an obvious example

Majority of the T10 CS programs have deprecated legacy admissions. Most are public universities.

> These schools can be filtering for a great many things

The de facto bare minimum you need to get into a BSCS at UIUC, UCB, or CMU is a high (3.8+ out for 4) GPA and a high SAT/ACT (1500+ or 34+).

In reality, these are minimums, and most applicants have taken college level CS courses in high school either at your local flagship or community college, taken 6 or more AP classes, and have a fairly robust roster and background in Extracurriculars like sports, non profits, and even a couple founders. One of my peers at my undergrad literally sold his bootstrapped company for $1m while he was in high school and he was from Cincinnati.

The point is, because admissions are so rigorous, you end up with very prepared students who already know the ins and outs of the major and industry they are targeting, and as such are able to hit the road running (getting internships in their freshman summer, participating in research from freshman year, graduating early or accelerating MS admissions).

If I need to take a financial bet on someone (which is what VC and hiring is), I can justify my choice based on the data provided above.

This does NOT mean that life ends at college. I know a lot of T10 grads who did dick (no internships, minimal research) and probably would have been better off going to another school or another program. I also know and am friends with plenty of people who went to non-T10 programs who had an AMAZING career trajectory because of how driven and hard working they were.

That said, your credentials are very important - having a successful academic and professional career will open plenty of doors.

Re: VCs aren’t your friends

#313

Post by JohnCClarke »

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…

> I can't imagine

Try imagining harder. (Or just google :-)

Sequoia was their first VC. Got the Apple II off the ground.

Re: VCs aren’t your friends

#314

Post by adwn »

leashless wrote: post #173
n2d4 wrote: post #169

Earlier quoted context omitted.

Is that supposed to mean something? Half of Hacker News is a startup CEO. By your own logic, you better pay yourself a $0 salary, $0 on secondaries, and invested all your personal savings into the project, because otherwise clearly you don't believe in your own company. Right? And I hope that is also true about every one of your employees?

Check the bio.

> Check the bio.

> Mattereum

Still none the wiser.

Re: VCs aren’t your friends

#315

Post by alephnerd »

throwaway11460 wrote: post #302
dblohm7 wrote: post #292

Earlier quoted context omitted.

> (they tend to have 2-4% acceptance rates to either the college or the CS department) This leads me to a broader question: What does their acceptance rate of high schoolers have to do with anything? We're always using that as some kind of proxy, but high schoolers (even the top ones) don't know much...

They probably meant universities (bachelor or masters program), but yeah I agree with you. People place way too much faith in institutions and take it as universal endorsement of ability, meanwhile many competent people are "misfits" that have all the brains and ability but can't stand the rules and mind games of these institutions; and those accepted are not significantly better than the ones below the acceptance li…

> meant universities

Nope. I meant departments. The T10 programs handle CS admissions at the College (Engineering) and Department level.

When you apply for a BS EECS at Cal or BSCS at CMU, it is the CS department (or School of Computer Science) that handles the entire application review process.

Only more traditional LACs (the kinds modeled after Harvard College or Dartmouth College) put all applicants in the same bucket.

Re: VCs aren’t your friends

#316

Post by mrgoldenbrown »

azemetre wrote: post #270
humansareok1 wrote: post #252

Earlier quoted context omitted.

The number of Stanford Juniors with 1 summer internship at a VC posting 'deep' Startup insights or advice is shocking. Like what do these kids with literally no experience running or starting anything know about companies? It's mind boggling.

Wait until you find out the work experience of people consultancies send out to clients. It's often one experienced person with a bunch of grunts pumping out "work." In a previous life I worked for a health insurance company that paid a million dollars to the Boston Consultancy Group on if we should use agile or not for development. The best part was seeing the half dozen or so people in our offices working so dilige…

IME it's not like McKinsey and friends are necessarily sending highly qualified people either. So it wouldn't take much to "beat" them on merit. It's frustrating to watch them get paid so much to recommend the thing we already recommended in house, except their version is missing all the hard parts because they never bothered to check whether the required infrastructure exists or can even be legally installed at the project site.

Re: VCs aren’t your friends

#317

Post by vidarh »

throwaway11460 wrote: post #281
giansegato wrote: post #277

Earlier quoted context omitted.

VC management fees are typically 2%/y. if a VC fund has $100 million in committed capital, the annual management fees would generally be between $2 million and $2.5 million. it's a lot of money.

So around 5-10 software engineers (compensation in finance seems mostly similar to SW), not including any other costs like office, etc? That's not a lot of money.

There's a reason most small VC funds have mostly useless infrastructure.

Re: VCs aren’t your friends

#318

Post by throwaway11460 »

alephnerd wrote: post #315
throwaway11460 wrote: post #302

Earlier quoted context omitted.

They probably meant universities (bachelor or masters program), but yeah I agree with you. People place way too much faith in institutions and take it as universal endorsement of ability, meanwhile many competent people are "misfits" that have all the brains and ability but can't stand the rules and mind games of these institutions; and those accepted are not significantly better than the ones below the acceptance li…

> meant universities Nope. I meant departments. The T10 programs handle CS admissions at the College (Engineering) and Department level. When you apply for a BS EECS at Cal or BSCS at CMU, it is the CS department (or School of Computer Science) that handles the entire application review process. Only more traditional LACs (the kinds modeled after Harvard College or Dartmouth College) put all applicants in the same bu…

I think we agree, my point was that you are not talking about high school (15-19 year old children where I live).

But now I see that their reply could also mean that the people are highschoolers at the time they are applying. I understood it as acceptance to high school itself.

Re: VCs aren’t your friends

#319

Post by n2d4 »

pwillia7 wrote: post #178
n2d4 wrote: post #163

Earlier quoted context omitted.

> 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.

Do you mean to the employees of VCs? LPs do have capital, that's why they're LPs. For the employees, the sentiment that you should bet on the sales pitch "I won't get you fired" over "I will make you wealthy beyond measure" still holds.

The LPs pay 2% management fee so the employees make some money regardless of the outcome, just like startup founders want to make some money even if the startup fails.

Re: VCs aren’t your friends

#320

Post by csomar »

leashless wrote: post #193
csomar wrote: post #187

Earlier quoted context omitted.

> 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...

So... where's the magic pixie in this story? If VC is not a job -- and remember most of the junior people in funds, it's like their first job in finance -- then what is it? I mean you've gotta define terms here...

It’s a job but not like any regular jobs. In most regular jobs, you are given a set of requirements/tasks, you do them 9-5 and go home. VC decides who gets money and as a result what kinda of jobs there will be out there. Luckily, VC is only a part of the financing sector.

The problem, in my opinion, is the lack of skin in the game in many of these funds. If the alpha is the 2% of funds managed, then the investments are a side show and as a result VC are just a plunder of these funds and a misallocation of resources in the economy. (Hence my comparison with communism).

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