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VC isn't VC anymore

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Re: VC isn't VC anymore

#211

Post by crote »

chris_marino wrote: post #192
unknownfuture wrote: post #171

Earlier quoted context omitted.

> The increase in regulations, post GFC, made it impractical/impossible for small companies to go public. Care to be more specific? "Regulations bad" is a pretty common platitude around here but you've stated your main thesis, here, without a hint of support to back it. My observation is that the glut of available private credit has meant for at least 15 years you could just raise funds from those markets, and that's…

Sure. SOX reg sec 302 and 404. Section 302 is a 100% dealbreaker for most companies, so I stand by my 'impossible' threshold. My comment was simply shorthand for all the upfront and downstream costs of going public, combined with fewer exit alternatives. Auditor/directors increased/personal liability, litigious shareholders, time and attention of management, etc. And, to your point, the lower cost of capital from gro…

Seriously? The "you can't knowingly lie in your financial statements, and you have to make an actual effort when compiling them" section?

If that's a "100% dealbreaker" to you, nobody should ever invest in your company, because you are literally complaining about not being able to defraud them!

Re: VC isn't VC anymore

#213

Post by crote »

throwawayffffas wrote: post #189
andix wrote: post #164

I think tech founders need to think smaller. Build software for a few thousand people and make a profit from it. Something niche. Something that is sustainable with a small team. VC eats up everything that's becoming bigger. And they will kill it. Their goal is not to run a healthy business that serves their customers. They try to take out as much money as possible and then trash it.

In that environment the founder has no hope or reason to go public, making equity in the company worthless. VC used to push to public exits in order to maximize the founders and VCs stake which turned employees equity to a liquid asset. Truly aligning everyones interests, nowadays not so much.

You're forgetting about dividend, and off-market trade.

If a company is worthless if it isn't public, then IKEA would be absolute garbage. Quite strange for a company making hundreds of millions in profit for its owners.

Re: VC isn't VC anymore

#214

Post by xaxbxcxdxe »

chris_marino wrote: post #151

The article does not mention or address an important contributor to the current state of VC. The increase in regulations, post GFC, made it impractical/impossible for small companies to go public. And, until recently M&A was actively avoided. The alternative was to stay private longer offering higher returns for private investors wanting to capture a (previously non-existent) illiquidity premium. The co-dependency of…

I think privatization is always a metric of the functionality and thrust level in a society. Cohesive, honest society, socialized health care. Messy, parralell society ladden mess, private healthcare. Basically the thrust that was in a society gets moved into a smaller parallel privat society.

Re: VC isn't VC anymore

#215

Post by crote »

vivzkestrel wrote: post #206

- you need 2 hands to clap, dont want a data center i ll give you a plan - stop using claude - stop using open AI - guess what happens? - user base drops to 0 - demand drops to 0 - both companies go bankrupt - no need for data centers anymore? see its that simple - in the first step, convince all the HN guys to cancel their subscriptions

A huge chunk of the demand is already fake. It's why there are so many auto-enabled "helpers", blinking nag buttons, and popups begging you to pleasepleaseplease use their new AI feature. The vast majority of people are simply ambivalent about the vast majority of AI integrations, so companies have to take increasingly-desperate measures to artificially keep their MAU up and pretend that they haven't wasted a huge amount of money. And all of that is before we get into the heavily-subsidized LLM subscriptions for the people who do want to use it.

User base and demand are irrelevant when it comes to a bubble. People invest because Line Goes Up, which in turn makes Line Goes Up, convincing people to invest. As the saying goes: markets can remain irrational a lot longer than you and I can remain solvent.

Re: VC isn't VC anymore

#216

Post by vivzkestrel »

crote wrote: post #215
vivzkestrel wrote: post #206

- you need 2 hands to clap, dont want a data center i ll give you a plan - stop using claude - stop using open AI - guess what happens? - user base drops to 0 - demand drops to 0 - both companies go bankrupt - no need for data centers anymore? see its that simple - in the first step, convince all the HN guys to cancel their subscriptions

A huge chunk of the demand is already fake. It's why there are so many auto-enabled "helpers", blinking nag buttons, and popups begging you to pleasepleaseplease use their new AI feature. The vast majority of people are simply ambivalent about the vast majority of AI integrations, so companies have to take increasingly-desperate measures to artificially keep their MAU up and pretend that they haven't wasted a huge am…

I am going to need a little more evidence for your claim that says "a huge chunk of demand is fake"

Re: VC isn't VC anymore

#217

Post by danaris »

Karrot_Kream wrote: post #184
unknownfuture wrote: post #183

Earlier quoted context omitted.

It's an observation about prevailing libertarian values in the HN community that tend to attract upvotes while going unchallenged. If you consider that part of a "culture war", then it seems that term has lost all meaning. Might as well just accuse me of being "woke" and get it over with.

I think this forum has a lot of values and don't think it's been libertarian in outlook in a long time based on what gets upvoted here so appealing to that is a bit silly but anyway I don't think this is a fruitful conversation so have a good day.

I think we're running into (or at least pretty close to) a Two Guys Fallacy here:

There's still a strong libertarian streak in HN posters, in a variety of ways.

However, there are also (mostly) different posters who have more vocally shifted the site's Overton window to the left.

These days, I find it fairly common to, for instance, make a comment that points out the very obvious problems the Republican Party has created in recent years, get downvoted to -3, and then upvoted to +5 (or vice versa), all within a few hours. This would suggest that there are contingents of posters (or at least voters!) in both camps.

Re: VC isn't VC anymore

#218

Post by danaris »

conqrr wrote: post #175
andix wrote: post #164

I think tech founders need to think smaller. Build software for a few thousand people and make a profit from it. Something niche. Something that is sustainable with a small team. VC eats up everything that's becoming bigger. And they will kill it. Their goal is not to run a healthy business that serves their customers. They try to take out as much money as possible and then trash it.

This is it. Sustainability. Not everything has to be about more money quickly. You don't even need VCs for that. More win to bootstrappers! I see a lot of folks bootstrapping in the LLM era, but that can be defeaned in the VC noise.

Exactly. And the dangerous mindset tends to be worse than just "more money quickly": it's far too commonly "if this can't become the next Facebook/iPhone/ChatGPT, it's not worth doing." The only options are "take over the world" or "fail"; there's no room (in many people's heads) for a product that makes a decent, steady profit and continues to do so over the course of many years.

Re: VC isn't VC anymore

#219

Post by robocat »

barchar wrote: post #143
cratermoon wrote: post #3

Earlier quoted context omitted.

Startups define different classes of stock. The class A shareholders are the founders and investors. Everyone else gets class B shares. The A class shares don't get diluted, and they are inherently worth more anyway.

Pref shares do get diluted, they are however senior to common stock so they get money FIRST if there’s not enough to go around. There is some cap on this and sometimes it’s pretty high. Huge pref overhangs are, indeed, a problem. Pref shares with a 1x preference are still worth like 10x common stock in early stage companies and it’s common for employed to get fucked by this. Founders don’t get preferred shares (I thi…

Founders that take a pay cut from a high paying job should demand preferential shares to the value they are giving up.

If they were in job where they were saving $50k a year, then after becoming a founder they should be getting $50k worth of preferential shares per year because they are investing that much in the business.

Not that I've actually ever heard of founders getting preferential shares to match their dollars invested.

Re: VC isn't VC anymore

#220

Post by zaptheimpaler »

> This is how brazen, how toxic and destructive, we’ve allowed the industry formerly known as venture capital to become. We must understand that it is no longer a financial machine that is used to fund startups, but a political and social machine focused on dismantling democracy and civil society. And it’s time to act accordingly.

Its at least heartening to see a broad recognition across many circles and communities of how insane wealth/power concentration, corruption and insane laws like Citizens United are dismantling democracy today. But a16z and others are still pushing their own techno-utopia anti-doomer message that a lot of useful idiots buy into, even though it serves to detract from the political and social root causes of our problems today and instead says even more technology will fix it all.

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