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VC isn't VC anymore

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Re: VC isn't VC anymore

#131

Post by slowin »

cratermoon wrote: post #3
palata wrote: post #2

Let's keep praying for fewer and fewer regulations, it's going great! I didn't know that VCs were ever "not cancer", I've always known them like that. Also my experience with startups is that it is a big scam for employees, but I understand it's not always the case (maybe it depends on where in the world?). I have been an early employee in multiple startups that got the founders rich, and what I got from the stocks d…

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.

This is not standard. Normally founders and employees get common stock and investors get preferred stock. Founders may get more stock issued in a round, and VCs/founders can pretty much rework the cap table to their liking if they really want to. The difference in return between founders and employees is down to percentages. Founders get 25-75% where employees get 0.01-1%, maybe a bit more if they're lucky.

Re: VC isn't VC anymore

#132

Post by leonidasrup »

testdummy13 wrote: post #115
keeda wrote: post #103

Earlier quoted context omitted.

I think the problem is that decentralization is almost by definition antithetical to the ability to capitalize on something. As you indicated, decentralization means diffusion of control and power, which are essential to capitalize on that thing. Why would a VC or any capitalist invest money if they cannot see a way to earn back multiples? Sure you could make some money, but nowhere near the monopoly profits everyone…

"Why would a VC or any capitalist invest money if they cannot see a way to earn back multiples?" Why did Andrew Carnegie invest in building public libraries? Surely it wasn't because he was expecting a capital return. The oligarchs (at least some of them) used to feel some responsibility to the betterment of man. It really seems like today's billionaires really only care about money and power and nothing else.

In case of Andrew Carnegie, it was probably desire at end of his life to been rembered as not only a ruthless businessmen and monopolist.

"Carnegie spent his last years as a philanthropist. From 1901 forward, public attention was turned from the shrewd business acumen which had enabled Carnegie to accumulate such a fortune, to the public-spirited way in which he devoted himself to using it on philanthropic projects."

https://en.wikipedia.org/wiki/Andrew_Carnegie

Bill Gates is in similar phase of life.

Re: VC isn't VC anymore

#133

Post by piker »

While Anil makes a lot of great comments about VC's shift towards institutional PE, the legal issues he harps on are insignificant.

Until 2012 or so there was no legal concept of "venture capital". Around that time, the SEC adopted some new rules in response to the GFC. In those rules came the "venture capital adviser" exemption. To be a "venture capital adviser", a firm needed to avoid doing a lot of things that looked like private equity investments or hedge fund management. The only consequence of falling awry of the new "venture capital adviser" definition was registration as an "investment adviser" with the SEC.

The important anti-fraud provisions of the Advisers Act still apply to "venture capital advisers" even though they aren't registered, and most big VC shops would have probably been pushed to register for other reasons anyway.

The legal stuff is nearly irrelevant here.

Re: VC isn't VC anymore

#134

Post by bluefirebrand »

bix6 wrote: post #75
bluefirebrand wrote: post #62

Earlier quoted context omitted.

> It’s unfortunate that so much money flows to certain VC firms when people like me exist since I reckon I’m much more aligned with what the general population wants. You sound like a pretty good dude The study of Ethics is such a double edged sword. On one hand you have people who study ethics to think about how to treat people well, on the other hand you have people who study ethics in order to treat people as poor…

I’m trying. I love startups and want as many good entrepreneurs to succeed as possible. All the VC drama causes people to forget the whole point. It’s inherent with true capitalism. You have to be willing to forego some profit to actually treat people right and for some that’s just too much.

> You have to be willing to forego some profit to actually treat people right

I wish they taught this in business schools. I get the impression they really don't, based on my experiences with business grads

Re: VC isn't VC anymore

#135

Post by bobbane »

4d4m wrote: post #29
saasisdead wrote: post #13

VC is basically just plowing capital into people that went to prestigious schools or maybe were at a top company. They collect fees and every once in a while a company hits. Any analysis on the asset class is moot. Most of the VC media is aimed at hiding the fact that its a lottery machine for a pre selected group

I think the letter V should be removed from VC to better reflect your point that these are barely ventures - they're more like a rigged casino spin for those that don't have the talent to do the building themselves.

I learned to pronounce the V in VC as 'vulture' back in the 1980's.

Re: VC isn't VC anymore

#136

Post by robocat »

cratermoon wrote: post #3
palata wrote: post #2

Let's keep praying for fewer and fewer regulations, it's going great! I didn't know that VCs were ever "not cancer", I've always known them like that. Also my experience with startups is that it is a big scam for employees, but I understand it's not always the case (maybe it depends on where in the world?). I have been an early employee in multiple startups that got the founders rich, and what I got from the stocks d…

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.

Founders get common stock - class A voting.

VCs get preferential shares, not common. Preferential shares have economic rights to protect the investors, but more importantly they usually have extra control rights like veto abilities, board seats, IPO control, or ability to sack the founder (which may even cut out the founder's voting rights by sunsetting their class A common into class B common shares).

Employees get a third tier of stock (e.g. options that convert to non-voting class B common shares).

After IPO the preferential sheets becomes common shares. The dual A class may be removed or have sunset clauses because large public investors prefer one plain common share class.

Not a VC - so take above as written by a student. Founders in zero sense have the same voting control as VCs.

Edit: VCs play the same game over and over again, against different innocent founders. VCs know how to stack everything in their favour - especially using social cues and "norms" that benefit them. My favourite article on this is: https://siliconhillslawyer.com/2019/02/18/relationships-and-...

Re: VC isn't VC anymore

#137

Post by carlosjobim »

palata wrote: post #2

Let's keep praying for fewer and fewer regulations, it's going great! I didn't know that VCs were ever "not cancer", I've always known them like that. Also my experience with startups is that it is a big scam for employees, but I understand it's not always the case (maybe it depends on where in the world?). I have been an early employee in multiple startups that got the founders rich, and what I got from the stocks d…

Everything which is not your salary is completely speculative, and should be valued at near-zero. That you wanted to gamble on that was your own decision and your own fault. You have nobody to blame but yourself. If you had gotten rich from the stocks you wouldn't have complained here.

Re: VC isn't VC anymore

#138

Post by zackmorris »

We need something like an open source model or guild for VC, where successful people can put money into a pool that is generally accessible to anyone, with little friction. The idea would be to join the guild and gain access to funding, with a contract to contribute back some percentage of gross revenue and/or net profit, depending on how many people game the rules.

Honestly, wealth inequality has reached such epic proportions, that if someone came up with an alternative funding model, they could make VC lock-in obsolete. This is simultaneously extremely easy and extremely difficult to pull off. Money talks yes, but sometimes saying "your money's no good here" is more empowering.

Re: VC isn't VC anymore

#139

Post by sershe »

palata wrote: post #92
sershe wrote: post #85

Earlier quoted context omitted.

Why is that a scam? Nobody ever promises you any specific valuation or fraction of the company. When I joined a company relatively late but well before IPO, some funny number of shares at 12 cents or whatever each did not even enter my calculation any more than "oh and they also give me a free lottery ticket". In my case depending on when one sold after IPO they would have been in the range centered around about comp…

> Nobody ever promises you any specific valuation or fraction of the company Would you mind asking before saying what I have been promised? Also it feels like you have never been in a startup. The whole language of growth everywhere, the "billion-dollar startup", the "becoming a unicorn", this is all suggesting that "you're part of it and it matters to you if it becomes a unicorn". But it doesn't, really. Because you…

I was given a very large number of very low value shares. The company was about 60 people iirc and I think the hr guy said well we won't IPO soon but when we do, these shares might be worth a lot! Companies often aim for shares to be worth 10, 20, 50 dollars at IPO! Something like that. But it's obviously just vague pep talk. They also sometimes say everyone is there to make the world a better place...

It would be a scam if they promised you 0.2% of the company but then it was diluted to 0.1%. and nobody prevents you from asking i think. Otherwise it's no more a scam than a lottery ticket commercial showing the guy who won a Ferrari.

Re: VC isn't VC anymore

#140

Post by s_dev »

dv_dt wrote: post #73
rconti wrote: post #61

I was thinking about this the other day in regard to Flock. There's simply no way this company will fail, despite the public outcry, because the rich people in charge will not _let_ it fail.

Of course it can fail, just like the AI circular investment moves can fail just like the Soviet Union failed. Too much decisive power in too few hands, disconnected from reality, disconnected from competition, disconnected from outside community criticism. It fails open loop. A lot of money can temporarily buffer the failure, but already we see world wide inflation and interest rate increases from the open loop decis…

Look at Silicon Valley Bank that was also "too big to fail" and when it did the taxpayer had to bail it out. If something is too big to fail, it's too big, the regulator should have stepped in earlier to chop it up.
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