Overvaluation is fine if they have put in place protections for their capital, like liquidation preferences and anti-dilution clauses for down rounds. In that case by pumping up a companies valuation in a financing event they're able to win the deal and put a stake in the ground for any acquisition offers. If the company is acquired for less than the last valuation they still get all their capital returned to them un…
What about up rounds?
Well in an up round they would probably participate and the value of their stock goes up either way so they're winning.
There is definitely a lack of transparency in venture funding, and studies show overall how VC's have been barely breaking even. Most of the big name investors were successful entrepreneurs (e.g. Andreessen and Netscape, e.g. Khosla and Sun, etc) who are assumed to be good investors. In reality, if most of these founders put their money in standard index funds, they would have better returns adjusted for risk, but wi…
Just like in a venture portfolio, the venture industry is characterized by a few big winners. While the industry in general may lose money, a few firms consolidate most of the profits of the entire industry. AH is one of the smartest firms, and one of the first to push the philosophy that "it is easier to train a technical founder to be ceo, than a ceo to be a technical founder". This was one of the firms that lead t…
> AH almost certainly beats 10% annually
If so, why don't they publicize their annual returns?
There is definitely a lack of transparency in venture funding, and studies show overall how VC's have been barely breaking even. Most of the big name investors were successful entrepreneurs (e.g. Andreessen and Netscape, e.g. Khosla and Sun, etc) who are assumed to be good investors. In reality, if most of these founders put their money in standard index funds, they would have better returns adjusted for risk, but wi…
> In reality, if most of these founders put their money in standard index funds, they would have better returns adjusted for risk, but without all of the publicity that they crave. This demonstrates a lack of understanding of venture returns. Actually Khosla, Andreessen, Benchmark and the rest of the top tier account for the vast majority of the outsize returns. The "average" VC you haven't heard of, and those are th…
I guess the entire professional investment community is incompetent then for investing so little of their money in VC.
There is definitely a lack of transparency in venture funding, and studies show overall how VC's have been barely breaking even. Most of the big name investors were successful entrepreneurs (e.g. Andreessen and Netscape, e.g. Khosla and Sun, etc) who are assumed to be good investors. In reality, if most of these founders put their money in standard index funds, they would have better returns adjusted for risk, but wi…
Venture capital does a great job when it comes to the VCs' real objective function, which is to maximize for their own careers and those of their buddies. It's a mediocre investment vehicle, but it's a great gig for a 21st-century job seller. Instead of selling off prestigious civil and foreign service jobs, they're selling executive positions in fast-growing companies. Chasing "unicorns" doesn't actually work out we…
I don't think job placement is a primary motivator for a VC. Instead, it's a prestigious, well-paid, low-risk (for the VC) position, and on top of that you own a lot of high-volatility, and therefore valuable, options in the form of carried interest, for free.
> In reality, if most of these founders put their money in standard index funds, they would have better returns adjusted for risk, but without all of the publicity that they crave. This demonstrates a lack of understanding of venture returns. Actually Khosla, Andreessen, Benchmark and the rest of the top tier account for the vast majority of the outsize returns. The "average" VC you haven't heard of, and those are th…
I guess the entire professional investment community is incompetent then for investing so little of their money in VC.
There are a limited number of great, breakout startups, and they can only really utilize so much capital. Reallocating your pension fund doesn't magically create more amazing startups.
There is definitely a lack of transparency in venture funding, and studies show overall how VC's have been barely breaking even. Most of the big name investors were successful entrepreneurs (e.g. Andreessen and Netscape, e.g. Khosla and Sun, etc) who are assumed to be good investors. In reality, if most of these founders put their money in standard index funds, they would have better returns adjusted for risk, but wi…
Just like in a venture portfolio, the venture industry is characterized by a few big winners. While the industry in general may lose money, a few firms consolidate most of the profits of the entire industry. AH is one of the smartest firms, and one of the first to push the philosophy that "it is easier to train a technical founder to be ceo, than a ceo to be a technical founder". This was one of the firms that lead t…
> a few firms consolidate most of the profits of the entire industry.
The problem is you don't know which ones beforehand.
> In reality, if most of these founders put their money in standard index funds, they would have better returns adjusted for risk, but without all of the publicity that they crave. This demonstrates a lack of understanding of venture returns. Actually Khosla, Andreessen, Benchmark and the rest of the top tier account for the vast majority of the outsize returns. The "average" VC you haven't heard of, and those are th…
I guess the entire professional investment community is incompetent then for investing so little of their money in VC.
Most professional limited partners typically do a small allocation (only a few percent) to VC overall.
I guess the entire professional investment community is incompetent then for investing so little of their money in VC.
There are a limited number of great, breakout startups, and they can only really utilize so much capital. Reallocating your pension fund doesn't magically create more amazing startups.
Scarcity should drive up the price and push net returns towards those of the broad market.
There are a limited number of great, breakout startups, and they can only really utilize so much capital. Reallocating your pension fund doesn't magically create more amazing startups.
Scarcity should drive up the price and push net returns towards those of the broad market.
The thing you are missing is that it's really really hard to find the breakout startups. Even the top tier VCs don't know for certain whether a specific investment will be the breakout in their portfolio. They are betting that 1 out of n will be 1000x.
There is definitely a lack of transparency in venture funding, and studies show overall how VC's have been barely breaking even. Most of the big name investors were successful entrepreneurs (e.g. Andreessen and Netscape, e.g. Khosla and Sun, etc) who are assumed to be good investors. In reality, if most of these founders put their money in standard index funds, they would have better returns adjusted for risk, but wi…
Venture capital does a great job when it comes to the VCs' real objective function, which is to maximize for their own careers and those of their buddies. It's a mediocre investment vehicle, but it's a great gig for a 21st-century job seller. Instead of selling off prestigious civil and foreign service jobs, they're selling executive positions in fast-growing companies. Chasing "unicorns" doesn't actually work out we…
> Instead of selling off prestigious civil and foreign service jobs, they're selling executive positions in fast-growing companies.
If what you're saying has any connection to actual reality, how much do these executive positions cost?