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VCs aren’t your friends

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Re: VCs aren’t your friends

#331

Post by vidarh »

vessenes wrote: post #323
earnesti wrote: post #295

Earlier quoted context omitted.

> 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.

Yep I'm sure I can speak for all of the $100M-fund work out of your home office types. Or at least > 99%. The Venn overlap between "content with promising people you'll make money for them believably", "too cheap to spend on office / marketing because your fake pitch was so good nobody will need it to feel comfortable", "enough executive function to make believable calls on believable companies while doing no sourcin…

I've not lost billions twice, but have definitely lost tens of millions, and worked alongside at lost one person who lost a billion once... It's an "interesting" business to be in...

Re: VCs aren’t your friends

#332

Post by MichaelZuo »

data_maan wrote: post #223
MichaelZuo wrote: post #45

Earlier quoted context omitted.

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?

A stable super genius is quite literally even better.

Re: VCs aren’t your friends

#333

Post by pjlegato »

davedx wrote: post #150
YetAnotherNick wrote: post #32

Earlier quoted context omitted.

Nikola Tesla received funds, in fact quite a bit of it. JP Morgan invested $150,000(~$5M in today terms) for just one project[1]. He died penniless because of his too much confidence in his ideas and he overused the money he got. Even with hindsight, funding Tesla was a bad decision for investors return wise. [1]: https://en.wikipedia.org/wiki/Wardenclyffe_Tower

> Even with hindsight, funding Tesla was a bad decision for investors return wise. He invented the brushless motor and types of transformers that were instrumental to building Westinghouse's empire. When Westinghouse was running low on money Tesla tore up the patents he'd sold to him to save the company. Tesla was definitely not a "bad decision for investors", the ROI for his inventions is some significant fraction o…

Investors don't operate charity funding to accrue value for the mutual collective benefit of some global system.

Investors MUST accrue ROI to their own account and/or that of their own investors, the limited partners. If they do not, they're done. Going bankrupt personally while providing huge value to the world at large is a TERRIBLE outcome for any investor.

Tesla invented great things that provide huge positive ROI to the global electrical system, yes. Nonetheless, giving Tesla 150k was a rather poor investment for JP Morgan. If Morgan had made many more such bad investments, he'd be bankrupt, and unable to fund any further value for anyone.

Re: VCs aren’t your friends

#334

Post by mrguyorama »

humansareok1 wrote: post #252
alephnerd wrote: post #205

Earlier quoted context omitted.

VC Analyst Internships are very well paid because they are competing with IB Analyst and FAANG SWE/PM internship offers. Imo the easiest way to get a VC Analyst internship is to do EECS@Cal/MIT or CS@Stanford with a Business (or in Cal+Stanford's case Econ or MS&E) minor, do a SWE internship in Frosh summer, and be prominent in your university's entrepreneurship or hackathon scene. That said, my question would be WHY…

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.

When you've been told all your life that you are better than others, you believe it

Re: VCs aren’t your friends

#335

Post by mrguyorama »

michaelt wrote: post #69
fsloth wrote: post #61

Earlier quoted context omitted.

In the tweet the wrong date was not a red flag due to lack of detail as such, but because it signaled: a) they had been raising for a while now b) the recipient was not their first choice (ouch, you can hear the ego taking a glancing hit) So ”the market” did not consider the startup investable, and they did not think about their sales pitch strategically enough … this VC would have liked to be sold to, not just a sou…

> the recipient was not their first choice (ouch, you can hear the ego taking a glancing hit) It baffles me that a person successful enough to get put in charge of an investment fund can have such incredibly thin skin. How would you even function in the real world if you were so easily offended?

>How would you even function in the real world if you were so easily offended?

They DON'T function in the real world. Rich people, especially the uber new rich in SV do not interact with the real world, but rather with a purchased world from companies selling "lifestyle". They have people bring them groceries that they never see the bill for, because everything is handled by their accountant. They are thin skinned, so they surround themselves with yesmen to continually tell them they are awesome. They write trite, useless blog posts about "working harder" and their army of loyal sycophants eat it up.

Re: VCs aren’t your friends

#336

Post by light_triad »

As one commenter mentioned it comes down to having suitable information exchange between the parties. Some VC said no to most big successes in SV at some point.

I recommend watching a pitch competition with lesser known VCs and companies like Pitchforce. You realize how difficult it is to understand what people are building and why it could be big. Most VCs will not be users of the product or experts in the vertical and will use other signals, however imperfect or limited as is the case here.

https://pitch-force.com/

Re: VCs aren’t your friends

#337

Post by ska »

vidarh wrote: post #294
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.

It really varies. I worked for a VC for years, and it often takes substantial reputation to be able to demand fees like that. It also takes substantial reputation to be able to get high enough quality inbound dealflow to be able to do so with few people. E.g. I know of a decent number of funds that size or smaller with a staff in the range of 10, a few with well above that. Even at 2% it's suddenly not so much money…

> On top of that comes often quite substantial requirements to buy into the fund for at least senior staff

This is a clearly beneficial requirement, but your point is fair about it leading to 'on-paper' comp looking high. But I'd even go so far as to say that the majority of comp for senior people should be contingent (not sure if that's typical).

Re: VCs aren’t your friends

#338

Post by matthewdgreen »

alephnerd wrote: post #267
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.

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…

Yes and no. Ability to enter a selective school sorts people based on a specific collection of attributes. Those certainly include intelligence and execution ability. But they also include the ability to slavishly follow rules and optimize ones' life to a specific college acceptance formula between the ages of 14-18. (Being at least reasonably wealthy and having educated parents helps too!) The cost is that this approach filters out a lot of extremely brilliant, creative people who don't want to "slavishly follow the formula", or just have normal teenage problems with authority.

Re: VCs aren’t your friends

#339

Post by vidarh »

ska wrote: post #337
vidarh wrote: post #294

Earlier quoted context omitted.

It really varies. I worked for a VC for years, and it often takes substantial reputation to be able to demand fees like that. It also takes substantial reputation to be able to get high enough quality inbound dealflow to be able to do so with few people. E.g. I know of a decent number of funds that size or smaller with a staff in the range of 10, a few with well above that. Even at 2% it's suddenly not so much money…

> On top of that comes often quite substantial requirements to buy into the fund for at least senior staff This is a clearly beneficial requirement, but your point is fair about it leading to 'on-paper' comp looking high. But I'd even go so far as to say that the majority of comp for senior people should be contingent (not sure if that's typical).

Yes, but it's tricky here because often it's upfront. The only reason it wasn't our case was that carry was unusually spread out over the team and the buying requirement was for everyone, so the LPs accepted that as long as there was a clear plan in place for everyone to buy in, it was ok.

Note that given salary levels this means that over the 10 year runtime of the fund, most of us would be giving up nearly ~20% of our 10 year aggregate gross salary, most of us within 4-5 years. My gross salary during that period was not much different from in my job before - it was a pretty steep sacrifice for a shot at that carry.

Re: VCs aren’t your friends

#340

Post by ska »

vidarh wrote: post #339
ska wrote: post #337

Earlier quoted context omitted.

> On top of that comes often quite substantial requirements to buy into the fund for at least senior staff This is a clearly beneficial requirement, but your point is fair about it leading to 'on-paper' comp looking high. But I'd even go so far as to say that the majority of comp for senior people should be contingent (not sure if that's typical).

Yes, but it's tricky here because often it's upfront . The only reason it wasn't our case was that carry was unusually spread out over the team and the buying requirement was for everyone , so the LPs accepted that as long as there was a clear plan in place for everyone to buy in, it was ok. Note that given salary levels this means that over the 10 year runtime of the fund, most of us would be giving up nearly ~20% o…

> Yes, but it's tricky here because often it's upfront.

Fair. These sorts of things are usually pretty nuanced.

> it was a pretty steep sacrifice for a shot at that carry.

I totally get that, but it also seems like the ideal balance of interests. To many obvious failure modes if you don't have enough skin in the game. Of course that works the other way too, the upside in good-to-great cases have to make it make sense.

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