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VCs mostly invest other peoples' money, not their own. The "rich people" are often pension funds, endowments, and other pools of capital rather than individual morons. VCs themselves probably suffer from chronic overestimation of their own intelligence, but there just aren't many good signals at the stage of companies they're looking at. No customers, no revenue; often just an idea and hopefully a prototype. GitHub s…
> the bar for signal quality is just really low
During the Covid-era when money was flowing more readily I worked with a series A startup founder on improving their unit economics. They were spending a lot on customer acquisition but after my analysis I realized that they were losing money on each customer. It didn't matter how long you ran the timeline, with churn they never broke even on new customers. When I recommended cutting marketing spend, they told me that they needed to show topline growth -- because that's what investors were looking for. And they knew from experience that the investors didn't dig into the numbers enough to realize they were growing themselves broke.