Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

Conflicted Capital

blog.aaronkharris.com

Post reply on HN
Print view View original

51–60 of 76 posts

Re: Conflicted Capital

#51

Post by TimPC »

stanrivers wrote: post #31
908B64B197 wrote: post #19

Earlier quoted context omitted.

In Xerox case, it was the same company that wouldn't enter the personal computing market because it might impact their copy-machine market.

I've seen that happen in hiring decisions as well. Junior people are in charge of screening candidates... really strong candidates, if hired, will make the average employee look bad. So, why should the person screening the candidates suggest the strongest candidates? This is why I tend to suggest equal seniority individuals should not screen candidates. It's a subconscious thing ("He's too aggressive" "She seems like…

Most people want to hire the best candidates they can despite some of the misaligned incentives. You don't want to spend overtime on someone else's bug because you hired poorly. The risk of a smaller bonus or less promotion chances is complicated as sometimes there is more available if the teams performance improves as a whole. When you deliver on a major project the team's pie is often much larger, and even if you end up with a smaller slice of said pie you're usually better off.

Re: Conflicted Capital

#52

Post by cgb223 »

rsweeney21 wrote: post #5

Raised money from VCs for my last startup. Series A investor made all sorts of overtures about how founder friendly they were and how supportive they would be. The week after we closed our series A they told me I had to hire a COO. I asked, "You trying to get me to hire my replacement?" "No, we'd never do that. How could you even think that?" Less than two months after we hired the COO they fired me. The COO was made…

Jesus...

Did they at least buy you out or did they literally rob you of your company?

Re: Conflicted Capital

#53

Post by Comevius »

xiaolingxiao wrote: post #44
Comevius wrote: post #36

Investors for software startups are not that great if you want your business to be self-sustaining without becoming a unicorn or a Ponzi scheme. I'm not saying that participating in bubbles cannot be economically rational, but venture capital today is especially suited for making decisions that are bad for everyone involved, prioritizing future valuation over good business. It's the same growth or sustainability choi…

"Investors for software startups are not that great if you want your business to be self-sustaining without becoming a unicorn or a Ponzi scheme. " - can you elaborate on this? Gut check wise this feels correct, but I'd like to hear your thoughts.

It's nothing new, investors chase valuation over profits, which among others depends on growth because of the benefits of network effect. As a result most invested capital goes into user acquisition, and products become heavily subsidised.

This venture model is good for unicorns like Facebook, who's network effect allows it to be eventually profitable, but the rest of the industry is not profitable. But VCs are, because of their management fees and because they avoid to be the greater fools, otherwise known as the bagholders who end up paying for it. VCs tend to encourage wasteful spending in the name of valuation on salaries, rents and user acquisition. It's a Ponzi-scheme where the bagholders tend to be limited partners and employees of the funded companies.

Re: Conflicted Capital

#54

Post by pm90 »

akharris wrote: post #14
pm90 wrote: post #3

Earlier quoted context omitted.

Only slightly related to your point, but I find almost the entire VC community not one that I would want to be working with very closely with. It’s just not the kind of people I find interesting. Not that they’re not skilled or provide value, but the whole fundraising dance seems to be tiring and honestly pointless. Harkens back to an equally pointless endeavor I’ve been through before: the struggle to get good grade…

There are quite a few VC firms that model what you're talking about - for instance I think this describes what Garry's doing at Initialized. But raising money is a choice that some founders will make because their businesses require it. If you don't need it, don't raise it. If you do need it, go into the process and decision with as much information as you can get.

I think I should have phrased my comment better. I’m not opposed to the idea of raising funds to grow a company, but the way that it’s usually done today. In particular: the people that the money needs to be raised from (VCs) seem to not be the kind of down to earth engineers that I love and respect, and the process itself involves a lot of marketing fluff that I find off putting.

I am willing to accept that, it may not be possible to have such a process. Perhaps to succeed in the “real world” you absolutely need to be fantastic at marketing and pitching.

I’m trying to describe what a process would look like that I personally would find enjoyable to work with, ignoring the reality of what might actually be required.

Re: Conflicted Capital

#55

Post by robaato »

jacquesm wrote: post #43

> Founders need to understand that venture investing is a business where friendship is an input or an outcome, and not the other way around. Does anybody know how to parse this?

Yup that struck me too as poorly phrased and unclear. Maybe crystal clear to writer, but not to readers...

Re: Conflicted Capital

#56

Post by deckard1 »

TimPC wrote: post #51
stanrivers wrote: post #31

Earlier quoted context omitted.

I've seen that happen in hiring decisions as well. Junior people are in charge of screening candidates... really strong candidates, if hired, will make the average employee look bad. So, why should the person screening the candidates suggest the strongest candidates? This is why I tend to suggest equal seniority individuals should not screen candidates. It's a subconscious thing ("He's too aggressive" "She seems like…

Most people want to hire the best candidates they can despite some of the misaligned incentives. You don't want to spend overtime on someone else's bug because you hired poorly. The risk of a smaller bonus or less promotion chances is complicated as sometimes there is more available if the teams performance improves as a whole. When you deliver on a major project the team's pie is often much larger, and even if you e…

If any of that were true, we'd have universal healthcare and live in a utopia. Crabs in a bucket. If you're focused on the ladder, you're not going to hire someone that has the potential of making you look bad.

Re: Conflicted Capital

#57

Post by 908B64B197 »

stanrivers wrote: post #31
908B64B197 wrote: post #19

Earlier quoted context omitted.

In Xerox case, it was the same company that wouldn't enter the personal computing market because it might impact their copy-machine market.

I've seen that happen in hiring decisions as well. Junior people are in charge of screening candidates... really strong candidates, if hired, will make the average employee look bad. So, why should the person screening the candidates suggest the strongest candidates? This is why I tend to suggest equal seniority individuals should not screen candidates. It's a subconscious thing ("He's too aggressive" "She seems like…

One way to offset that is to make sure that team performance is as much of an incentive as individual performance.

A stock compensation helps in that regard: hiring strong individuals will help ship a better product faster and should increase the stock value. Meanwhile traditional stack-ranking and a mostly salary compensation will encourage individuals to make sure they are seen as the top performer no matter what.

Re: Conflicted Capital

#58

Post by sebmellen »

k__ wrote: post #28
sebmellen wrote: post #21

Earlier quoted context omitted.

You might not realize that a 5% stake with two board seats is much more powerful than a 25% stake with one board seat. Corporate dynamics are weird.

Ah, okay. I think, in Germany it's different, sorry.

Ganz ok. Ist ja sehr verwirrend.

Re: Conflicted Capital

#59

Post by evancharles »

jacquesm wrote: post #43

> Founders need to understand that venture investing is a business where friendship is an input or an outcome, and not the other way around. Does anybody know how to parse this?

My guess is he means that VCs don't make decisions out of friendship.

Re: Conflicted Capital

#60

Post by InitialLastName »

DenisM wrote: post #47
rsweeney21 wrote: post #5

Raised money from VCs for my last startup. Series A investor made all sorts of overtures about how founder friendly they were and how supportive they would be. The week after we closed our series A they told me I had to hire a COO. I asked, "You trying to get me to hire my replacement?" "No, we'd never do that. How could you even think that?" Less than two months after we hired the COO they fired me. The COO was made…

Being friendly is much like being powerful - if you have to say that you are, you aren't. (with tons of apologies to Margaret Thatcher)

Same thing with honest.
Post reply on HN