VCs are liars. And so am I. • Hacker News Board

Re: VCs are liars. And so am I.

#71

Post by 1123581321 » Thu, Jun 14, 2012, 3:26 AM UTC

jayliew wrote: post #69

notJim wrote: post #65

Earlier quoted context omitted.

The most-analogous situation I've been with this is in hiring, and if one of my coworkers gave age or "fidgeting in chair" as a reason not to hire, I would call them out on it. I'm sorry, but that's simply not a valid measure of competence. If these are the reasons VCs choose not to invest in companies, then the reason VCs lie is because their reasoning is bullshit, and they don't want to get called out on it.

1. The value/measure of a VC to their bosses (their LP / investors) are whether or not they provide a good return. Period. Their bosses do not incentivize them based on great interviewing skills. There is nothing to be "called out" for here. They could have the crappiest interviewing skills, as long as they make their investors money. This is not a contest on meritocracy, or skill, as it pertains to interviewing. 2.…

Regarding #1. The author of the essay left out that he and the other VCs have learned to identify behavior in the interview that equates to ability, or lack of ability, to make money. For example, the fidgeting he observes in response to a certain question indicates that the founder is less likely to make money because of an unaddressed problem, possibly unaddressable due to the founder's character or way of doing business.

The essay jumps straight from interview behavior to a decision to not fund, leaving the reader to work out what is the assumption. There is simply no other reason the VC would consider such behavior important.

Re: VCs are liars. And so am I.

#72

Post by notJim » Thu, Jun 14, 2012, 3:29 AM UTC

cookiecaper wrote: post #67

notJim wrote: post #63

Earlier quoted context omitted.

The problem is associating "50+" with "cannot build social startup". If the 50+ part was irrelevant, then he wouldn't have mentioned it.

As I said, I read that line as an illustration of an obvious incongruity between the company the founder is trying to pitch and the perception of the background and qualifications of the founder. Age plays into this, and if the 50+ founder doesn't have a strong history in compsci/startups/whatever, the assumptions generally attached to 50+-year-old sales people will stick. As such, the founder will need to recognize…

> Generalizations and stereotypes are a reality that founders must shape to their advantage.

I think this is ultimately true. Whether the bias is justified or not, the best founders will be aware of it and work to make up for it. The same could be said for bias against women in technology, for example.

That being said, I still believe this bias is wrong, and am concerned that this VC so publicly shared it, because to me, his publicly sharing it indicates that he's not even aware there's anything wrong with it. I do not believe a 50 year-old should have to work any harder than a 24 year-old in proving that they have what it takes to run a social startup.

Re: VCs are liars. And so am I.

#73

Post by notJim » Thu, Jun 14, 2012, 3:32 AM UTC

1123581321 wrote: post #71

jayliew wrote: post #69

Earlier quoted context omitted.

1. The value/measure of a VC to their bosses (their LP / investors) are whether or not they provide a good return. Period. Their bosses do not incentivize them based on great interviewing skills. There is nothing to be "called out" for here. They could have the crappiest interviewing skills, as long as they make their investors money. This is not a contest on meritocracy, or skill, as it pertains to interviewing. 2.…

Regarding #1. The author of the essay left out that he and the other VCs have learned to identify behavior in the interview that equates to ability, or lack of ability, to make money. For example, the fidgeting he observes in response to a certain question indicates that the founder is less likely to make money because of an unaddressed problem, possibly unaddressable due to the founder's character or way of doing bu…

> There is simply no other reason the VC would consider such behavior important.

Unless maybe the VC is in irrational human being who has biases just like everyone else.

Unless they've actually done studies on whether fidgeting is a good indication of company performance, this statement is ludicrous.

Re: VCs are liars. And so am I.

#74

Post by notJim » Thu, Jun 14, 2012, 3:48 AM UTC

jayliew wrote: post #69

notJim wrote: post #65

Earlier quoted context omitted.

The most-analogous situation I've been with this is in hiring, and if one of my coworkers gave age or "fidgeting in chair" as a reason not to hire, I would call them out on it. I'm sorry, but that's simply not a valid measure of competence. If these are the reasons VCs choose not to invest in companies, then the reason VCs lie is because their reasoning is bullshit, and they don't want to get called out on it.

1. The value/measure of a VC to their bosses (their LP / investors) are whether or not they provide a good return. Period. Their bosses do not incentivize them based on great interviewing skills. There is nothing to be "called out" for here. They could have the crappiest interviewing skills, as long as they make their investors money. This is not a contest on meritocracy, or skill, as it pertains to interviewing. 2.…

1. Essentially, you are correct here, in that being biased against seemingly irrelevant details seems to work just fine for VCs. That being said, a) these biases may be preventing them from making optimal decisions (instead, they're making good enough decisions.) and b), I hold my peers to a certain standard of ethics like not discriminating against people. I suspect that VCs do too.

2. You said we should give credit for the OP giving feedback, and that VCs lie because they don't like getting snarky responses. I am arguing that a) this response is deserving of a response like nirvana's because it reveals that VCs make judgments based on unquestioned biases and irrelevant details, and b) VCs don't give feedback because it would reveal that their processes are biased and based on irrelevant details.

3. Good candidates do not want interviewers who look past all their flaws, and that's not what I was trying to say. Good candidates want relevant feedback. "You're too old to do this job" is not relevant feedback. "You don't understand $x well enough to do this job" is great feedback.

Also, in the real world, there's bias and it sucks, and great candidates/founders will be aware of this, and work to combat it. That doesn't mean I'm going to throw up my hands and give up on trying to eliminate bias.

Re: VCs are liars. And so am I.

#75

Post by rexreed » Thu, Jun 14, 2012, 3:49 AM UTC

1123581321 wrote: post #71

jayliew wrote: post #69

Earlier quoted context omitted.

1. The value/measure of a VC to their bosses (their LP / investors) are whether or not they provide a good return. Period. Their bosses do not incentivize them based on great interviewing skills. There is nothing to be "called out" for here. They could have the crappiest interviewing skills, as long as they make their investors money. This is not a contest on meritocracy, or skill, as it pertains to interviewing. 2.…

Regarding #1. The author of the essay left out that he and the other VCs have learned to identify behavior in the interview that equates to ability, or lack of ability, to make money. For example, the fidgeting he observes in response to a certain question indicates that the founder is less likely to make money because of an unaddressed problem, possibly unaddressable due to the founder's character or way of doing bu…

The reality, as indicated in a recent Kauffman report is that the majority (actually, a super-majority) of venture capital forms perform poorly to the extent that they are not worth the management fees or continued investment. [1]

This would indicate that VCs, on average, make poor judgement on the quality of their investments. The use of arbitrary indicators and qualitative characteristics as a primary decision factor for who they invest in or not would seem to be contributory to their overall poor performance. Perhaps VCs should learn to resist their early (and probably incorrect) assumptions about entrepreneurs based on age, nervousness, or other factors and instead look to the underlying premise of the business and existing capabilities of the management team. Or at least they should realize that they are not particularly good evaluators of those characteristics, based on their past performance, and factor that in accordingly.

[1] http://www.kauffman.org/newsroom/institutional-limited-partn...

Re: VCs are liars. And so am I.

#76

Post by [deleted] » Thu, Jun 14, 2012, 4:01 AM UTC

[deleted]

Re: VCs are liars. And so am I.

#77

Post by 1123581321 » Thu, Jun 14, 2012, 4:05 AM UTC

rexreed wrote: post #75

1123581321 wrote: post #71

Earlier quoted context omitted.

Regarding #1. The author of the essay left out that he and the other VCs have learned to identify behavior in the interview that equates to ability, or lack of ability, to make money. For example, the fidgeting he observes in response to a certain question indicates that the founder is less likely to make money because of an unaddressed problem, possibly unaddressable due to the founder's character or way of doing bu…

The reality, as indicated in a recent Kauffman report is that the majority (actually, a super-majority) of venture capital forms perform poorly to the extent that they are not worth the management fees or continued investment. [1] This would indicate that VCs, on average, make poor judgement on the quality of their investments. The use of arbitrary indicators and qualitative characteristics as a primary decision fact…

We don't know the VCs have better indicators available. The mutual fund industry also interviews CEOs but largely invests based on data, and it has the same performance problems even among niche micro-cap funds.

Re: VCs are liars. And so am I.

#78

Post by 1123581321 » Thu, Jun 14, 2012, 4:08 AM UTC

notJim wrote: post #73

1123581321 wrote: post #71

Earlier quoted context omitted.

Regarding #1. The author of the essay left out that he and the other VCs have learned to identify behavior in the interview that equates to ability, or lack of ability, to make money. For example, the fidgeting he observes in response to a certain question indicates that the founder is less likely to make money because of an unaddressed problem, possibly unaddressable due to the founder's character or way of doing bu…

> There is simply no other reason the VC would consider such behavior important. Unless maybe the VC is in irrational human being who has biases just like everyone else. Unless they've actually done studies on whether fidgeting is a good indication of company performance, this statement is ludicrous.

It's not a ludicrous statement. We must assume the VC wants to make money and thinks it is an indicator, just like we assume a plumber wants to fix pipes even if he uses a divination rod to find leaks.

There is a difference between intent to be rational and actually making good decisions, and they don't have to go together.

Re: VCs are liars. And so am I.

#79

Post by rexreed » Thu, Jun 14, 2012, 4:08 AM UTC

javajosh wrote: post #57

jbreinlinger wrote: post #49

Earlier quoted context omitted.

Thanks for the feedback ;)

There is a sense of sustained confidence, of inevitability, of capability, that investors must look for in their founders. A person like this is bound to have a history of success, large and small. They can't help it. And none of these qualities are correlated to personality type or financial status. Such people are simply incessant creators. They cannot stop creating. You might try to stop them creating, and they wo…

What I usually say:

Think big. Start small. Iterate often. If you aren't failing, you aren't learning (or trying).

Money from customers beats money from investors. See if you can get that. And if you can't, find another metric for success.

Re: VCs are liars. And so am I.

#80

Post by dsrguru » Thu, Jun 14, 2012, 4:32 AM UTC

notJim wrote: post #65

jayliew wrote: post #56

Earlier quoted context omitted.

This response just proves the OP's point. Give him credit for opening up, instead of this response (which is not constructive), and comes off as an attack back at him. For VCs to make money, they need to have as many founders like them, so they lie .. exactly because of responses like this. It does the VCs more harm to be honest with what they think[1], because it pisses off the founders. [1] Sure they could be wrong…

The most-analogous situation I've been with this is in hiring, and if one of my coworkers gave age or "fidgeting in chair" as a reason not to hire, I would call them out on it. I'm sorry, but that's simply not a valid measure of competence. If these are the reasons VCs choose not to invest in companies, then the reason VCs lie is because their reasoning is bullshit, and they don't want to get called out on it.

While VCs may very well misjudge prospective startups far too often, choosing not to invest in a company because you have a negative impression of the founders is not a bullshit reason for passing. Reading people is a very important skill, part of which is subconcious and, therefore, very difficult to explain to others. It's such an important skill that one-on-one interviews are often still done in person, even though the telephone has been around for over 130 years.