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VCs are liars. And so am I.

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Re: VCs are liars. And so am I.

#81

Post by redthrowaway »

cookiecaper wrote: post #41

Most people should not be told just to give up completely. I'm not sure why the OP wants to focus on "you just don't have what it takes to run a company" instead of "your presentation skills were lacking, rehearse more", or something like that. For many entrepreneurs, the offense is not in "x needs improvement", but "We believe you are too stupid to improve on x". Even if you believe that, why not just say "x needs i…

>There is nothing productive about "you're incapable, just give up"

I disagree. For some people, hard as it is to take, this is exactly the right advice. Some people simply aren't cut out for what they're trying to do, and changing tack sooner rather than later is the optimal course of action. Any advice which precipitates that decision is therefore good advice, no matter how hurtful it might be to receive.

Re: VCs are liars. And so am I.

#82

Post by [deleted] »

cookiecaper wrote: post #41

Most people should not be told just to give up completely. I'm not sure why the OP wants to focus on "you just don't have what it takes to run a company" instead of "your presentation skills were lacking, rehearse more", or something like that. For many entrepreneurs, the offense is not in "x needs improvement", but "We believe you are too stupid to improve on x". Even if you believe that, why not just say "x needs i…

[deleted]

Re: VCs are liars. And so am I.

#83

Post by jayliew »

1123581321 wrote: post #77
rexreed wrote: post #75

Earlier quoted context omitted.

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.

Someone comes up to you and say, "I have a GREAT idea, it's going to be the next Google / Facebook / Twitter / etc. I just need a CTO / web developer to build it. Quit your job, joined me full time now."

Would you? If you've heard that a lot, you probably won't. There's nothing wrong per se - the person could be right, but it's more likely that he is wrong[1]. But something could be said about this person's approach to finding a co-founder, i.e. if he's going about his co-founder search this way, he's probably doing other more serious mistakes other battle-hardened entrepreneurs have learned the hard way.

It's a mental decision-making shortcut. Don't get hung up over little things such as the OP's actual words, like the way the interviewee answers a questions, fidgets, etc. It's just a mental shortcut signal. Sure the OP could be wrong. But he could also be right. How do you know you're not wrong? VCs take a million meetings, make a million decisions, they have LOTS of data to test how well they're doing. They are not random schmucks. Clearly they think about this day and night. Is it possible that they're all wrong and you're right?

Also - I'm not in VC so I can't comment from a position of being an insider, but consider this: if you were a stock trader with an uber stock trading algorithm, would you share it? No. I don't see why VCs would share their "algorithm" either. They're competing with the other VCs for deals in startups, and they each have their secret sauce. They also compete with each other for more investor money (from their LPs).

Lastly, consider this: would any anti-spam vendor fully disclose all their algorithms to detect spam? No, that would be dumb, because then spammers would know exactly how to circumvent them.

[1] Fact: most startups fail

Re: VCs are liars. And so am I.

#84

Post by [deleted] »

1123581321 wrote: post #77
rexreed wrote: post #75

Earlier quoted context omitted.

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.

[deleted]

Re: VCs are liars. And so am I.

#85

Post by 1123581321 »

jayliew wrote: post #83
1123581321 wrote: post #77

Earlier quoted context omitted.

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.

Someone comes up to you and say, "I have a GREAT idea, it's going to be the next Google / Facebook / Twitter / etc. I just need a CTO / web developer to build it. Quit your job, joined me full time now." Would you? If you've heard that a lot, you probably won't. There's nothing wrong per se - the person could be right, but it's more likely that he is wrong[1]. But something could be said about this person's approach…

I think you have gone off-topic somewhere. Originally this was about whether this VC's shortcuts were tied to likelihood of a good return; now you are either saying not much works or they know what they are doing, i.e. looking for fidgeting works. Or maybe both or neither? I've been pitched on stupid "next Facebook" ideas, tried to make one (didn't go anywhere), am now developing one as a consultant that is going somewhere and also analyzed securities professionally so I understand some of these difficulties, but my concern is that the essay author's assumption (some in-interview behaviors tend to represent bigger problems that sink startups) is recognized as the missing link between the interview behavior and declining to fund.

Re: VCs are liars. And so am I.

#87

Post by jandrewrogers »

nirvana wrote: post #15

Do angels require liquidation preferences and other arbitrary terms (like paying their lawyer fees) that VCs do? Do angels impose bad decisions? (I've seen more than one company lose %50 of its ultimate market value as a result of a VC imposing bad decisions on them.) Are angels more or less likely to follow the heard or be arbitrary? (EG: he's nervous while pitching us therefore, he must be hiding something) Since A…

Many startups are not website hacked together over a few months, they require much more time and more capital. Even limiting it to the domain of software-based services, applications that are based on genuinely new software technology still require building an enormous amount of software infrastructure that cannot be slapped together with a clever bit of scripting. Most of the really interesting stuff requires capital because it requires a lot of very careful and very high-end code development.

I would strongly recommend bootstrapping if possible but that is not feasible for many cases. Some people conflate the " for website" startups with the actual technology startups. If your startup requires shipping a 100k lines of novel and bulletproof code, you are not going to be doing it for less than a couple million bucks. Software development of the purest kind is expensive but it also produces much of the interesting value.

Re: VCs are liars. And so am I.

#88

Post by cookiecaper »

redthrowaway wrote: post #81
cookiecaper wrote: post #41

Most people should not be told just to give up completely. I'm not sure why the OP wants to focus on "you just don't have what it takes to run a company" instead of "your presentation skills were lacking, rehearse more", or something like that. For many entrepreneurs, the offense is not in "x needs improvement", but "We believe you are too stupid to improve on x". Even if you believe that, why not just say "x needs i…

>There is nothing productive about "you're incapable, just give up" I disagree. For some people, hard as it is to take, this is exactly the right advice. Some people simply aren't cut out for what they're trying to do, and changing tack sooner rather than later is the optimal course of action. Any advice which precipitates that decision is therefore good advice, no matter how hurtful it might be to receive.

Some people may need to put in a lot of work at something to become competent, but I don't believe that wholesale just some people can never succeed at something as generic as entrepreneurship unless there is a physical or mental disability or some really exceptional background involved. Most normal people really can become successful entrepreneurs if they try hard enough.

As the OP said, just saying, "You'll never make it, just give up" is very unlikely to yield positive results. So even if you think the founder really will never make it, why is that an important criticism to share? They may surprise you if you actually provide helpful criticism on action points where real progress can occur. "Stop being you" is, of course, not actionable.

Re: VCs are liars. And so am I.

#89

Post by cft »

shard wrote: post #55
cookiecaper wrote: post #39

Earlier quoted context omitted.

Your ellipses excludes some important context: >people that are past the age of 50 and are trying to start a mobile, local, social startup but really are not capable Not "all people past the age of 50 -are- incapable", just people who are so incapable they don't recognize the credibility they lack due to external influential but not necessarily exclusive factors like their age, background, and appearance. I think all…

Ageism is just as inappropriate as sexism or racism. The tech industry seems to be going through growing pains with respect to sexism, but ageism is apparently still widely acceptable.

At some point in life it becomes hard to do something you have not done before. You can get better at what you are already doing (e.g. Going from 20bn to 40bn like Warren Buffett after 60), but it's harder to go from 0 to 1m, since this involves new stuff, a qualitative change.

Re: VCs are liars. And so am I.

#90

Post by [deleted] »

rexreed wrote: post #62
raffi wrote: post #53

shrug I used to be part of the "please give me permission to start a business by letting me into your seed program" crowd. My company made it to the final round for a program and the end feedback was they didn't think we could deliver on what we were building. At first, I took it as le insult. An insult against my mad pr0grammer skills. In hindsight, I look at it as: my technology may have been OK, but it wasn't asto…

So are you saying you would rather have not heard the honest, but negative feedback at all? It sounds like in hindsight you are grateful for the honesty. Would n-years of lying have helped you any more? Would you have the insight you have now if you were simply lied to and told "great team - show me more traction", when they really think "gosh, what a sucky team"?

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