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Some of this is actually the sign of a bubble in startup investing. When the market is tough, investors typically do much more diligence (they are more careful
by sib 11y ago
Some of this is actually the sign of a bubble in startup investing. When the market is tough, investors typically do much more diligence (they are more careful and they have more leverage). When the market is superheated, there's so much money chasing any deal that looks remotely interesting that any investor who wants to do real diligence is basically shut out by the investors who are willing to put up a check without it. FOMO overcomes the duty of care.
It's like buying a house in a hot market; cash offers with no contingencies win out over "smart" buyers who want to know what they're getting.
- wwwdonohue 11y agoWas this like that? Because it seems like Theranos had a pretty tough time finding investors, or at least reputable ones. GV laughed them off. As did all the life-sciences firms.
- sib 11y agoIt may be a cousin to it. In this case, perhaps second-tier investors saw it as an opportunity to get into a hot sector, with some comfort (and reduced diligence) because there were investors like Tim Draper involved.