6 ms·

> don't get funding from clueless VCs Usually if people put money down and there is an entire industry around it, the collective mindset of that industry is cl

> don't get funding from clueless VCs Usually if people put money down and there is an entire industry around it, the collective mindset of that industry is close to optimal. They might be wrong on a couple of important issues. They also might be very wrong, but they're still close to optimal by definition because nobody's doing it better. TL;DR: calling entire world-class industries clueless implies naiveté.

tjholowaychuk 10y ago
Removed my "clueless" generalization. It's anecdotal, but most that I've encountered (relating to SaaS products) don't have much of a technical background at all, just throwing money at buzzwords, meanwhile they think critical services such as logging aren't worth going after, just because it's not trendy. I'm sure it varies from industry to industry.
- keithwhor 10y ago
  Hey TJ. It's easy to feel that way coming from a deeply technical background, but trust me, money isn't "thrown" anywhere. It's a high-risk high-reward game where one company (esp. at seed stage) will end up returning the majority of your fund, and every company has to potentially be that company, so outlandish buzzwords that might be the next big thing more often draw capital. Investors are people, paid to move money, with targets to hit and limited partners to provide returns for. In the same way you or I wouldn't accept a PR that doesn't align with the larger vision of a framework or library we've written, VCs don't want to fund a company if the leaders of the company aren't empathetic with the VCs goals. It's about aligning interests. The goal is really to align technology and people - create something technically amazing, with huge potential, and align yourself and your vision with those who have the capital to fund you. You don't have to do the dance if you don't want to, but I'd be hesitant to be overly dismissive of it.
- jzwinck 10y ago
  Logging is indeed a critical part of many processes, but it's very hard to do it in a way that pleases everyone. Most loggers don't even support renewable inputs like bamboo. Before you think this is a mere joke, consider that normal people don't even know what computer logging is, much less want to become a user of a logging service. The addressable eyeballs are few, and it's a market chock full of free products already. Plus the most serious consumers always end up with a bespoke proprietary solution.
  - deleted 10y ago
    [deleted]
- alexqgb 10y ago
  Serious money is rarely thrown at anyone - no matter how buzzy their language - without some sign of a defensible offering that has product / market fit in a sector with healthy prospects + a team that can clearly execute against the opportunity. While it's easy to find sensational stories to the contrary, bear in mind that sensationalism is a cheap path to sales, meaning not every narrator is reliable. Indeed, if you start raising money yourself you'll quickly discover how unreliable many "sources" can be.
ian0 10y ago
While true, assuming the collective mindset of an industry runs close to optimal just because its there is also naive. VCs themselves bet on industries being un-optimised! Plus in evaluating an industry you would need to see it in context. So returns for investors VS similar asset classes. Or in this case how VC funding compares to other funding methods for founders under relevant circumstances - and looking at relevant metrics (pace of growth, sanity etc).
- dllthomas 10y ago
  > VCs themselves bet on industries being un-optimised! And they're usually wrong.
calchris42 10y ago
In finance this is called efficient market hypothesis. And as I understand, generally considered false. From Efficient Market Hypothesis: Is The Stock Market Efficient? | Investopedia http://www.investopedia.com/articles/basics/04/022004.asp#ixzz4QmzFc26W http://www.investopedia.com/articles/basics/04/022004.asp#ix... "Conclusion It's safe to say the market is not going to achieve perfect efficiency anytime soon. For greater efficiency to occur, the following criteria must be met: (1) universal access to high-speed and advanced systems of pricing analysis, (2) a universally accepted analysis system of pricing stocks, (3) an absolute absence of human emotion in investment decision-making, (4) the willingness of all investors to accept that their returns or losses will be exactly identical to all other market participants. It is hard to imagine even one of these criteria of market efficiency ever being met."
- nostrademons 10y ago
  I wouldn't say it's generally considered false, considering that the company founded on this assumption - Vanguard - is now the largest fund in the U.S. and second largest asset manager in the world. Markets are interesting, though, in that the more people believe they are efficient, the more inefficiencies creep in, and the more people believe they are inefficient, the more they become efficient. When everyone assumes everyone else has found all the opportunities, nobody bothers to look, and so there are lots of undiscovered opportunities to cash in on. When everyone assumes they can get rich finding opportunities, they bid up prices to very close to their "true" value, and the profit opportunities disappear. It's a self-correcting system. The question of how widely believed the EMH is itself suffers from selection bias. People who believe markets are efficient don't enter the financial industry, they give their money to Vanguard to manage. That means that everyone in the financial industry, by definition, believes that they can make better-than-average returns, otherwise they wouldn't be in the industry. And then by returns, most of them are wrong, but that also doesn't matter because the few who are right are the ones who survive to play the next round.

tjholowaychuk 10y ago

Removed my "clueless" generalization. It's anecdotal, but most that I've encountered (relating to SaaS products) don't have much of a technical background at all, just throwing money at buzzwords, meanwhile they think critical services such as logging aren't worth going after, just because it's not trendy. I'm sure it varies from industry to industry.

keithwhor 10y ago
Hey TJ. It's easy to feel that way coming from a deeply technical background, but trust me, money isn't "thrown" anywhere. It's a high-risk high-reward game where one company (esp. at seed stage) will end up returning the majority of your fund, and every company has to potentially be that company, so outlandish buzzwords that might be the next big thing more often draw capital. Investors are people, paid to move money, with targets to hit and limited partners to provide returns for. In the same way you or I wouldn't accept a PR that doesn't align with the larger vision of a framework or library we've written, VCs don't want to fund a company if the leaders of the company aren't empathetic with the VCs goals. It's about aligning interests. The goal is really to align technology and people - create something technically amazing, with huge potential, and align yourself and your vision with those who have the capital to fund you. You don't have to do the dance if you don't want to, but I'd be hesitant to be overly dismissive of it.
jzwinck 10y ago
Logging is indeed a critical part of many processes, but it's very hard to do it in a way that pleases everyone. Most loggers don't even support renewable inputs like bamboo. Before you think this is a mere joke, consider that normal people don't even know what computer logging is, much less want to become a user of a logging service. The addressable eyeballs are few, and it's a market chock full of free products already. Plus the most serious consumers always end up with a bespoke proprietary solution.
- deleted 10y ago
  [deleted]
alexqgb 10y ago
Serious money is rarely thrown at anyone - no matter how buzzy their language - without some sign of a defensible offering that has product / market fit in a sector with healthy prospects + a team that can clearly execute against the opportunity. While it's easy to find sensational stories to the contrary, bear in mind that sensationalism is a cheap path to sales, meaning not every narrator is reliable. Indeed, if you start raising money yourself you'll quickly discover how unreliable many "sources" can be.

ian0 10y ago

While true, assuming the collective mindset of an industry runs close to optimal just because its there is also naive. VCs themselves bet on industries being un-optimised! Plus in evaluating an industry you would need to see it in context. So returns for investors VS similar asset classes. Or in this case how VC funding compares to other funding methods for founders under relevant circumstances - and looking at relevant metrics (pace of growth, sanity etc).

dllthomas 10y ago
> VCs themselves bet on industries being un-optimised! And they're usually wrong.

calchris42 10y ago

In finance this is called efficient market hypothesis. And as I understand, generally considered false. From Efficient Market Hypothesis: Is The Stock Market Efficient? | Investopedia http://www.investopedia.com/articles/basics/04/022004.asp#ixzz4QmzFc26W http://www.investopedia.com/articles/basics/04/022004.asp#ix... "Conclusion It's safe to say the market is not going to achieve perfect efficiency anytime soon. For greater efficiency to occur, the following criteria must be met: (1) universal access to high-speed and advanced systems of pricing analysis, (2) a universally accepted analysis system of pricing stocks, (3) an absolute absence of human emotion in investment decision-making, (4) the willingness of all investors to accept that their returns or losses will be exactly identical to all other market participants. It is hard to imagine even one of these criteria of market efficiency ever being met."

nostrademons 10y ago
I wouldn't say it's generally considered false, considering that the company founded on this assumption - Vanguard - is now the largest fund in the U.S. and second largest asset manager in the world. Markets are interesting, though, in that the more people believe they are efficient, the more inefficiencies creep in, and the more people believe they are inefficient, the more they become efficient. When everyone assumes everyone else has found all the opportunities, nobody bothers to look, and so there are lots of undiscovered opportunities to cash in on. When everyone assumes they can get rich finding opportunities, they bid up prices to very close to their "true" value, and the profit opportunities disappear. It's a self-correcting system. The question of how widely believed the EMH is itself suffers from selection bias. People who believe markets are efficient don't enter the financial industry, they give their money to Vanguard to manage. That means that everyone in the financial industry, by definition, believes that they can make better-than-average returns, otherwise they wouldn't be in the industry. And then by returns, most of them are wrong, but that also doesn't matter because the few who are right are the ones who survive to play the next round.