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I've gotten so tired of the VC model. It produces nothing. Just company after company of the same rehashed ideas (or worse still, good ideas) that are doomed to

I've gotten so tired of the VC model. It produces nothing. Just company after company of the same rehashed ideas (or worse still, good ideas) that are doomed to failure because they can't eat the world. I wouldn't work at a VC unless I had literally no other options, and if I ever start a business, I'm doing it the way the author here did: honest work for honest wage. Maybe I won't get any Ferrari's but at least I'll have my dignity.

brilliantcode 10y ago
You aren't alone. The current VC model is destructive because of it's wasting capital at perhaps the most riskiest and inefficient way of producing alpha on other people's money-spraying & praying. I don't know all the ins and outs but I have to echo the sentiment that it is better to make $1 for every $0 spent than $1 for every $2 spent. The latter makes zero economic sense. Any fucking idiot can spend money and make negative ROI. But the market dissonance is being fueled by low interest capital. We are going to see history repeat again this year and when the water goes out, we'll see who's been swimming naked. They'll be back for the next bubble. I'm convinced these bubbles are engineered who make money from the ride up and the ride down. Pump & dump on a national level but of course the men who play Gods need not play by the same rules they enforce on lowly mortals. You will be able to buy a used Ferrari as they depreciate fairly quickly unless they are rare. They aren't built with longevity in mind and the parts do not depreciate in prices (expect to pay a Honda s2000 for clutch and F1 paddle shift pumps).
- chrissnell 10y ago
  It's not really accurate to say that the VC game makes $0.50 on the dollar. If that was true, they wouldn't be in business. They make money by hitting grand slams--throwing out a BS number here--every 30 times at-bat. That's all they need. What's unfortunate about the VC model is that 29 out of those 30 at-bats is made on the backs of people who genuinely believe that they have a strong chance of being that grand slam. It's those startup founders who end up with the grey hair and circles under their eyes. As long as their are optimistic dreamers, there will be VC patrons.
  - FussyZeus 10y ago
    Except it's not 1/30, it's more like 1/300 which still sounds generous to me. As for founders with grey hair, I admire their passion, but I didn't get to where I am now by lighting both ends of my life candle on fire for a 1/300 chance of being better off. Fuck that noise. I'd rather have a life and be poor.
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jartelt 10y ago
There is nothing in the VC model that says you have to run your business like an idiot if you take VC money... You can still run your business lean and keep your dignity. However, if you take VC money you need to realize that the VC wants liquidity and a ROI in ~7 years. So, if you want to run a small business that brings in ~$2M a year, don't go try raise a huge VC round at a high valuation. That probably would not work out well for either party.
- aianus 10y ago
  > So, if you want to run a small business that brings in ~$2M a year, don't go try raise a huge VC round at a high valuation. That probably would not work out well for either party. I'm curious, how would that negatively impact the founder? If the founder still has a controlling interest what leverage do the VCs have to tell him that $2m/year in profit is not enough and to make him risk it for more?
  - xenadu02 10y ago
    If you can retain board control there isn't a ton of leverage unless the VC wants to hurt your business out of spite... in which case you picked the wrong partner. What the VC can do is ignore you, in which case why did you take VC money when you intended to pass up the networking opportunities? What if you change your mind about raising another round of funding in three years but you already burned the bridge? You should also remember that your cofounders will be on the board. Often the VC only needs to convince one of them you need a change in direction. A lifelong friend as cofounder will stab you in the back without a second thought if they smell a billion dollars at stake. Hence the advice to be careful about who you get into business with.
    - FussyZeus 10y ago
      Or just don't take VC money in the first place. Then: Networking doesn't come with strings attached (or money), you have zero incentive to grow too fast, and there's no reason that you MUST make 2 billion dollars or shut down the business. Seriously I've lost count of how many useful services have shut down because they couldn't eat the world, because just making really good money but not incredible ALL THE MONEY wasn't good enough. And for what? Some time in the public eye and a ton of money to blow on dumb shit like San Francisco offices that reduce productivity and a metric assload of hardware you didn't need in the first place.

brilliantcode 10y ago

You aren't alone. The current VC model is destructive because of it's wasting capital at perhaps the most riskiest and inefficient way of producing alpha on other people's money-spraying & praying. I don't know all the ins and outs but I have to echo the sentiment that it is better to make $1 for every $0 spent than $1 for every $2 spent. The latter makes zero economic sense. Any fucking idiot can spend money and make negative ROI. But the market dissonance is being fueled by low interest capital. We are going to see history repeat again this year and when the water goes out, we'll see who's been swimming naked. They'll be back for the next bubble. I'm convinced these bubbles are engineered who make money from the ride up and the ride down. Pump & dump on a national level but of course the men who play Gods need not play by the same rules they enforce on lowly mortals. You will be able to buy a used Ferrari as they depreciate fairly quickly unless they are rare. They aren't built with longevity in mind and the parts do not depreciate in prices (expect to pay a Honda s2000 for clutch and F1 paddle shift pumps).

chrissnell 10y ago
It's not really accurate to say that the VC game makes $0.50 on the dollar. If that was true, they wouldn't be in business. They make money by hitting grand slams--throwing out a BS number here--every 30 times at-bat. That's all they need. What's unfortunate about the VC model is that 29 out of those 30 at-bats is made on the backs of people who genuinely believe that they have a strong chance of being that grand slam. It's those startup founders who end up with the grey hair and circles under their eyes. As long as their are optimistic dreamers, there will be VC patrons.
- FussyZeus 10y ago
  Except it's not 1/30, it's more like 1/300 which still sounds generous to me. As for founders with grey hair, I admire their passion, but I didn't get to where I am now by lighting both ends of my life candle on fire for a 1/300 chance of being better off. Fuck that noise. I'd rather have a life and be poor.

deleted 10y ago

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jartelt 10y ago

There is nothing in the VC model that says you have to run your business like an idiot if you take VC money... You can still run your business lean and keep your dignity. However, if you take VC money you need to realize that the VC wants liquidity and a ROI in ~7 years. So, if you want to run a small business that brings in ~$2M a year, don't go try raise a huge VC round at a high valuation. That probably would not work out well for either party.

aianus 10y ago
> So, if you want to run a small business that brings in ~$2M a year, don't go try raise a huge VC round at a high valuation. That probably would not work out well for either party. I'm curious, how would that negatively impact the founder? If the founder still has a controlling interest what leverage do the VCs have to tell him that $2m/year in profit is not enough and to make him risk it for more?
- xenadu02 10y ago
  If you can retain board control there isn't a ton of leverage unless the VC wants to hurt your business out of spite... in which case you picked the wrong partner. What the VC can do is ignore you, in which case why did you take VC money when you intended to pass up the networking opportunities? What if you change your mind about raising another round of funding in three years but you already burned the bridge? You should also remember that your cofounders will be on the board. Often the VC only needs to convince one of them you need a change in direction. A lifelong friend as cofounder will stab you in the back without a second thought if they smell a billion dollars at stake. Hence the advice to be careful about who you get into business with.
  - FussyZeus 10y ago
    Or just don't take VC money in the first place. Then: Networking doesn't come with strings attached (or money), you have zero incentive to grow too fast, and there's no reason that you MUST make 2 billion dollars or shut down the business. Seriously I've lost count of how many useful services have shut down because they couldn't eat the world, because just making really good money but not incredible ALL THE MONEY wasn't good enough. And for what? Some time in the public eye and a ton of money to blow on dumb shit like San Francisco offices that reduce productivity and a metric assload of hardware you didn't need in the first place.