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>The investors who bought your token, like public market investors, may be gone tomorrow, next month, or next year, having moved on to the next big thing, leavi

>The investors who bought your token, like public market investors, may be gone tomorrow, next month, or next year, having moved on to the next big thing, leaving you with little to show for it other than the money you raised. Oh boy... >VCs, at leas the best ones, are there for your company in good times and bad. There is a difference, trust me. This part made me laugh so bad, my entire body hurts. Now, I know pretty well who he is, thus why he may not realize how much bad VCs hurt the industry, especially when a vast number does exactly what he said: leaving as soon as there are any signs of trouble. And I know that from experience. Now, do I always agree with ICOs? Not really, selling promises that particular way is bound to lead up to some disappointment from one side or the other. But they are perfectly valid to fund yourself if your service, your core business model can be compartmentalized that way. As he said: "The token that you sell in your ICO is the atomic unit of your business model."

DennisP 9y ago
Maybe there's a role here for startup consultants, who provide the sort of help that VCs claim to provide, to startups who have already raised money via ICOs.
- jacquesm 9y ago
  Most start-ups would not be in a position to pay and if they were they usually would not realize they need that kind of help until it is too late.
  - Everhusk 9y ago
    The key is to find a way to contractualize third party help into a smart contract so some of the tokens are released if the advice truly helps in the long run.
    - DennisP 9y ago
      One way is just to pay consultants at least partially with the project tokens, which should go up in value if the project succeeds.
  - DennisP 9y ago
    That's why I mentioned "startups who have already raised money via ICOs," many of whom certainly are in a position to pay. I don't think there's any particular reason to think the founders are idiots, though of course some will be. But it will also be up to the consultants to demonstrate their value.
  - _pmf_ 9y ago
    This is known as a "CEO" on the non-startup world.
    - jacquesm 9y ago
      No, it really isn't. Technically it is known as a 'management consultant'. The CEO is an entirely different role.
mbesto 9y ago
> leaving as soon as there are any signs of trouble. Spot on. When you have a portfolio approach to your investment thesis, there is almost no incentive to help your portfolio companies when times are bad. That being said, I genuinely do believe there is a subset of VCs (including USV) that will go beyond this and mentor startups past challenges.
- JumpCrisscross 9y ago
  > When you have a portfolio approach to your investment thesis, there is almost no incentive to help your portfolio companies when times are bad Instead of "portfolio" I think you mean "diversified" or even "scattershot". Such "spray and pray" types are too widely invested to devote meaningful time to their portfolio companies. (Notable exception: Y Combinator.) There's nothing wrong with this. They're taking a thematic approach and can be a good source of capital (and market intel). But they won't devote a partner to helping you pivot. In contrast, the "concentrated" player takes a few, deep bets. This is a more orthodox approach. You'll get more attention, including when you're down. You'll also get more when the investment is being considered. That means deeper due diligence and, in all likelihood, a stronger negotiation around terms. Knowing when to fold is also material. If a founder is intransigent, a savvy investor should know to cut their losses and hope for the best.
  - mbesto 9y ago
    "Portfolio" is precisely what I meant. Given it appears you have a background in PE, perhaps the term is more aligned to PE/VC investors in the UK (where much of my M&A experience originated from). VC models aren't necessarily diversified, because diversity implies variance in type, not necessarily in volume, which the latter driving the lack of incentives for VC investors - they simply don't have the time. Nevertheless, I think we're saying the same things - just different terminology (which certainly is prevalent in finance).
  - rdlecler1 9y ago
    In what way does YC provide long term support? They literally hundreds and hundreds of alumni, how did they scale themselves?
cocktailpeanuts 9y ago
You are right to certain degree and I also am not a fan of VCs trying to get in on the bandwagon somehow, but he does have a point. Most "normal people" don't buy as much as VCs do, so they don't have as much stake. VCs are in it purely to make money so they end up investing much more than ordinary joe, which is why they will be there to help you out when things are not going well, exactly because they need their return on investment. Another thing is, VCs have reputation to manage, so they just can't move on easily without feeling even a little bit of guilt. On the other hand, users don't care about you and they don't (and shouldn't) feel a bit of guilt moving on from you. Overall, as long as they have large stake in your tokens VCs will help you, not because they are saints, but because they can't lose money and reputation
lpolovets 9y ago
I'm a VC, so I'm definitely biased here. On the one hand, I want to be a good person and to do the right thing, so I do my best to be one of the good VCs and not one of the bad ones. (I.e. I don't leave when things get bad.) On the other hand, when VCs leave at the first sign of trouble, why is that so terrible? I think giving bad advice -- advice that a lot of founders will listen to because they often assume a VC knows what they're talking about -- is much more dangerous. If a VC gives bad advice, that can sink a company that could've been successful otherwise. If a VC walks away or stops being involved, then that seems much closer to neutral than to bad. They no longer try to help, but so what? You have their investment and that is valuable by itself -- especially compared to not having had an investment in the first place. As an analogy, let's say you go to a doctor for a rare medical condition. They suggest a few treatments, and none work. They're out of ideas. Would you rather a) have them walk away so that you can look for another doctor or try to educate yourself on your condition, or b) have them keep seeing you and either wasting your time or giving you dangerous prescriptions?
- seibelj 9y ago
  There is massive bias for VC's to believe they have enormous value that cannot be obtained other ways. This is disruption in real time, disrupting the very people who believed they themselves are the disrupters, and it's making them very scared. Imagine devoting your life, climbing the ladder, becoming a VC partner, having entrepreneurs begging to speak with you, and seemingly overnight a new model exists that makes you obsolete. Very scary. However, I think VC can stay around as "gold star" supporters who vouch for authenticity of a company before opening up to widespread investment and get some of the tokens in return. Even if this ICO craze dies, I think the cat is out of the bag, and being able to raise funds globally and instantly is simply too good to pass up.
  - lpolovets 9y ago
    I agree that there's a lot of disruption and innovation happening on the capital side. AngelList syndicates were already doing that before ICOs. But the advisory side is not really being disrupted so far, afaik. What I do like about all of the innovations on the capital side is that over time, I think they'll drive inferior/shitty VCs out of business. Most founders would prefer to work with Sequoia to using an ICO or AngelList, but ICOs/AngelList are better than SomeRandomFundWithCrappyAdvice. So the SRFWCAs will go out of business over time, but I think the Sequoias will do just fine.

DennisP 9y ago

Maybe there's a role here for startup consultants, who provide the sort of help that VCs claim to provide, to startups who have already raised money via ICOs.

jacquesm 9y ago
Most start-ups would not be in a position to pay and if they were they usually would not realize they need that kind of help until it is too late.
- Everhusk 9y ago
  The key is to find a way to contractualize third party help into a smart contract so some of the tokens are released if the advice truly helps in the long run.
  - DennisP 9y ago
    One way is just to pay consultants at least partially with the project tokens, which should go up in value if the project succeeds.
- DennisP 9y ago
  That's why I mentioned "startups who have already raised money via ICOs," many of whom certainly are in a position to pay. I don't think there's any particular reason to think the founders are idiots, though of course some will be. But it will also be up to the consultants to demonstrate their value.
- _pmf_ 9y ago
  This is known as a "CEO" on the non-startup world.
  - jacquesm 9y ago
    No, it really isn't. Technically it is known as a 'management consultant'. The CEO is an entirely different role.

mbesto 9y ago

> leaving as soon as there are any signs of trouble. Spot on. When you have a portfolio approach to your investment thesis, there is almost no incentive to help your portfolio companies when times are bad. That being said, I genuinely do believe there is a subset of VCs (including USV) that will go beyond this and mentor startups past challenges.

JumpCrisscross 9y ago
> When you have a portfolio approach to your investment thesis, there is almost no incentive to help your portfolio companies when times are bad Instead of "portfolio" I think you mean "diversified" or even "scattershot". Such "spray and pray" types are too widely invested to devote meaningful time to their portfolio companies. (Notable exception: Y Combinator.) There's nothing wrong with this. They're taking a thematic approach and can be a good source of capital (and market intel). But they won't devote a partner to helping you pivot. In contrast, the "concentrated" player takes a few, deep bets. This is a more orthodox approach. You'll get more attention, including when you're down. You'll also get more when the investment is being considered. That means deeper due diligence and, in all likelihood, a stronger negotiation around terms. Knowing when to fold is also material. If a founder is intransigent, a savvy investor should know to cut their losses and hope for the best.
- mbesto 9y ago
  "Portfolio" is precisely what I meant. Given it appears you have a background in PE, perhaps the term is more aligned to PE/VC investors in the UK (where much of my M&A experience originated from). VC models aren't necessarily diversified, because diversity implies variance in type, not necessarily in volume, which the latter driving the lack of incentives for VC investors - they simply don't have the time. Nevertheless, I think we're saying the same things - just different terminology (which certainly is prevalent in finance).
- rdlecler1 9y ago
  In what way does YC provide long term support? They literally hundreds and hundreds of alumni, how did they scale themselves?

cocktailpeanuts 9y ago

You are right to certain degree and I also am not a fan of VCs trying to get in on the bandwagon somehow, but he does have a point. Most "normal people" don't buy as much as VCs do, so they don't have as much stake. VCs are in it purely to make money so they end up investing much more than ordinary joe, which is why they will be there to help you out when things are not going well, exactly because they need their return on investment. Another thing is, VCs have reputation to manage, so they just can't move on easily without feeling even a little bit of guilt. On the other hand, users don't care about you and they don't (and shouldn't) feel a bit of guilt moving on from you. Overall, as long as they have large stake in your tokens VCs will help you, not because they are saints, but because they can't lose money and reputation

lpolovets 9y ago

I'm a VC, so I'm definitely biased here. On the one hand, I want to be a good person and to do the right thing, so I do my best to be one of the good VCs and not one of the bad ones. (I.e. I don't leave when things get bad.) On the other hand, when VCs leave at the first sign of trouble, why is that so terrible? I think giving bad advice -- advice that a lot of founders will listen to because they often assume a VC knows what they're talking about -- is much more dangerous. If a VC gives bad advice, that can sink a company that could've been successful otherwise. If a VC walks away or stops being involved, then that seems much closer to neutral than to bad. They no longer try to help, but so what? You have their investment and that is valuable by itself -- especially compared to not having had an investment in the first place. As an analogy, let's say you go to a doctor for a rare medical condition. They suggest a few treatments, and none work. They're out of ideas. Would you rather a) have them walk away so that you can look for another doctor or try to educate yourself on your condition, or b) have them keep seeing you and either wasting your time or giving you dangerous prescriptions?

seibelj 9y ago
There is massive bias for VC's to believe they have enormous value that cannot be obtained other ways. This is disruption in real time, disrupting the very people who believed they themselves are the disrupters, and it's making them very scared. Imagine devoting your life, climbing the ladder, becoming a VC partner, having entrepreneurs begging to speak with you, and seemingly overnight a new model exists that makes you obsolete. Very scary. However, I think VC can stay around as "gold star" supporters who vouch for authenticity of a company before opening up to widespread investment and get some of the tokens in return. Even if this ICO craze dies, I think the cat is out of the bag, and being able to raise funds globally and instantly is simply too good to pass up.
- lpolovets 9y ago
  I agree that there's a lot of disruption and innovation happening on the capital side. AngelList syndicates were already doing that before ICOs. But the advisory side is not really being disrupted so far, afaik. What I do like about all of the innovations on the capital side is that over time, I think they'll drive inferior/shitty VCs out of business. Most founders would prefer to work with Sequoia to using an ICO or AngelList, but ICOs/AngelList are better than SomeRandomFundWithCrappyAdvice. So the SRFWCAs will go out of business over time, but I think the Sequoias will do just fine.