3 ms·

If only there was some method of exchanging money for the time of professionals capable of vetting a technical product and giving a summarized report.

btown 7y ago
VCs don't even have the time to source and coordinate professionals for vetting. They're weighing what they view as a million-to-one chance (because a VC principal thinks highly of their ability to detect a shady person) of a million-dollar loss due to fraud, and the >3 hours of time required to find a professional, get them under NDA, schedule them with the portfolio company... is worth far less to them.
- ben_jones 7y ago
  I disagree, here [1] is a small clip from a really powerful documentary on the subject of Venture Capital and finance. [1]: https://www.youtube.com/watch?v=xbBD7VIJ4cc https://www.youtube.com/watch?v=xbBD7VIJ4cc
- vidarh 7y ago
  I work for a VC, and it's sort-of like this. Not so much because we think so highly of our ability to detect shady people, as because the checks we do are fine most of the time, and constantly being refined. But they do need to be cheap - it's not easy to place money and manage that portfolio for 5-10 years cheap enough to actually make a good return when factoring in investments that fail for reasons that are far harder to identify ahead of time than outright fraud. The outright frauds are rare enough that checking for them needs to be very cheap for it not to be more cost-effective to spend that money improving other deal-flow filtering. That's not to say that VCs aren't trying to improve on it. It's just that fraud is just one of many risks, and managing risk is about taking a dispassionate view of which measures improve your returns the most.
- catalogia 7y ago
  I think we should consider whether there might be a social responsibility to not fund scammers. Rather than considering the matter purely from the perspective of the investor's bank account, we should consider the broader impact of allowing scammers to find investors. It degrades the reputation of the industry every time it happens, and frankly I think it degrades society. Every time a scammer is enriched, society as a whole is harmed.

btown 7y ago

VCs don't even have the time to source and coordinate professionals for vetting. They're weighing what they view as a million-to-one chance (because a VC principal thinks highly of their ability to detect a shady person) of a million-dollar loss due to fraud, and the >3 hours of time required to find a professional, get them under NDA, schedule them with the portfolio company... is worth far less to them.

ben_jones 7y ago
I disagree, here [1] is a small clip from a really powerful documentary on the subject of Venture Capital and finance. [1]: https://www.youtube.com/watch?v=xbBD7VIJ4cc https://www.youtube.com/watch?v=xbBD7VIJ4cc
vidarh 7y ago
I work for a VC, and it's sort-of like this. Not so much because we think so highly of our ability to detect shady people, as because the checks we do are fine most of the time, and constantly being refined. But they do need to be cheap - it's not easy to place money and manage that portfolio for 5-10 years cheap enough to actually make a good return when factoring in investments that fail for reasons that are far harder to identify ahead of time than outright fraud. The outright frauds are rare enough that checking for them needs to be very cheap for it not to be more cost-effective to spend that money improving other deal-flow filtering. That's not to say that VCs aren't trying to improve on it. It's just that fraud is just one of many risks, and managing risk is about taking a dispassionate view of which measures improve your returns the most.
catalogia 7y ago
I think we should consider whether there might be a social responsibility to not fund scammers. Rather than considering the matter purely from the perspective of the investor's bank account, we should consider the broader impact of allowing scammers to find investors. It degrades the reputation of the industry every time it happens, and frankly I think it degrades society. Every time a scammer is enriched, society as a whole is harmed.