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Sometimes I wonder why people spend all this energy to bash VC. It's a 4,500 words article and there's only have 5-6 companies to mention as failures of the mod

Sometimes I wonder why people spend all this energy to bash VC. It's a 4,500 words article and there's only have 5-6 companies to mention as failures of the model in the past decade, compared to the tends of thousands that raised money, and all of those are consumer-facing products. The New Yorker uses Parse.ly (Venture backed company), GitHub (Venture backed company), BrowserStack (Venture backend company), Asana (Venture backed company), Hipchat (Venture backend company), just to name a few they listed on their Stackshare profile [0] (another venture backed company). I'm sure they are glad those were funded :) [0] https://stackshare.io/new-yorker/new-yorker https://stackshare.io/new-yorker/new-yorker

onion2k 7y ago
I think you're seeing the issue as a bit too black and white. It's entirely reasonable to think many VCs and VC-backed companies are ostensibly terrible and still buy from the VC-backed companies you don't think are like that.
- FanaHOVA 7y ago
  I agree with you. If you look at some of the examples they mention, like WeWork and Theranos, a lot of the issues there come from founders' questionable practices (or straight up fraud, depending how harsh you want to be). VCs are partially responsible for funding them, but at the same time they are not the ones building the company, and usually don't have high visibility into the day-to-day operations outside of updates the founders send (and board meetings, if they have a seat).
  - learc83 7y ago
    They create the environment that encourages and allows those actions though. If you encourage a rapid growth at all costs mindset, you can't be surprised when outright fraud results. And if the VCs that funded Theranos had done actual due diligence instead of getting so caught up in FOMO, the whole thing could have never happened.
    - CalChris 7y ago
      Theranos wasn't really VC funded. There were angels (whales if you prefer) and corporate but not much VC and certainly no major funds (DFJ being an exception). https://www.crunchbase.com/organization/theranos#section-funding-rounds https://www.crunchbase.com/organization/theranos#section-fun... A16Z as a firm took pains to say that it didn't invest and that Sand Hill VCs couldn't diligence Theranos. https://a16z.com/2020/01/11/16-bio-myths-misconceptions/ https://a16z.com/2020/01/11/16-bio-myths-misconceptions/ But Marc Andreessen himself was a big Holmes fan. https://www.vanityfair.com/news/2016/05/theranos-silicon-valley-media https://www.vanityfair.com/news/2016/05/theranos-silicon-val...
geofft 7y ago
This is the "and yet you use an iPhone" fallacy, except for B2B. https://thenib.com/mister-gotcha/ https://thenib.com/mister-gotcha/ It is entirely consistent to believe that venture capital is systemically bad despite producing the best companies at the moment. That is, in fact, exactly what the article argues - that the reason venture capital is so dangerous is precisely because it's been so short-term successful despite clear reasons it might not be long-term sustainable, that VC might be squeezing out modestly successful companies because they only get rich from hyper-successful ones. Of your examples, The New Yorker is probably actually not terribly glad about HipChat, which shut down and redirected its customers to venture-backed Slack, which is growing even more quickly. If this keeps up, venture "capitalism" will be a misnomer - capitalism doesn't work without competition.
dkersten 7y ago
Completely anecdotal and subjective, I know: Personally I try to steer clear of venture-backed startups when I can for the following reasons. The first is out of fear of the dreaded announcement about the exciting next steps for the team because they got acquired yay (which typically translates to either the product I was relying on being shut down, merged into a shitty bigger product and/or my data being used by Big Co which is possibly what I was trying to avoid by using a small companies product in the first place. Basically, a service provider being acquired has never translated to a positive to me the customer in my personal experience). Especially if the company gets bought by google: now I can look forward to both having my data taken by google (something I’m going to great lengths to minimise!) and an above average chance of the product getting cancelled. The second is the pressure to make the big return on investment (not just sustainable profit), which in consumer products usually means advertisement and in b2b often means aggressive analytics. Finally, if the company wasn’t successful enough fast enough it often gets shut down. Either way, the business pressures usually mean it ends up negative for me, the customer.
- mmhsieh 7y ago
  Exactly how (typically venture backed) cyber vendors for the financial vertical evolved over the last 10 years.
- dehrmann 7y ago
  At one place I worked with a lot of customers' data, I floated the idea of adding a clause in the standard customer contract that an acquirer would only be able to use customers' data to continue to offer the service. I didn't push hard enough for it to be rejected, but this wasn't usually a dealbreaker for customers.
- dehrmann 7y ago
  > dreaded announcement about the exciting next steps for the team because they got acquired This announcement usually means it was an acquihire, and the company was already dead, so you have to stop using the product either way.
  - 7y ago
ForHackernews 7y ago
I imagine the New Yorker's writing staff has vanishingly little influence over the tech stack their dev team chooses.
- blawson 7y ago
  I think the point is that these are good tools to use anyway. So VC companies have produced lots of valuable companies and products.

onion2k 7y ago

I think you're seeing the issue as a bit too black and white. It's entirely reasonable to think many VCs and VC-backed companies are ostensibly terrible and still buy from the VC-backed companies you don't think are like that.

FanaHOVA 7y ago
I agree with you. If you look at some of the examples they mention, like WeWork and Theranos, a lot of the issues there come from founders' questionable practices (or straight up fraud, depending how harsh you want to be). VCs are partially responsible for funding them, but at the same time they are not the ones building the company, and usually don't have high visibility into the day-to-day operations outside of updates the founders send (and board meetings, if they have a seat).
- learc83 7y ago
  They create the environment that encourages and allows those actions though. If you encourage a rapid growth at all costs mindset, you can't be surprised when outright fraud results. And if the VCs that funded Theranos had done actual due diligence instead of getting so caught up in FOMO, the whole thing could have never happened.
  - CalChris 7y ago
    Theranos wasn't really VC funded. There were angels (whales if you prefer) and corporate but not much VC and certainly no major funds (DFJ being an exception). https://www.crunchbase.com/organization/theranos#section-funding-rounds https://www.crunchbase.com/organization/theranos#section-fun... A16Z as a firm took pains to say that it didn't invest and that Sand Hill VCs couldn't diligence Theranos. https://a16z.com/2020/01/11/16-bio-myths-misconceptions/ https://a16z.com/2020/01/11/16-bio-myths-misconceptions/ But Marc Andreessen himself was a big Holmes fan. https://www.vanityfair.com/news/2016/05/theranos-silicon-valley-media https://www.vanityfair.com/news/2016/05/theranos-silicon-val...

geofft 7y ago

This is the "and yet you use an iPhone" fallacy, except for B2B. https://thenib.com/mister-gotcha/ https://thenib.com/mister-gotcha/ It is entirely consistent to believe that venture capital is systemically bad despite producing the best companies at the moment. That is, in fact, exactly what the article argues - that the reason venture capital is so dangerous is precisely because it's been so short-term successful despite clear reasons it might not be long-term sustainable, that VC might be squeezing out modestly successful companies because they only get rich from hyper-successful ones. Of your examples, The New Yorker is probably actually not terribly glad about HipChat, which shut down and redirected its customers to venture-backed Slack, which is growing even more quickly. If this keeps up, venture "capitalism" will be a misnomer - capitalism doesn't work without competition.

dkersten 7y ago

Completely anecdotal and subjective, I know: Personally I try to steer clear of venture-backed startups when I can for the following reasons. The first is out of fear of the dreaded announcement about the exciting next steps for the team because they got acquired yay (which typically translates to either the product I was relying on being shut down, merged into a shitty bigger product and/or my data being used by Big Co which is possibly what I was trying to avoid by using a small companies product in the first place. Basically, a service provider being acquired has never translated to a positive to me the customer in my personal experience). Especially if the company gets bought by google: now I can look forward to both having my data taken by google (something I’m going to great lengths to minimise!) and an above average chance of the product getting cancelled. The second is the pressure to make the big return on investment (not just sustainable profit), which in consumer products usually means advertisement and in b2b often means aggressive analytics. Finally, if the company wasn’t successful enough fast enough it often gets shut down. Either way, the business pressures usually mean it ends up negative for me, the customer.

mmhsieh 7y ago
Exactly how (typically venture backed) cyber vendors for the financial vertical evolved over the last 10 years.
dehrmann 7y ago
At one place I worked with a lot of customers' data, I floated the idea of adding a clause in the standard customer contract that an acquirer would only be able to use customers' data to continue to offer the service. I didn't push hard enough for it to be rejected, but this wasn't usually a dealbreaker for customers.
dehrmann 7y ago
> dreaded announcement about the exciting next steps for the team because they got acquired This announcement usually means it was an acquihire, and the company was already dead, so you have to stop using the product either way.
- 7y ago

ForHackernews 7y ago

I imagine the New Yorker's writing staff has vanishingly little influence over the tech stack their dev team chooses.

blawson 7y ago
I think the point is that these are good tools to use anyway. So VC companies have produced lots of valuable companies and products.