4 ms·

I know a lot of people on HN hate VCs, but it is not the role of VCs to invest in companies who build things "the society needs". They invest in things the soc

I know a lot of people on HN hate VCs, but it is not the role of VCs to invest in companies who build things "the society needs". They invest in things the society didn't even know it needed. Of course there are huge flops and failures and near-scams, but I think it's good that these businesses exist, and I disagree with people who stigmatize the entrepreneurs who build the "stupid" startups and the VCs who fund them. Imagine a world where everyone was building things that everybody already knew they needed. It would be a dull world and very deterministic. Not a world I want to live in.

jackyinger 6y ago
Oh give me a break; no one is saying that we shouldn’t innovate. And I don’t think people are hating on VC as a whole, this site is run by VCs after all. Do you really want to live in a society where people go after businesses to make a quick buck no matter the consequences? I know that I self censor some of my ideas on the basis that I wouldn’t want to live with the results if they were wildly successful. We all have an obligation to create a world that we (not the royal we) would like to live in. And that means constructing things with real, broad societal value. Think renewable energy rather than uber for liquor.
- cocktailpeanuts 6y ago
  this is like saying art should not exist. I'm likening these companies to artists (no value judgement attached). Artists make stuff they want to make, and it provides value to the world in some way. Otherwise they shouldn't exist. Artists don't deliberately make things with "real broad societal value".
throwawaygh 6y ago
> They invest in things the society didn't even know it needed. 1. They invest in things that will out-perform other investment vehicles over the time frame that the LPs are interested in optimizing over. Generalizing beyond that seems like a fool's errand. VC is huge, incentives myriad, but, at base, return to investors is eventually a hard constraint on any private investment vehicle. The article's main point seems to be "venture capitalists are capitalists and often retain/double as fantstic PR firms". Which, yeah. Good or bad, it's true. 2. "invest in things the society didn't even know it needed" is something that most anything high-yield claims to be doing in one way or another. Not all, but probably most. Not many other places to get high yields. > but I think it's good that these businesses exist... Imagine a world where everyone was building things that everybody already knew they needed. It would be a dull world and very deterministic. Not a world I want to live in. This "is VC good or not" argument seems a bit off-topic for the article. It's possible that VC serves an important -- even critical -- purpose, and also that VC needs to be complemented by robust public sector investment because there are some things that just aren't going to have good returns over even long times frames (or ever) but which still benefit society. "Markets a great but not omniscient or perfect". Which, yeah. Anyways, I think the article does more harm than good, because it sets up an us-vs-them. But, as the digital libraries -> google example illustrates, VC and public sector investment aren't mutually exclusive. They can support one another in a virtuous cycle: public sector investment in scientific progress -> VC-funded innovation -> tax dollars -> public sector investment in scientific progress -> ...
codr7 6y ago
They invest in potential for awesome profits, period. There are no awesome profits in unknowns, too much of a gamble and too much effort to get there; better to focus on the hype. Take Bitcoin, no one would have invested in the idea before it was a fact. Once the hype started winding up, VCs were all over it.
JSavageOne 6y ago
> They invest in things the society didn't even know it needed. That's an overly generous way to put it. In reality, VCs exist to fund companies that will make the VCs a lot of money. So either the companies they invest in have to (1) become profitable, or (2) the share price must increase drastically such that the VC's can sell their shares at a profit. The reason VCs don't build hotels for the homeless isn't because "society already knows it needs this", it's because homeless people don't have any money so there's no profit in serving them.
vikramkr 6y ago
They invest in opportunities to build portfolios that provide a reward/risk ratio and performance/risk characteristics that are appealing to their LPs. If they don't, they don't survive. They aren't charities investing in things society doesn't know it needs, they're investment vehicles geared towards providing exposure to high risk/high reward early stage private investments. Some of them have a social impact angle, and those funds are different by nature due to the demands of their LPs, but it doesn't make sense to pretend this is about anything other than profit on a given timescale.

jackyinger 6y ago

Oh give me a break; no one is saying that we shouldn’t innovate. And I don’t think people are hating on VC as a whole, this site is run by VCs after all. Do you really want to live in a society where people go after businesses to make a quick buck no matter the consequences? I know that I self censor some of my ideas on the basis that I wouldn’t want to live with the results if they were wildly successful. We all have an obligation to create a world that we (not the royal we) would like to live in. And that means constructing things with real, broad societal value. Think renewable energy rather than uber for liquor.

cocktailpeanuts 6y ago
this is like saying art should not exist. I'm likening these companies to artists (no value judgement attached). Artists make stuff they want to make, and it provides value to the world in some way. Otherwise they shouldn't exist. Artists don't deliberately make things with "real broad societal value".

throwawaygh 6y ago

> They invest in things the society didn't even know it needed. 1. They invest in things that will out-perform other investment vehicles over the time frame that the LPs are interested in optimizing over. Generalizing beyond that seems like a fool's errand. VC is huge, incentives myriad, but, at base, return to investors is eventually a hard constraint on any private investment vehicle. The article's main point seems to be "venture capitalists are capitalists and often retain/double as fantstic PR firms". Which, yeah. Good or bad, it's true. 2. "invest in things the society didn't even know it needed" is something that most anything high-yield claims to be doing in one way or another. Not all, but probably most. Not many other places to get high yields. > but I think it's good that these businesses exist... Imagine a world where everyone was building things that everybody already knew they needed. It would be a dull world and very deterministic. Not a world I want to live in. This "is VC good or not" argument seems a bit off-topic for the article. It's possible that VC serves an important -- even critical -- purpose, and also that VC needs to be complemented by robust public sector investment because there are some things that just aren't going to have good returns over even long times frames (or ever) but which still benefit society. "Markets a great but not omniscient or perfect". Which, yeah. Anyways, I think the article does more harm than good, because it sets up an us-vs-them. But, as the digital libraries -> google example illustrates, VC and public sector investment aren't mutually exclusive. They can support one another in a virtuous cycle: public sector investment in scientific progress -> VC-funded innovation -> tax dollars -> public sector investment in scientific progress -> ...

codr7 6y ago

They invest in potential for awesome profits, period. There are no awesome profits in unknowns, too much of a gamble and too much effort to get there; better to focus on the hype. Take Bitcoin, no one would have invested in the idea before it was a fact. Once the hype started winding up, VCs were all over it.

JSavageOne 6y ago

> They invest in things the society didn't even know it needed. That's an overly generous way to put it. In reality, VCs exist to fund companies that will make the VCs a lot of money. So either the companies they invest in have to (1) become profitable, or (2) the share price must increase drastically such that the VC's can sell their shares at a profit. The reason VCs don't build hotels for the homeless isn't because "society already knows it needs this", it's because homeless people don't have any money so there's no profit in serving them.

vikramkr 6y ago

They invest in opportunities to build portfolios that provide a reward/risk ratio and performance/risk characteristics that are appealing to their LPs. If they don't, they don't survive. They aren't charities investing in things society doesn't know it needs, they're investment vehicles geared towards providing exposure to high risk/high reward early stage private investments. Some of them have a social impact angle, and those funds are different by nature due to the demands of their LPs, but it doesn't make sense to pretend this is about anything other than profit on a given timescale.