5 ms·
Putting aside the important issues of diversity and inclusiveness, there's some really strong criticism of the business ethics and financial soundness of the VC
by KKKKkkkk1 6y ago
Putting aside the important issues of diversity and inclusiveness, there's some really strong criticism of the business ethics and financial soundness of the VC model.
As I said, I’ve been really disillusioned with Silicon Valley investing for a long time. It reminds me of Wall Street going up to 2008. The idea was, ‘As long as someone wants to buy this [collateralized debt obligation], we’re good.’ Nobody is thinking about: Is this a good product?
So many things that VCs have created are really financial instruments like those CDOs. They aren’t really thinking about whether this is a company that could survive on revenue from its customers. Deals are designed entirely around an exit. As long as you can get some sucker to take them, [you’re good]. So many acquisitions fail, for example, but the VCs are happy because — guess what? — they got their exit.
- RestlessMind 6y agoLooking at some prominent examples in the last 1-2 years (Uber, WeWork, Lyft) and the recent batch of S-1 filings, I indeed see a lot of companies still operating at a loss. The analogy to CDOs and finding a bigger sucker starts ringing true. So far, the bigger suckers were Softbank and public markets. It would be interesting to see what happens going forward.
- achillesheels 6y agoTo that point on public markets: who on Earth is buying the equities of a Zynga or a SurveyMonkey? (no offense to any current or former employees) I get that speculators exist, but I see more and more the public listing of IT startups as “siphoning” passive index funds as part of a necessary diversified portfolio strategy - this is how VCs are exiting. I haven’t done the research, but this is merely the extension of principally why VC exists: the statistical inference of putting X% (typically less than 3) into high risk investments from 10 and 11 figure funds.
- terminalcommand 6y agoI don't know about Surveymonkey, but Zynga makes profit from games. Games are addictive, people pay.
- plorkyeran 6y agoZynga made a profit in 2019. They appear to be a sustainable business which can keep operating at roughly break-even levels while hoping for another big breakout hit that makes a lot of money. Not a great investment, but certainly not a money pit.
- jariel 6y agoThe notion of grabbing market share at a loss in order to capture future profits is actually sound. What matters obviously are the underlying fundamentals behind the strategy, which depend on a lot of things, can change, and are therefore amenable to hustling. Each case is different.
- lazylizard 6y agoCan i say unless subsidised i believe this has no chance against a farm* in dalat despite shipping costs? https://techcrunch.com/2019/06/11/infarm-series-b/ https://techcrunch.com/2019/06/11/infarm-series-b/ But nobody will give you us$200m to start farming in dalat. Smart, vertical, aeroponic, hydroponic or otherwise. *make that a plain default old school fully manual dumb and horizontal kind of farm haha
- deleted 6y ago[deleted]
- closeparen 6y agoIt is unethical to be an outsourced R&D operation for an eventual acquirer, instead of an independent business?