4 ms·

I've realized in the last few years that VC is fundamentally marketing. Getting pitched by the best founders and getting the biggest LPs is all about how well a

I've realized in the last few years that VC is fundamentally marketing. Getting pitched by the best founders and getting the biggest LPs is all about how well a VC can position themselves as a thought leader. That's why most of the day job of a VC is basically content marketing: blogging, writing surveys of the tech landscape, appearing on startup pitch competitions, getting quoted in the media.

ackbar03 6y ago
This would suggest that there is an imbalance and a lot more capital than startup projects though. Is it really that extreme over there in silicon valley?
- codingprograms 6y ago
  Yeah. There’s a lot of startups, but only a few that are actually promising from a risk reward perspective. VC investing is about home runs. So they all fight over investing in a few companies
- staysaasy 6y ago
  It depends a bit on the stage. It is definitely that competitive for the best growth stage companies, where "best" roughly means "highest growth in a market that can sustain a venture-level return (which in practice means a $1B+ valuation)." These companies tend to be large enough that they naturally gain access to investors, there's cheap capital everywhere, and there just aren't that many companies in big markets that are on aggressive growth trajectories. Fwiw it also isn't just silicon valley at this point, the funding patterns increasingly hold across much of north america.
- Fordec 6y ago
  It's not about the lack of startup projects, it's the lack of genuine unicorn projects that pays for the other 19 companies that fail in their portfolio along the way from MVP to IPO. Everyone has ideas for companies that can be worth millions. But the current orthodoxy around VC economics balk if your game plan is to be a 50M sale. Either you make the big time, or you can be a tax write off when you fail. A "moderate" success won't pay the Limited Partners back at the end of the 10 year vesting cycle the billions the put in at the start.
- bob33212 6y ago
  Theranos is an example how how much money there is trying to find the next Jobs/Musk/Zuck/Gates. Everyone that gave Elizabeth Holmes money we hoping that she was the Steve Jobs of biotech. There is much less money for someone who wants to create a a dating site for people with food allergies.
  - stainforth 6y ago
    Isn't that a perfect example of the folly of this intention? Maybe better if we collectively pursue a more fractal, pluralistic model? If capital only pursues monopolies that are a detriment to individuals at large, shouldn't we redirect that urge?
jacquesm 6y ago
VC is fundamentally about the exits and the 'unrealized value'. Without those there is no way to keep the cycle going. Of course those exits had better confirm the unrealized value from previous news sent to investors.
- vlovich123 6y ago
  WeWork, Valient and many others should dispel any notion of market sanity. There’s an insane amount of hype to the point of it being difficulty sometimes to discern who the bullshitter is (especially since everyone, including the “successful” gamblers, is bullshitting to some degree since there’s a lot of negotiation).
  - jacquesm 6y ago
    The other way to look at this is that there are some VCs (for instance: Softbank) who do not believe in rationality.
    - vlovich123 6y ago
      I don’t see why it’s irrational to believe that you can overwhelm the information channels a large amount of people have access to so that your hype gives you a market advantage (or in 0-sum situations your competitors end up making incorrect chooses).. You know the saying “perception is reality”? That’s not an irrational position and failing to acknowledge this is just leaving money on the table. To me the question is whether such unbridled hype is actually worth the cost. To me it seems to come with a lot of degradation in public trust, a commodity that’s perhaps the most important when trying to building a lasting, cohesive society.
paxys 6y ago
This is exactly why VC Twitter is a thing.
staysaasy 6y ago
Yup, and it's also an aggressive flywheel: - You are thought of as a leader - You get to invest in better companies because they know/want you - The better companies outperform, because they were better - You are increasingly thought of as a leader - You get to invest in better companies... etc. The marketing angle is increasingly a way to get onto (and sustain your place on) this carousel.
NotPavlovsDog 6y ago
For a post-industrial economy, it's marketing all the way down, for the "fast-growing" segments. Tesla and Apple valuations come to mind. Good marketing goes above the activities you list, creating a sub-culture pushing the hype for the brand instead. VCs are not there, and probably never will be, but they dream of it, as some of their self-aggrandizing visionary guru posturing can attest.
- zapita 6y ago
  Isn’t YC an example of VC successfully creating such a “subculture pushing the hype for the brand”? After all, we are having this conversation on their website...
  - Nowado 6y ago
    ALL the way down. And up.
- ForHackernews 6y ago
  It's kind of hard for me to claim Apple is all marketing hype when they've just released their own new silicon that is by all accounts outstanding. That's not marketing, that's real engineering. (Unless they didn't actually do that work and just white-labelled some chips from another firm)
  - flyinglizard 6y ago
    Apple just mastered the cycle, making it self reinforce at every tick. At their DNA they are a lifestyle company.
    - NotPavlovsDog 6y ago
      I miss Steve Wozniak values at apple. "We put out manuals that had just hundreds of pages of listings of code, descriptions of circuits, examples of boards that you would plug in—so that anyone could look at this and say, “Now I know how I would do my own.” They could type in the programs on their own Apple II and then see “that’s how that works” instantly, and know how to write their own programs. Running cards was the most important thing. All these companies started up making cards that you could plug into your Apple II and write a little software (mostly games at first) on cassette tapes. You’d go to the store and they’d just have all this stuff that you could buy to enhance the Apple II. So one of our big keys to success was that we were very open. There’s a big world out there for other people to come and join us." Steve Wozniak in "Founders at Work" by Jessica Livingston.
hehehaha 6y ago
VC is basically selling their rolodex. And to be honest that’s why most c-suite gets paid into the millions. In other words, it’s gatekeeping.
boh 6y ago
Investing of any kind and everything affiliated with investing of any kind is 90% marketing.

ackbar03 6y ago

This would suggest that there is an imbalance and a lot more capital than startup projects though. Is it really that extreme over there in silicon valley?

codingprograms 6y ago
Yeah. There’s a lot of startups, but only a few that are actually promising from a risk reward perspective. VC investing is about home runs. So they all fight over investing in a few companies
staysaasy 6y ago
It depends a bit on the stage. It is definitely that competitive for the best growth stage companies, where "best" roughly means "highest growth in a market that can sustain a venture-level return (which in practice means a $1B+ valuation)." These companies tend to be large enough that they naturally gain access to investors, there's cheap capital everywhere, and there just aren't that many companies in big markets that are on aggressive growth trajectories. Fwiw it also isn't just silicon valley at this point, the funding patterns increasingly hold across much of north america.
Fordec 6y ago
It's not about the lack of startup projects, it's the lack of genuine unicorn projects that pays for the other 19 companies that fail in their portfolio along the way from MVP to IPO. Everyone has ideas for companies that can be worth millions. But the current orthodoxy around VC economics balk if your game plan is to be a 50M sale. Either you make the big time, or you can be a tax write off when you fail. A "moderate" success won't pay the Limited Partners back at the end of the 10 year vesting cycle the billions the put in at the start.
bob33212 6y ago
Theranos is an example how how much money there is trying to find the next Jobs/Musk/Zuck/Gates. Everyone that gave Elizabeth Holmes money we hoping that she was the Steve Jobs of biotech. There is much less money for someone who wants to create a a dating site for people with food allergies.
- stainforth 6y ago
  Isn't that a perfect example of the folly of this intention? Maybe better if we collectively pursue a more fractal, pluralistic model? If capital only pursues monopolies that are a detriment to individuals at large, shouldn't we redirect that urge?

jacquesm 6y ago

VC is fundamentally about the exits and the 'unrealized value'. Without those there is no way to keep the cycle going. Of course those exits had better confirm the unrealized value from previous news sent to investors.

vlovich123 6y ago
WeWork, Valient and many others should dispel any notion of market sanity. There’s an insane amount of hype to the point of it being difficulty sometimes to discern who the bullshitter is (especially since everyone, including the “successful” gamblers, is bullshitting to some degree since there’s a lot of negotiation).
- jacquesm 6y ago
  The other way to look at this is that there are some VCs (for instance: Softbank) who do not believe in rationality.
  - vlovich123 6y ago
    I don’t see why it’s irrational to believe that you can overwhelm the information channels a large amount of people have access to so that your hype gives you a market advantage (or in 0-sum situations your competitors end up making incorrect chooses).. You know the saying “perception is reality”? That’s not an irrational position and failing to acknowledge this is just leaving money on the table. To me the question is whether such unbridled hype is actually worth the cost. To me it seems to come with a lot of degradation in public trust, a commodity that’s perhaps the most important when trying to building a lasting, cohesive society.

paxys 6y ago

This is exactly why VC Twitter is a thing.

staysaasy 6y ago

Yup, and it's also an aggressive flywheel: - You are thought of as a leader - You get to invest in better companies because they know/want you - The better companies outperform, because they were better - You are increasingly thought of as a leader - You get to invest in better companies... etc. The marketing angle is increasingly a way to get onto (and sustain your place on) this carousel.

NotPavlovsDog 6y ago

For a post-industrial economy, it's marketing all the way down, for the "fast-growing" segments. Tesla and Apple valuations come to mind. Good marketing goes above the activities you list, creating a sub-culture pushing the hype for the brand instead. VCs are not there, and probably never will be, but they dream of it, as some of their self-aggrandizing visionary guru posturing can attest.

zapita 6y ago
Isn’t YC an example of VC successfully creating such a “subculture pushing the hype for the brand”? After all, we are having this conversation on their website...
- Nowado 6y ago
  ALL the way down. And up.
ForHackernews 6y ago
It's kind of hard for me to claim Apple is all marketing hype when they've just released their own new silicon that is by all accounts outstanding. That's not marketing, that's real engineering. (Unless they didn't actually do that work and just white-labelled some chips from another firm)
- flyinglizard 6y ago
  Apple just mastered the cycle, making it self reinforce at every tick. At their DNA they are a lifestyle company.
  - NotPavlovsDog 6y ago
    I miss Steve Wozniak values at apple. "We put out manuals that had just hundreds of pages of listings of code, descriptions of circuits, examples of boards that you would plug in—so that anyone could look at this and say, “Now I know how I would do my own.” They could type in the programs on their own Apple II and then see “that’s how that works” instantly, and know how to write their own programs. Running cards was the most important thing. All these companies started up making cards that you could plug into your Apple II and write a little software (mostly games at first) on cassette tapes. You’d go to the store and they’d just have all this stuff that you could buy to enhance the Apple II. So one of our big keys to success was that we were very open. There’s a big world out there for other people to come and join us." Steve Wozniak in "Founders at Work" by Jessica Livingston.

hehehaha 6y ago

VC is basically selling their rolodex. And to be honest that’s why most c-suite gets paid into the millions. In other words, it’s gatekeeping.

boh 6y ago

Investing of any kind and everything affiliated with investing of any kind is 90% marketing.