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Is this a recent change or something that's not visible to people outside? I'm asking while seemingly recalling some bizarre VC investments (say, MoviePass) fro

Is this a recent change or something that's not visible to people outside? I'm asking while seemingly recalling some bizarre VC investments (say, MoviePass) from the past decade or so.

shoto_io 5y ago
You need to a background check on the founders. If they had already exited successfully, then anything gets funded.
ZephyrBlu 5y ago
A few bizzare investments doesn't give good insight into what the majority of investments look like.
lmeyerov 5y ago
Yes and no :) Avoiding category-creation risk is true of most investors most of the times For VCs, it's understandable given investors see so many co's pitch and it's one less risk to worry about. The later the stage and bigger the check, even more pressure. Earlier stage is always more welcoming than later stage. Risk is lower for angels b/c betting on team means the startup can pivot (harder later) and can always exit for lower amounts ($20-30M exit for a $50K check is more of a 5X return than the goal of 10-100X return-the-fund, but a few of these still works and is more doable)
caseysoftware 5y ago
Different VCs work at different stages and take on different types of risk depending on what they know and have done. Roughly: The earliest investors (mostly angels, usually not VCs) are taking the risk of "can you ship?" The next round (some angles, but mostly VCs) are taking the risks of "is there any market for this?" and "can you sell to a few customers in that market?" The next round (almost entirely VCs) are taking the triple risks of "is this a real market?", "can you sell to LOTS of customers?" and "can you scale a business quickly?" And every round (exclusively VCs) are taking the dual risk of "can you expand your customer base into adjacent segments?" and "do your economies of scale eventually work?" Unfortunately, no stage proves the next one, sometimes what looked like market early on turns out not to be one (many of the dotcoms), sometimes the math never works out (MoviePass, 98% of the dotcoms), sometimes the people who got you there can't get you to the next level and can't admit it, and there's the occasional frauds that slip through (Theranos). There are hundreds of other, more nuanced reasons investments fail but those are the big ones.

Is this a recent change or something that's not visible to people outside? I'm asking while seemingly recalling some bizarre VC investments (say, MoviePass) from the past decade or so.

shoto_io 5y ago

You need to a background check on the founders. If they had already exited successfully, then anything gets funded.

ZephyrBlu 5y ago

A few bizzare investments doesn't give good insight into what the majority of investments look like.

lmeyerov 5y ago

Yes and no :) Avoiding category-creation risk is true of most investors most of the times For VCs, it's understandable given investors see so many co's pitch and it's one less risk to worry about. The later the stage and bigger the check, even more pressure. Earlier stage is always more welcoming than later stage. Risk is lower for angels b/c betting on team means the startup can pivot (harder later) and can always exit for lower amounts ($20-30M exit for a $50K check is more of a 5X return than the goal of 10-100X return-the-fund, but a few of these still works and is more doable)

caseysoftware 5y ago

Different VCs work at different stages and take on different types of risk depending on what they know and have done. Roughly: The earliest investors (mostly angels, usually not VCs) are taking the risk of "can you ship?" The next round (some angles, but mostly VCs) are taking the risks of "is there any market for this?" and "can you sell to a few customers in that market?" The next round (almost entirely VCs) are taking the triple risks of "is this a real market?", "can you sell to LOTS of customers?" and "can you scale a business quickly?" And every round (exclusively VCs) are taking the dual risk of "can you expand your customer base into adjacent segments?" and "do your economies of scale eventually work?" Unfortunately, no stage proves the next one, sometimes what looked like market early on turns out not to be one (many of the dotcoms), sometimes the math never works out (MoviePass, 98% of the dotcoms), sometimes the people who got you there can't get you to the next level and can't admit it, and there's the occasional frauds that slip through (Theranos). There are hundreds of other, more nuanced reasons investments fail but those are the big ones.