4 ms·

I'll try to reword it in the hope of being clearer. The observation is that disruptive innovation is inevitable. The role of VCs is to protect against this ri

I'll try to reword it in the hope of being clearer. The observation is that disruptive innovation is inevitable. The role of VCs is to protect against this risk. You can't protect money by letting it in the bank, investing and hedging is the only viable option.

breck 5y ago
This is a good way to describe it. To use concrete examples, while I know there are always internal believers, perhaps decision makers at Visa invested in Stripe and at USAA invested in Coinbase to hedge downside of disruption, not because they want to encourage those technologies.
- mbesto 5y ago
  > perhaps decision makers at Visa invested in Stripe and at USAA invested in Coinbase to hedge downside of disruption, PS - Those are examples of CVC. Which IMHO have very different goals than traditional VCs.
  - breck 5y ago
    Ah yes, I was agreeing with your points about CVC. I probably should have responded to the parent thread but had to run so clicked submit.
mbesto 5y ago
> The observation is that disruptive innovation is inevitable. Makes sense, agreed. > The role of VCs is to protect against this risk. Protect who though? Are you just saying that a LP has to allocate funds to a VC asset class in order to hedge against worse returns in other asset classes? In other words, if I'm a pension fund, I don't put all of my capital into Marriott because I need to allocate some of it into AirBnb, since Marriott's market cap will likely go down as a result of ABNB's success? Hence - the hedge.
- stephc_int13 5y ago
  I am not talking about individual VCs, but in general, all of them, their collective role is to protect money (from their clients) from potential disruptive innovation. The goal is not to create value or even to make money, but to not lose it.
  - mbesto 5y ago
    > but to not lose it. But for who? You keep saying "from their clients", but I don't think you understand how the VC model works or care to explain what you mean by "protect". Here's an example: The California State Teacher's Retirement System, or CalSTRS (called an LP) committed money into Shashta Ventures. Shasta ventures then invested in several Series A and Series B startups (presumably "disruptive innovation"). Sashta then profits from selling those companies and takes a part of that profit for themselves and gives another part to CalSTRS. So. No, they're not "protecting it from their clients". VCs clients are their LPs and their goal is purely to profit from M&A/IPO activity and return that for themselves and their LPs. There isn't any dirty little secret about the industry - its that simple.
    - stephc_int13 5y ago
      This is not a secret but a common misunderstanding about alignment. VCs (and their clients) are aligned against innovation, contrary to what we might read naïvely. They are investing in "innovative" companies to protect their money against the innovation and also to control them.
      - mbesto 5y ago
        Providing no evidence nor having experience in this area for why this is the case other than repeating the same thing over and over again isn't a very compelling argument. For the record, I'm an angel investor and work with VCs. What you're saying makes no sense to me.
        5y ago

breck 5y ago

This is a good way to describe it. To use concrete examples, while I know there are always internal believers, perhaps decision makers at Visa invested in Stripe and at USAA invested in Coinbase to hedge downside of disruption, not because they want to encourage those technologies.

mbesto 5y ago
> perhaps decision makers at Visa invested in Stripe and at USAA invested in Coinbase to hedge downside of disruption, PS - Those are examples of CVC. Which IMHO have very different goals than traditional VCs.
- breck 5y ago
  Ah yes, I was agreeing with your points about CVC. I probably should have responded to the parent thread but had to run so clicked submit.

mbesto 5y ago

> The observation is that disruptive innovation is inevitable. Makes sense, agreed. > The role of VCs is to protect against this risk. Protect who though? Are you just saying that a LP has to allocate funds to a VC asset class in order to hedge against worse returns in other asset classes? In other words, if I'm a pension fund, I don't put all of my capital into Marriott because I need to allocate some of it into AirBnb, since Marriott's market cap will likely go down as a result of ABNB's success? Hence - the hedge.

stephc_int13 5y ago
I am not talking about individual VCs, but in general, all of them, their collective role is to protect money (from their clients) from potential disruptive innovation. The goal is not to create value or even to make money, but to not lose it.
- mbesto 5y ago
  > but to not lose it. But for who? You keep saying "from their clients", but I don't think you understand how the VC model works or care to explain what you mean by "protect". Here's an example: The California State Teacher's Retirement System, or CalSTRS (called an LP) committed money into Shashta Ventures. Shasta ventures then invested in several Series A and Series B startups (presumably "disruptive innovation"). Sashta then profits from selling those companies and takes a part of that profit for themselves and gives another part to CalSTRS. So. No, they're not "protecting it from their clients". VCs clients are their LPs and their goal is purely to profit from M&A/IPO activity and return that for themselves and their LPs. There isn't any dirty little secret about the industry - its that simple.
  - stephc_int13 5y ago
    This is not a secret but a common misunderstanding about alignment. VCs (and their clients) are aligned against innovation, contrary to what we might read naïvely. They are investing in "innovative" companies to protect their money against the innovation and also to control them.
    - mbesto 5y ago
      Providing no evidence nor having experience in this area for why this is the case other than repeating the same thing over and over again isn't a very compelling argument. For the record, I'm an angel investor and work with VCs. What you're saying makes no sense to me.
      - 5y ago