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This seems like misdirected blame: maybe low interest rates incentivize this behavior, but surely we expect VC firms to be capable of operating within host lega

This seems like misdirected blame: maybe low interest rates incentivize this behavior, but surely we expect VC firms to be capable of operating within host legal frameworks, right? I think it’s maybe more judicious to look at the culture these VC firms have fostered instead: one where law and civic interest are secondary at best responsibilities. Racing to an obscene valuation that gets saddled on public investors is the #1 priority.

jmeister 4y ago
Parent is comment is referring to poor corporate governance, not necessarily illegal.
spamizbad 4y ago
Yeah it’s strange these firms, staffed with expensively educated professionals from top institutions, with decades of industry experience, somehow lose all autonomy if interest rates get too low for too long. It seems like every egregious mistake firms make somehow gets traced back to interest rates. A very convenient way to absolve people of responsibility.
- vba616 4y ago
  >it’s strange I don't understand what's strange about it. Short term thinking spreads even among people who know better because of competition. If you're not taking the risks other people are, then how do you do business? A fairly well known quote from a bank CEO is "As long as the music is playing, you’ve got to get up and dance". The corollary, from that perspective, seems to be that government regulation is required to save industry because individuals can't prevent a crisis.
  - FormerBandmate 4y ago
    Tiger Global thrashed every other VC because they did no due diligence, so everyone else stopped doing it. Competition frequently leads to market failures
cloutchaser 4y ago
You are partially right, of course the individuals bear responsibility. But you also have to acknowledge that at a macro level every economic crises since 1999 has been caused by central banks blowing bubbles. Including the recent VC bubble.
- woodruffw 4y ago
  In general, I’m skeptical of any sort of “look what you made me do” reasoning. Central banks can incentivize more or less risky market behavior, but they don’t strip investors’ autonomy. It takes a conscious effort to dump your money into patently fraudulent ventures.
  - vba616 4y ago
    >In general, I’m skeptical of any sort of “look what you made me do” reasoning Sure, I would be too. But you're not conversing with the people who did it, are you?
    - woodruffw 4y ago
      Not sure what you mean; the GP’s comment is an example of this reasoning format.
nprateem 4y ago
A VC firm charging 20% carry has a massive incentive not to put their civic interests before profit. Plus, if they don't chase returns, their competitors will, then they'll struggle to raise subsequent funds. Market forces + low interest rates are a recipe for recklessness.
raincom 4y ago
A lot of human activity is mimetic--from learning slang/jargon, accents, all the way to hiring and laying off people. If one top tier VC invests in a company X, other top tiers pile on X, thereby increasing the valuation multiples.
xwolfi 4y ago
VC firms are not really capable of anything purposeful: they're here to find a discount, which helps the company return a premium: they're a symbiotic parasite and whatever the culture they foster, when discount is hard to find or when premium look gigantic, well they jump on anything forgetting that finding a discount in a difficult period or a gigantic premium is a red flag. But do you expect parasites to start thinking ? They cant. Sequoia put in their own website that the FTX CEO was playing a video game while pitching hundreds of millions of investment. The same firm would kick me out of the door if I went without a tie to interview for a secretary job. Difference is that I dont promise a huge premium at a huge discount. And it's a red flag for any sentient when someone is distracted in a high stake conversation, but not to the Sequoia parasite only eating premiums.
spaceman_2020 4y ago
It doesn’t absolve VCs of their fiduciary responsibilities, but it does explain their callousness. If both founders and their backers know that money is practically free, governance lapses can always be papered over by raising another round. And since interest rates are negligible, there’s too much money chasing too few deals. Any VC that stops to do active due diligence is too late to close the deal.

jmeister 4y ago

Parent is comment is referring to poor corporate governance, not necessarily illegal.

spamizbad 4y ago

Yeah it’s strange these firms, staffed with expensively educated professionals from top institutions, with decades of industry experience, somehow lose all autonomy if interest rates get too low for too long. It seems like every egregious mistake firms make somehow gets traced back to interest rates. A very convenient way to absolve people of responsibility.

vba616 4y ago
>it’s strange I don't understand what's strange about it. Short term thinking spreads even among people who know better because of competition. If you're not taking the risks other people are, then how do you do business? A fairly well known quote from a bank CEO is "As long as the music is playing, you’ve got to get up and dance". The corollary, from that perspective, seems to be that government regulation is required to save industry because individuals can't prevent a crisis.
- FormerBandmate 4y ago
  Tiger Global thrashed every other VC because they did no due diligence, so everyone else stopped doing it. Competition frequently leads to market failures

cloutchaser 4y ago

You are partially right, of course the individuals bear responsibility. But you also have to acknowledge that at a macro level every economic crises since 1999 has been caused by central banks blowing bubbles. Including the recent VC bubble.

woodruffw 4y ago
In general, I’m skeptical of any sort of “look what you made me do” reasoning. Central banks can incentivize more or less risky market behavior, but they don’t strip investors’ autonomy. It takes a conscious effort to dump your money into patently fraudulent ventures.
- vba616 4y ago
  >In general, I’m skeptical of any sort of “look what you made me do” reasoning Sure, I would be too. But you're not conversing with the people who did it, are you?
  - woodruffw 4y ago
    Not sure what you mean; the GP’s comment is an example of this reasoning format.

nprateem 4y ago

A VC firm charging 20% carry has a massive incentive not to put their civic interests before profit. Plus, if they don't chase returns, their competitors will, then they'll struggle to raise subsequent funds. Market forces + low interest rates are a recipe for recklessness.

raincom 4y ago

A lot of human activity is mimetic--from learning slang/jargon, accents, all the way to hiring and laying off people. If one top tier VC invests in a company X, other top tiers pile on X, thereby increasing the valuation multiples.

xwolfi 4y ago

VC firms are not really capable of anything purposeful: they're here to find a discount, which helps the company return a premium: they're a symbiotic parasite and whatever the culture they foster, when discount is hard to find or when premium look gigantic, well they jump on anything forgetting that finding a discount in a difficult period or a gigantic premium is a red flag. But do you expect parasites to start thinking ? They cant. Sequoia put in their own website that the FTX CEO was playing a video game while pitching hundreds of millions of investment. The same firm would kick me out of the door if I went without a tie to interview for a secretary job. Difference is that I dont promise a huge premium at a huge discount. And it's a red flag for any sentient when someone is distracted in a high stake conversation, but not to the Sequoia parasite only eating premiums.

spaceman_2020 4y ago

It doesn’t absolve VCs of their fiduciary responsibilities, but it does explain their callousness. If both founders and their backers know that money is practically free, governance lapses can always be papered over by raising another round. And since interest rates are negligible, there’s too much money chasing too few deals. Any VC that stops to do active due diligence is too late to close the deal.