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What I find amazing is that it doesn't look like a superpower to see that some Startup makes no sense at all... and don't really bring any "revolution" to some

What I find amazing is that it doesn't look like a superpower to see that some Startup makes no sense at all... and don't really bring any "revolution" to some market, and yet they seem to have no problem getting funding and to carry on with their non-sense. The most classical example I can think of is Juicero (remember that one?) - it's not rocket science to figure out it that as an investor, it's not very clever to put your money there. I wonder why VCs and stuff make these dumb decisions, that even without any sort of "market research" it's obvious it is pure BS, and yet there seems to be no shortage of idiotic ideas getting funding.

misja111 4y ago
This is what you get when leaving your money on a bank account -costs- money, due to negative interest rates. Even a startup with a highly dubious business plan might be better than leaking your cash away.
infecto 4y ago
Money was cheap. I am sure there are many more reasons but in my opinion it all stems from how cheap money was. The great experiment is still unfolding and I am not entirely sure how much the VC -> Startup relationship will change.
- icedchai 4y ago
  Money is still cheap, compared to the 80's and most of the 90's. Rates during most of the dot-com boom were higher than they are now.
parmenidean 4y ago
Caveat: I'm the founder of a VC-backed startup, so my perspective is likely skewed. The VC mode of thinking becomes a lot clearer when you realize that their returns are completely driven by moonshots. Something like 1% of the portfolio will drive 56% of the returns. As a result: (1) It costs them nearly nothing if a startup goes to 0. Most of their portfolio will go to 0. (2) Conversely, it will cost them a ton if they miss a potential moonshot. Even if the idea sounds dumb on face, if there's a chance it becomes big, the VC needs to be in it in order to survive. (3) There's reputational risk at play for the individual VC investor. Every VC will have a low hit rate, so they're not worried about looking dumb losing money on some startup going to 0. What they are worried about is being known as the person who passed on the next Airbnb despite getting a look. (4) Later stage VC funding becomes an access game — there's more capital than good ideas, and so these companies can have their pick of the litter. This means, as a VC, you need to prioritize being founder friendly and having a pre-existing relationship with a company. As such, you'll see VCs throw in $1m to $10m checks without much though, with the hope that if the company every does scale, they'll be able to write a sizable follow-on. It's weird to think about if you're used to public markets, where hit rate matters a lot more and diligence is centered on "why should I invest". In VC-land, the burden of proof is flipped.
- hashtag-til 4y ago
  It's very interesting this point of view. I wasn't aware of - thanks for explaining.

misja111 4y ago

This is what you get when leaving your money on a bank account -costs- money, due to negative interest rates. Even a startup with a highly dubious business plan might be better than leaking your cash away.

infecto 4y ago

Money was cheap. I am sure there are many more reasons but in my opinion it all stems from how cheap money was. The great experiment is still unfolding and I am not entirely sure how much the VC -> Startup relationship will change.

icedchai 4y ago
Money is still cheap, compared to the 80's and most of the 90's. Rates during most of the dot-com boom were higher than they are now.

parmenidean 4y ago

Caveat: I'm the founder of a VC-backed startup, so my perspective is likely skewed. The VC mode of thinking becomes a lot clearer when you realize that their returns are completely driven by moonshots. Something like 1% of the portfolio will drive 56% of the returns. As a result: (1) It costs them nearly nothing if a startup goes to 0. Most of their portfolio will go to 0. (2) Conversely, it will cost them a ton if they miss a potential moonshot. Even if the idea sounds dumb on face, if there's a chance it becomes big, the VC needs to be in it in order to survive. (3) There's reputational risk at play for the individual VC investor. Every VC will have a low hit rate, so they're not worried about looking dumb losing money on some startup going to 0. What they are worried about is being known as the person who passed on the next Airbnb despite getting a look. (4) Later stage VC funding becomes an access game — there's more capital than good ideas, and so these companies can have their pick of the litter. This means, as a VC, you need to prioritize being founder friendly and having a pre-existing relationship with a company. As such, you'll see VCs throw in $1m to $10m checks without much though, with the hope that if the company every does scale, they'll be able to write a sizable follow-on. It's weird to think about if you're used to public markets, where hit rate matters a lot more and diligence is centered on "why should I invest". In VC-land, the burden of proof is flipped.

hashtag-til 4y ago
It's very interesting this point of view. I wasn't aware of - thanks for explaining.