8 ms·

Are softbank actually the biggest idiots in VC? It almost seems like everything they invest in is a handshake deal built on "just trust me bro" numbers.

motoxpro 3y ago
Not just SoftBank. Founders Fund too.
- fakedang 3y ago
  Founders Fund offloads it onto the next guy though. And very well too (looking at you, StemCentrx and AbbVie).
rasz 3y ago
someone sure is >Masayoshi Son. He had for many years the distinction of being the person who had lost the most money in history (more than $59bn[38] during the dot com crash of 2000 alone, when his SoftBank shares plummeted),[39] a feat surpassed by Elon Musk[40][41][42] in the following decades.
ProllyInfamous 3y ago
LOL I personally know an asshat VP at SoftBank — "just trust me bruh" ! In early 2017, while being ousted from another banking system, he advised me to invest in a Retail Mall Holdings company, instead of Bitcoin (because the latter is "idiotic"). I did NOT take his advice. See CBL's returns verse BTC's.
- axus 3y ago
  Wow, 0HQK has a very interesting chart. I wonder what happened in November 2021.
CharlieDigital 3y ago
I have brought this up in another comment, but my experience in the VC world is that it operates too heavily based on 4 types of "trust": 1) Institutional trust (Stanford, Harvard, MIT, "ex-FAANG", "ex-McKinsey", etc.), 2) Social trust (someone you know that has already established one of the three other kinds of trust), 3) Serial trust ("3-exits", "former CEO/CTO/VP of..."), and 4) Transitive trust ("Sequoia invested in X; I trust Sequoia; therefore, I should invest in X") In many cases, this trust makes perfect sense. But it seems that in more than a handful of high profile cases, these types of investments based on trust has superseded basic due diligence, skepticism, and common sense.
- rossjudson 3y ago
  I've always had this background thought that it would be a fun job to do "due diligence" on behalf of VCs. I remember being on the receiving end of some of that work, and I wasn't all that impressed. Do today's VCs take technical due diligence seriously? If not, why not?
  - afavour 3y ago
    > Do today's VCs take technical due diligence seriously? If not, why not? Because they're worried they'll miss the boat. Maybe less true in these not-quite-so-booming economic times but not so long ago VCs were literally competing to get in on rounds of funding for hyped up startups. The fact that the hype often never amounted to anything didn't seem to matter, if so-and-so was investing then you wanted to be in on that too or you'll look bad.
  - FormerBandmate 3y ago
    Tiger Global and SoftBank made tons of money by doing zero due diligence in 2020. It inexplicably became a phenomenon
  - makestuff 3y ago
    I think the issue is in the last few years hot startups would just say sorry we are going with another firm. There was so much money flying around it was similar to home buyers buying houses with all cash offers and waiving inspections.
    - SV_BubbleTime 3y ago
      Another positive of the free money era on pause.
      - orangepurple 3y ago
        ZIRP is the technical term
  - gizmo 3y ago
roseway4 3y ago
Softbank had a strategy of deploying a lot of capital very quickly. That is, taking many more bets than traditional “high conviction” VCs. High transaction costs (including time to close) as a consequence of deep diligence would have broken this model. It doesn’t look like this strategy worked out well for them.
xiphias2 3y ago
Not really...the real idiots are Saudis for giving SoftBank more money to play with. Still, so far it doesn't look like oil revenues are going down.
deleted 3y ago
[deleted]
dbish 3y ago
Having recently completed fundraising for a pre-seed, it's wild to me that I had VCs spending multiple weeks sometimes on "due diligence" for an idea-stage product, yet there are many examples of just yolo huge investments. It's who you know or what hype is around you in these cases I suppose.
- thephyber 3y ago
  A company in pre-seed phase has no history, so some of the other indicators of promise/trust don’t yet exist. It makes more sense for the first investor in a new company to spend some time to investigate the founders and/or the idea or market. That, however, doesn’t mean that later or faster investment rounds are any more informed.
- ignoramous 3y ago
  You may find this interesting: http://paulgraham.com/herd.html http://paulgraham.com/herd.html

motoxpro 3y ago

Not just SoftBank. Founders Fund too.

fakedang 3y ago
Founders Fund offloads it onto the next guy though. And very well too (looking at you, StemCentrx and AbbVie).

rasz 3y ago

someone sure is >Masayoshi Son. He had for many years the distinction of being the person who had lost the most money in history (more than $59bn[38] during the dot com crash of 2000 alone, when his SoftBank shares plummeted),[39] a feat surpassed by Elon Musk[40][41][42] in the following decades.

ProllyInfamous 3y ago

LOL I personally know an asshat VP at SoftBank — "just trust me bruh" ! In early 2017, while being ousted from another banking system, he advised me to invest in a Retail Mall Holdings company, instead of Bitcoin (because the latter is "idiotic"). I did NOT take his advice. See CBL's returns verse BTC's.

axus 3y ago
Wow, 0HQK has a very interesting chart. I wonder what happened in November 2021.

CharlieDigital 3y ago

I have brought this up in another comment, but my experience in the VC world is that it operates too heavily based on 4 types of "trust": 1) Institutional trust (Stanford, Harvard, MIT, "ex-FAANG", "ex-McKinsey", etc.), 2) Social trust (someone you know that has already established one of the three other kinds of trust), 3) Serial trust ("3-exits", "former CEO/CTO/VP of..."), and 4) Transitive trust ("Sequoia invested in X; I trust Sequoia; therefore, I should invest in X") In many cases, this trust makes perfect sense. But it seems that in more than a handful of high profile cases, these types of investments based on trust has superseded basic due diligence, skepticism, and common sense.

rossjudson 3y ago
I've always had this background thought that it would be a fun job to do "due diligence" on behalf of VCs. I remember being on the receiving end of some of that work, and I wasn't all that impressed. Do today's VCs take technical due diligence seriously? If not, why not?
- afavour 3y ago
  > Do today's VCs take technical due diligence seriously? If not, why not? Because they're worried they'll miss the boat. Maybe less true in these not-quite-so-booming economic times but not so long ago VCs were literally competing to get in on rounds of funding for hyped up startups. The fact that the hype often never amounted to anything didn't seem to matter, if so-and-so was investing then you wanted to be in on that too or you'll look bad.
- FormerBandmate 3y ago
  Tiger Global and SoftBank made tons of money by doing zero due diligence in 2020. It inexplicably became a phenomenon
- makestuff 3y ago
  I think the issue is in the last few years hot startups would just say sorry we are going with another firm. There was so much money flying around it was similar to home buyers buying houses with all cash offers and waiving inspections.
  - SV_BubbleTime 3y ago
    Another positive of the free money era on pause.
    - orangepurple 3y ago
      ZIRP is the technical term
- gizmo 3y ago

roseway4 3y ago

Softbank had a strategy of deploying a lot of capital very quickly. That is, taking many more bets than traditional “high conviction” VCs. High transaction costs (including time to close) as a consequence of deep diligence would have broken this model. It doesn’t look like this strategy worked out well for them.

xiphias2 3y ago

Not really...the real idiots are Saudis for giving SoftBank more money to play with. Still, so far it doesn't look like oil revenues are going down.

deleted 3y ago

[deleted]

dbish 3y ago

Having recently completed fundraising for a pre-seed, it's wild to me that I had VCs spending multiple weeks sometimes on "due diligence" for an idea-stage product, yet there are many examples of just yolo huge investments. It's who you know or what hype is around you in these cases I suppose.

thephyber 3y ago
A company in pre-seed phase has no history, so some of the other indicators of promise/trust don’t yet exist. It makes more sense for the first investor in a new company to spend some time to investigate the founders and/or the idea or market. That, however, doesn’t mean that later or faster investment rounds are any more informed.
ignoramous 3y ago
You may find this interesting: http://paulgraham.com/herd.html http://paulgraham.com/herd.html