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Even the most cynical of us were amazed by the fundamental lack of due diligence shown with FTX. If the people that funded that were asking you for more money t

Even the most cynical of us were amazed by the fundamental lack of due diligence shown with FTX. If the people that funded that were asking you for more money then responding with scrutiny is at the polite end of possible responses. The problem VCs have is that the signal that a company is VC funded is now only a sign that the founders are connected. It says nothing about competence or ability to execute at all.

gunapologist99 3y ago
Do you think that VC's should be pulling credit reports or criminal background checks or something, like a bank? (And what would that have accomplished with SBF anyway?) Lots of founders don't have good credit, or maybe even any credit at all. Do we really want to make it even harder to raise? There is no "due diligence" that can detect when you've invested in a turkey, or even a turkey that later turns out to have combined funds (perhaps fraudulently) or practiced financial mismanagement to the point that he was bailing out Alameda with FTX funds. That's why you invest in a wide variety of things. FTX is why LPs might be hesitant to invest in Sequoia in the future, but the "variety" part might also be why they don't hesitate, too.
- blitzar 3y ago
  SBF presented himself as a shit talking bullshitter dosed up to the eyeballs on amphetamines. Not only did Sequoia notice that this was the case, but they loved it and threw as many fistfulls of cash as they could at it.
  - gunapologist99 3y ago
    Point taken, but he also presented himself as a brilliant (if slightly psychotic) nerd, which is exactly the archetype that has worked well for Sequoia in the past.
- AlexandrB 3y ago
  > Do you think that VC's should be pulling credit reports or criminal background checks or something, like a bank? It's funny to use this as some kind of absurd example when in many places this kind of stuff is standard before someone lets you rent an apartment. Isn't vetting founders and their companies before risking the LP's money part of the job for a VC?
  - gunapologist99 3y ago
    Of course, it is an absurd example. I'm sure SBF had great credit and no criminal background. Very few founders who would ever catch even the remotest VC interest would have any significant negatives, on paper anyway. SBF was seen as a catch because of his elitist and entrepreneurial background, with two professor parents at Stanford, a background on Wall Street, a hilariously affected backstory about international cryptocurrency arbitrage, crazy ideas on how his future wealth could (and would) save the world, and a later history of donating or bundling crazy amounts of money for his preferred political party (and anyone else in either party or agency that he could perhaps influence with donations). That's why checking credit report or even criminal background is so absurd in this context. Checks like this won't do anything except further entrench the elitist anti-meritocracy that currently infects the VC community. Lots of people can walk into a bank and get a loan, but very few can walk into Sand Hill Road and raise a round of any size.
malux85 3y ago
Yep, one of the recent places I have worked had a 19 year old founder and raised 6 million euros. Founder has no experience, a buggy non functioning mvp, no customers, no traction. He only got investment by plagiarising a paper that got cited a few times and then exploiting the fact that he fooled one clueless VC into giving them money so he must be good. This snowballed into other investors giving money. No technical DD, I spent 20 minutes reading the code when I started and could tell it was a whole bunch of nothing - a tiny system that creates a docker container but worse (reinventing the square wheel) Well he might have potential you say? Nope. It’s been 2 years and he has completely failed to execute and get even a minimal number of customers (I.E. the individual ones that try it immediately churn because it’s buggy and useless) It’s a complete circus, I can’t believe that a group of well known VC names are so clueless

gunapologist99 3y ago

Do you think that VC's should be pulling credit reports or criminal background checks or something, like a bank? (And what would that have accomplished with SBF anyway?) Lots of founders don't have good credit, or maybe even any credit at all. Do we really want to make it even harder to raise? There is no "due diligence" that can detect when you've invested in a turkey, or even a turkey that later turns out to have combined funds (perhaps fraudulently) or practiced financial mismanagement to the point that he was bailing out Alameda with FTX funds. That's why you invest in a wide variety of things. FTX is why LPs might be hesitant to invest in Sequoia in the future, but the "variety" part might also be why they don't hesitate, too.

blitzar 3y ago
SBF presented himself as a shit talking bullshitter dosed up to the eyeballs on amphetamines. Not only did Sequoia notice that this was the case, but they loved it and threw as many fistfulls of cash as they could at it.
- gunapologist99 3y ago
  Point taken, but he also presented himself as a brilliant (if slightly psychotic) nerd, which is exactly the archetype that has worked well for Sequoia in the past.
AlexandrB 3y ago
> Do you think that VC's should be pulling credit reports or criminal background checks or something, like a bank? It's funny to use this as some kind of absurd example when in many places this kind of stuff is standard before someone lets you rent an apartment. Isn't vetting founders and their companies before risking the LP's money part of the job for a VC?
- gunapologist99 3y ago
  Of course, it is an absurd example. I'm sure SBF had great credit and no criminal background. Very few founders who would ever catch even the remotest VC interest would have any significant negatives, on paper anyway. SBF was seen as a catch because of his elitist and entrepreneurial background, with two professor parents at Stanford, a background on Wall Street, a hilariously affected backstory about international cryptocurrency arbitrage, crazy ideas on how his future wealth could (and would) save the world, and a later history of donating or bundling crazy amounts of money for his preferred political party (and anyone else in either party or agency that he could perhaps influence with donations). That's why checking credit report or even criminal background is so absurd in this context. Checks like this won't do anything except further entrench the elitist anti-meritocracy that currently infects the VC community. Lots of people can walk into a bank and get a loan, but very few can walk into Sand Hill Road and raise a round of any size.

malux85 3y ago

Yep, one of the recent places I have worked had a 19 year old founder and raised 6 million euros. Founder has no experience, a buggy non functioning mvp, no customers, no traction. He only got investment by plagiarising a paper that got cited a few times and then exploiting the fact that he fooled one clueless VC into giving them money so he must be good. This snowballed into other investors giving money. No technical DD, I spent 20 minutes reading the code when I started and could tell it was a whole bunch of nothing - a tiny system that creates a docker container but worse (reinventing the square wheel) Well he might have potential you say? Nope. It’s been 2 years and he has completely failed to execute and get even a minimal number of customers (I.E. the individual ones that try it immediately churn because it’s buggy and useless) It’s a complete circus, I can’t believe that a group of well known VC names are so clueless