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The reason VCs are funding lightweight companies isn't that VCs want to fund lightweight companies. It's something else, and it's easy to see the reason if you
by michaelochurch 14y ago
The reason VCs are funding lightweight companies isn't that VCs want to fund lightweight companies. It's something else, and it's easy to see the reason if you understand the sociology of VC-istan.
VC-istan has become a good-ol'-boy network like any other. You need connections. You need the VCs to see you as a real person so that, instead of getting an indefinite put-off or a horrible term sheet, you either get (a) funding, quickly, on decent terms, or (b) a sit-down explanation of why your idea was rejected and either (i) introductions to investors who might be interested, or (ii) an EIR gig to pay the bills until you happen upon an idea that has wings. If you're not on those kinds of terms with VCs, and I doubt more a very small percentage of people are, then you shouldn't be wasting your time in VC-istan.
If you're a real founder, not getting funding means that a VC will pop you in to a high-level position at a portfolio company that one would never get on the open job market, and that will make up for the 6 months you spent without income. Actually, you're going to have more than one of these offers.
If you're not a real founder, not getting funding means that, congratulations, you spent months hustling with no income and no results.
The reason why lightweight companies are getting all the funding is that building up and maintaining those VC contacts is expensive and time-consuming. It's easily as large a time commitment as a full-time job, if not worse, and it takes months before you see any payoff.
VCs aren't preternaturally biased in favor of lightweight companies, but the people who are doing heavyweight stuff don't have the time to become "real founders" (i.e. "made men" in the VCs' eyes, who are entitled to sit-down explanations and EIR gigs upon rejection). So they have to pursue other routes to funding.
- legutierr 14y agoThis sounds very sub-optimal from the VCs' perspective.
- pg 14y agoThis is simply false. VCs have a network among themselves, but they don't expect founders to be part of it.
- j_s 14y agoThere is a huge space between the OP and your response... I think reality varies in-between, particularly outside YC.
- vwoolf 14y agoPeter Thiel thinks VCs are biased against big ideas: http://blakemasters.tumblr.com/post/24122680868/peter-thiels-cs183-startup-class-15-notes-essay http://blakemasters.tumblr.com/post/24122680868/peter-thiels... . (This is in response to the grandparent: "VCs aren't preternaturally biased in favor of lightweight companies, but the people who are doing heavyweight stuff don't have the time to become "real founders.")
- michaelochurch 14y agoI think it's pretty accurate to say that they'll readily fund a band of outsiders if they think the idea's good, but still, they also put out terms that make it easy to take over the company if they don't see the founders as "real founders", "made men", "like us", or however you want to describe that status. Also, here's the difference for real founders vs. the rest of us. Real founders get alternatives put in front of them when their ideas are rejected-- EIR gigs to pay the bills, spots in portfolio companies. The rest of us get zilch; spent months with no income and nothing to show for it. Real Founder social status doesn't mean that bad ideas get funded, but it does mean you don't have to deal with the extreme income risk associated with startups for non-Real Founders-- a risk that stops making sense to take after age 25.
- deleted 14y ago[deleted]
- pg 14y agoNo, the reason experienced founders get better terms from VCs is that have more experience dealing with VCs.
- raldi 14y agoYou mean the "old boy" network. "Good ol' boys" are something completely different.
- brd 14y agoEither could be correct in this case but I'd say "Good ol' boy" is more accurate. "Old boy" network has a more specific meaning (childhood colleagues) vs. "Good ol' boy" which just implies cronyism.
- raldi 14y agoNo, that's exactly the misconception I'm trying to dispel here. "Good ol' boy" has nothing whatsoever to do with cronyism. See http://en.wikipedia.org/wiki/Talk:Good_ol%27_boy_network http://en.wikipedia.org/wiki/Talk:Good_ol%27_boy_network for details.
- michaelochurch 14y agoI hope it's not an Old Boy network. 15 years imprisonment in a shitty hotel room is more than I can handle.
- friendstock 14y agoI really disagree with your views on venture funding... but this Korean movie reference was funny.
- michaelochurch 14y agoI don't think all or most VCs are assholes. Far from it. I think most of them are probably good people. The bad ones get a lot of press, but I think they have the same distribution as people in finance: a few jerks who get a lot of attention, while the majority, by far, are decent, ethical, and competent professionals. I just think the sociology of the VC ecosystem is broken. I think there's a lot more social climbing and fluff than real technology and real work coming out of it, not because VCs are bad people (they aren't) but because the society has gotten to an undesirable state. I don't have any direct negative experiences with VC, but I've seen some shitty human beings get funding, and then go on to do some awful stuff in their startups. And the ethical problems in VC-istan may not be directly caused by VCs, but the VCs are the actual bosses and they should be clamping down.
- qq66 14y agoSo how do companies like Google, Amazon, Genentech, Facebook, etc. get started at all? These are "heavyweight" companies that raised lots of VC money.