11 ms·

In 2025, venture capital can't pretend everything is fine any more

282 points by namanyayg 1y ago

jmclnx 1y ago
I guess it is time to do your homework and invest in real tangible products instead of trying to make a quick buck and get out before the company fails.
- mistrial9 1y ago
  I can work for a year and produce something worth a few thousand dollars in profits.. meanwhile the financial grind generated that in a portion of a day. Those are the same dollars used to buy a house or save for retirement. see Thomas Piketty .. this will get worse before it gets better
  - cadamsdotcom 1y ago
    What’re your thoughts on how it’ll get worse, and how it’ll get better?
oli5679 1y ago
It’s really easy to be cynical. There is a big upside potential for high growth companies taking advantage of technology trends. Today, Google’s revenue is £263.66 Billion. This is nearly 300x the revenue Google generated in 2003 ($961.9 million). The company went public on August 19, 2004, at $85 per share, valuing the company at $23 billion. After the IPO, Google reported $1.47 billion in revenue for fiscal year 2003, with a profit of $105.6 million.
- snowstormsun 1y ago
  Don't confuse cynical with realistic, though.
  - yeeshh 1y ago
    [dead]
  - AbstractH24 1y ago
    It’s literally a matter of perspective
- toomuchtodo 1y ago
  Is that because of innovation? Or is that because of Google’s antitrust activity the US government is currently busting? Safari default search engine deal, etc.
  - bobxmax 1y ago
    "Antitrust" is just lawyer-talk for winning strategies that we later arbitrarily decide is not good for capitalism. They weren't a bunch of gremlins in a cave conspiring to commit "anti-trust violations" in 2005. They were smart as hell and invested in the right areas. Microsoft would get hit with the same anti-trust Google is being hit with if Bing and Windows Phone were successful - they're getting away with it because they're terrible.
    - deleted 1y ago
      [deleted]
    - toomuchtodo 1y ago
      > "Antitrust" is just lawyer-talk for winning strategies that we later arbitrarily decide is not good for capitalism. “I don’t like the law and its application” isn’t an argument.
      - tqi 1y ago
        These aren't like the laws of physics, there's obviously a lot of post hoc interpretation that happens.
        toomuchtodo 1y ago
        Certainly, when a law that wasn’t applied begins to be applied again, I can see certain mental models taking issue with that. Regardless, the law and its historical application and consequences didn’t change, only a politically driven low enforcement period. That was the anomaly.
        echelon 1y ago
- matthewdgreen 1y ago
  But let’s ask a different question: aside from re-allocating the economy’s marketing and advertising budget into Google (from, presumably, local newspapers and TV before Google existed) how much of that revenue comes from actual tangible new wealth creation? To put some context on this, 78% of Google’s revenue is advertising. Overall US ad spending has been increasing at about 1.6% per year since 2001, with no obvious indication of an acceleration (beyond some bumps around 2007/8.) So is there actually a success story beyond market capture here? And if all we’re doing is concentrating existing business into new channels, is this something we should be excited about?
  - econ 1y ago
    You simply pay more for a product to find you. The more overpriced ones find you first. Googles business model is to make it as hard as possible for products to find you while simultaneously pretending to be the go-to place for precisely the opposite. A truly magical accomplishment. Wealth creation?
  - nottorp 1y ago
    The antitrust people in various governments should definitely get excited about it :) And they apparently are indeed.
  - hluska 1y ago
    This is an interesting topic and I’m not sure it has an answer. In 1995 advertising was really spray and pray. Testing ads was a really difficult proposition so we saw things like bearer coupons (mention this ad or bring in this coupon for 20% off!). The dominant advice out of radio was to play an ad constantly. That advice worked well for traditional media but not so well for advertisers. That model worked so well for advertisers that thirty years later, people around my age in my city can all sing the same five advertising jingles. Google provided a toolkit to test ads and figure out which are most effective. Now the other side of that argument is that in industry, a massive of percentage of qualified people still spray and pray. The advertising industry as a whole is far from data driven. At one point, there was an argument this was good for the planet. My newspapers are much thinner than they were 30 years ago when I could collect a metre of newsprint a month if I subscribed to the Globe and Mail plus a local. But I don’t think anyone can claim now that data centres are environmental miracles. This has also decimated local journalism to such a point that people are less aware of environmental catastrophes in their own relative backyards. It’s possible the net effect was positive and advertising is more efficient. It’s more accurate to say advertisers have a toolkit to analyze effectiveness but many don’t or aren’t capable. Edit - I’m going to give a very specific example of a radio jingle. If anyone is around forty or older and from a major city in Saskatchewan, they will be able to finish this. “I said no no no no don’t pay anymore, no GST and no money down.”
- asdf6969 1y ago
  Google search, google maps, gmail, YouTube, and Chrome have all been good functional products for over a decade. I genuinely don’t know what they’ve been doing since then other than milking us and getting new customers. Maybe 10% of this growth leads to a real improvement in human lives.
etaioinshrdlu 1y ago
Ignoring politics, which I think makes this article somewhat off-topic, I would argue with many of the points in this article - but just one would be that ZIRP specifically caused inflation and required higher interest rates. The way I remember it, rates were already raised substantially, during the first Trump admin, not due to inflation, lowered again during COVID, and raised due to inflation, where a likely causative factor in the inflation being high government spending and stimulus.
- wombatpm 1y ago
  Rate increases didn’t start until 2022. I was with a startup in the mortgage industry and got to experience that company’s first layoff followed by a layoff at a different startup 10 months later because raising another round of capital was seen as impossible. First action by the Federal Reserve March 16, 2022: Increased to 0.25%–0.50%
  - etaioinshrdlu 1y ago
    In the chart in the article: https://pivot-to-ai.com/wp-content/uploads/2025/05/zirp-2005-2025-page.webp https://pivot-to-ai.com/wp-content/uploads/2025/05/zirp-2005... You can clearly see non-zero interest rates from 2016 to 2020...
    - wombatpm 1y ago
      Very slow increase to around 2 in an attempt to end QE, dipping to 1.5 before falling off a cliff with COVID. Compare to rates going back to 2000
- scarface_74 1y ago
  You can’t ignore politics when it’s the direct cause of this economic mess
- toomuchtodo 1y ago
  Broad macro inflation is due to smaller working age populations. The pandemic pulled this forward due to excess deaths and retirements (~3M). It’s also why the labor market has been so resilient (unemployment rate) in the face of so much uncertainty and volatility. There are simply not enough workers. Egg inflation is Avian flu related, housing is because of a housing shortage caused by building pipeline impairment since the 2008 GFC (which will likely never recover, due to structural demographics and no appetite to allow immigration at the level required for the construction trades). (~4M Boomers retire a year, ~11k/day, ~2M people 55+ die every year, about half of which are in the labor force; that means ~13k-14k workers leave the labor force every day in the US) https://www.axios.com/2024/06/27/labor-shortage-workforce-economy https://www.axios.com/2024/06/27/labor-shortage-workforce-ec... http://charleshughsmith.blogspot.com/2022/08/are-older-workers-propping-up-us-economy.html http://charleshughsmith.blogspot.com/2022/08/are-older-worke... https://www.stlouisfed.org/timely-topics/retirements-increased-during-pandemic https://www.stlouisfed.org/timely-topics/retirements-increas...
A_D_E_P_T 1y ago
> Here is the state of venture capital in early 2025: Venture capital is moribund except AI. AI is moribund except OpenAI. OpenAI is a weird scam that wants to burn money so fast it summons AI God. Nobody can cash out. The interesting thing, to me, is how speculative OpenAI's bet is. IIRC it was 2019 when I tinkered with the versions of GPT 2.0 that had web interfaces, and they were interesting toys. Then I began using ChatGPT since its launch, which was around Dec 2022, and that was a profound paradigm shift. It showed real emergent behavior and it was capable of very interesting things. 2019 - 2022 was three years. No hype, no trillions of dollars invested, but tremendous progress. Now, there has been progress in the part ~three years in synthetic benchmarks, but the feeling with ChatGPT 4.5 today is still the same as it was with GPT-3/GPT-4 in 2022. 4.5/o3 doesn't seem hugely more intelligent then 3.0 -- it hallucinates less, and it's capable of running web searches and doing directed research -- but it's no paradigm shift. If things keep progressing the way they're going, we'll get better interfaces and more tools, but it's far from clear that superintelligence (more-than-human insight, skill, and inventiveness,) is even possible with LLMs.
- bobxmax 1y ago
  [flagged]
  - dang 1y ago
    I get the frustration of encountering shallow dismissals and curmudgeonly comments (this is why we changed the guidelines recently - https://news.ycombinator.com/item?id=43922742 https://news.ycombinator.com/item?id=43922742). At the same time, please don't react by breaking the site guidelines yourself or by putting down the community. It doesn't help; it only makes things worse. If you know more than others do, or have something more constructive to say, that's great! Please share some of that so the rest of us can learn and converse. If you don't want to or don't have time, that's also fine, but please don't add putdowns to the thread. It's always an option to downvote and/or flag comments that are breaking the rules, but if another commenter is wrong and you don't want to post a constructive correction, it's best to just move on. https://news.ycombinator.com/newsguidelines.html https://news.ycombinator.com/newsguidelines.html
Herring 1y ago
I think the problem is businesses are tiny little fascist dictatorships. They are always trying to pay less taxes, evade regulations, layoff workers, monopolize, destroy competitors etc. This is their first time ever having to think about the public sphere, or common good, or government, or democracy, or rule of law. They suck at that, it goes against all their training and instincts.
- yeeshh 1y ago
  [dead]
- epistasis 1y ago
  I don't think that's true at all, business has had to think about the public sphere and how to shape it to their benefit since corporations started. For a long time Silicon Valley tried to avoid politics, or at least that was the vibe of everyone. But even in the 1980s, when Japan was rising and threatening to outcompete the US semiconductor industry, Captains of Industry that had been former strident libertarians went hat in hand to Uncle Sam to tilt the field to favor their survival.
  - mistrial9 1y ago
    there might be insight there, but.. too broad brush. As "everyone knows" Silicon Valley started as a dot-mil fab but California invented the personal computer and sold it. Hey wait, just California?! yes, mostly.. See the West Coast Computer Fair .. shout out to Byte Magazine from New England too. "avoid politics" was true for some stripes of participants and completely not true for others.. It is true IMHO that consumer gear generated a lot of success and was largely apolitical.
  - Herring 1y ago
    You missed the point. Yes I agree they're more concerned with "how to tilt the field", but that's not what good governance is (should be) about. It's a bit like a kid trying to push the bounds of acceptable behavior, versus a parent trying to figure out how to raise multiple kids well.
  - 1y ago
drdrek 1y ago
I've got AI fatigue as the next guy, but this is over correcting. VC money is in a constant state of FOMO, this is nothing new. Companies dress up as AI, or web3 or web2, or fintech or what ever to more easily attract capital. If 57.9% of dollars went to AI startups this year is not because everything is AI, I would bet 25% are just companies that tacked AI on to an unrelated business model and its skewing the statistics. I'll promise you that 10 years from now 57.9% of VC funding is going to be in some other buzzword and its not going to be AI.
- rco8786 1y ago
  Can confirm. I’m at a startup in a pretty boring space and we’re having lots of success just by bringing modern software into the industry, but we’re gearing up for a series A and we absolutely must include AI in our pitch deck. So for the last 6-8 months we’ve just been scrambling to find some sort of reasonable use cases for AI in our product, but in reality it’s not a differentiator for us at all.
  - 486sx33 1y ago
    [dead]
  - bo1024 1y ago
    [flagged]
    - echelon 1y ago
      It's not dishonest. It's opportunity cost.
    - rco8786 1y ago
      I mean. It’s just reality lol. We need money. We tailor our deck to what investors want to hear.
      - jeffreygoesto 1y ago
        But why do you want them in your business and will have to cash them out someday? Why not organically grow and own your business?
mapt 1y ago
> The report somehow fails to mention the bit where the Silicon Valley VC and executive crowd worked their backsides off to elect Trump and several of them sat in the front row at his inauguration. Then they were actually surprised when the leopard ate their faces too. Many of these people are still running the Trump Administration from the shadows. Elon Musk turns out to just be one example of the billionaire to right wing brainrot lunatic infohazard funnel. It mentions the Semafor story. Here's Adam Conover covering that - https://youtu.be/3_PKKUFxRyk?feature=shared https://youtu.be/3_PKKUFxRyk?feature=shared
jparishy 1y ago
IMO the best innovations tend to happen when someone has their hands bound and has no other choices but to figure out a new way or die. Now seems like an incredible time for new models and startup paradigms. To me I think VC's figured out a way to market a very specific way to build companies and convinced a lot of people it's the only way for 20-ish years. Then there was this sort of shift to selling to enterprise, I think because B2C got harder and easy money was the goal. By then a lot of enterprise design makers were probably in the networks of the people selling. There's a meme about YC-of-late being mostly companies that sell shovels to each other. But when you optimize for enterprise, I think you end up losing a lot of diversity of opinion in where the value comes from, which leads to top-heavy companies. My main issue is that after the ZIRP era I don't believe the money is gone or unavailable. It just seems to be hoarded for some reason. There is astronomical wealth out there that could be used for trying new economic models that compete with the last generation of VCs. But it isn't happening. Maybe the next era of VC decision makers, the ones who themselves were funded on big bets, just don't have the same appetite for risk? Or maybe the era of "developing your brand" has made them not want to share their success? I'm not sure but it's weird to me.
jeffreyrogers 1y ago
It's a little hard to say for sure because companies can stay private longer and in some cases don't need to go public at all, but it seems that the last wave of huge successes were founded pre-2015 and since then the industry has been looking for the next wave, first with crypto, now with AI, and there are some tentative pushes into manufacturing/defense. AI actually seems like a great fit for the VC business model, much more so than most SaaS companies are. Successes are likely to make a ton of money and they can't self finance or finance with debt because they need to spend a huge amount of money.
enahs-sf 1y ago
The article somehow misses the mark on how VC firms actually make money apart from carry, its management fees. Thus, a16z raising a 20b fund on 3% management fee and 30% carry effectively guarantees them 600M even if the fund goes to zero and they have many such funds. Sure, they would prefer to make money through carry, but the management fee is a nice downside protection.
- alephnerd 1y ago
  Funds like A16Z can demand a high management fee because they have shown that they can deliver reasonable exits. Most funds have management fees in the 1-2% range and a carry at around 20%. VC is a power curve, where a couple of large funds have an outsized impact. And if a fund or VC (from associate to partner) cannot deliver, your career in the space is basically over.
jgalt212 1y ago
ZIRP is gone for sure, but most of the $7T the Fed printed during COVID and the $3.5T the Fed printed post-GFC remains (net +8T). For this reason, I believe the era of VC-driven nonsense is far from over. A simple example is that stonks have recovered all of almost of all the post Liberation Day losses. This excess cash / Helicopter Money for the investor class has to go somewhere. https://fred.stlouisfed.org/series/WALCL https://fred.stlouisfed.org/series/WALCL
- xk_id 1y ago
  But as the graph shows, QT is well underway and it would take approx 5yr to suck the cash back in, no? It will be gradual, but we should see that risk is starting to become expensive again.
  - jgalt212 1y ago
    They keep slowing down the rate of QT so who know when they'll get back to pre-GFC levels (if ever). Until then, the do nothing investor class will rule the roost, and calls to action such as "It's Time to Build" will go unheeded.
deleted 1y ago
[deleted]
vessenes 1y ago
This is so wrong as to be almost laughable. My VC friends are working double shifts on financing companies that are disrupting nearly every market vertical. There’s almost an infinite greenfield out there right now. Quick example : a company founded in the last three or four months that provides appointment setting and calendar management for a single healthcare vertical. They are already profitable. There are at least 5,000 market verticals like this in the US alone. Tech to provide this is going to keep commodifying and that will leave early entrants as wealthy incumbents; journalism telling people to be certain that the opposite will happen is borderline irresponsible and certainly missing the situation full stop.
- moneywoes 1y ago
  I seem to be bad at market research but as someone who's tried appointment setting for healthcare verticals all user interviews indicated either their EHR e.g. Cerner, Oracle, Athena or if smaller ( independent) something like Calendly worked Am I missing anything, what's the differentiation
  - JohnMakin 1y ago
    imagination
  - vessenes 1y ago
    Not my space, but I imagine your user interviews didn't ask questions like: "How many FTEs do you use to manage appointment setting and calendaring for your practice right now?" "What's your no-show rate?" "How much more money would you make if your most lucrative patients on average booked appointments two to four weeks earlier and your money-losing ones booked two months later?" The answers to these questions likely end up with someone realizing you could save them $100k+ a year and make them $500k+ a year (I here imagine numbers for a small practice with absolutely no knowledge) and therefore they should absolutely take a free trial and then pay you $500/month in perpetuity.
- RainyDayTmrw 1y ago
  Intentional or not, that sounds too uncomfortably close to personal bragging.
asdev 1y ago
the expected value of their AI bets panning out is so high that they're obligated to make those bets
TrapLord_Rhodo 1y ago
I agree with the article in faith, but i think they've gotten the cause wrong. The problem is, scaling was ALWAYS the hard part. at a certain level, you don't have to worry about sharding and replicating databases, moving over to NoSQL, async race conditions, etc. etc. Why bet the house on one business idea, when you can have 10 "Micro-SaaS's" that are all bootstrapped but might make 10-20k in MRR. In the day and age where the average business person has like 20-30 subscriptions for random tools, emails, websites, marketing, email lists, automations, SaaS products, freelancers, etc. it very much lends itself to the micro model. The 'VC' business model is starting to break down. Just by looking around youtube and Indie Hackers, most of the successful businesses now adays are bootstrapped where the founder has some kind of community where they blog, youtube, have a patreon, X, etc.. They become the brand and they have no use for VC's. As soon as they launch a new app idea, they have 200K people on twitter, 150k people on youtube that will atleast give the app a look.
- wslh 1y ago
  I agree that today's focus is more on integration than relying on a single "corporate" system. However, I believe a major issue with micro-SaaS in general is security. While even FAANG companies face security challenges, relying on many smaller SaaS providers introduce weak points into your system, and security is a challenging factor for small company budgets.
  - benoau 1y ago
    This isn't exclusively or particularly solved by VC-funded or giant tech companies - Dropbox once deployed a bad build that accepted any password, Apple accidentally had a blank root password, I'm sure there are many more embarrassing tales like this. https://techcrunch.com/2011/06/20/dropbox-security-bug-made-passwords-optional-for-four-hours/ https://techcrunch.com/2011/06/20/dropbox-security-bug-made-... https://www.macrumors.com/how-to/temporarily-fix-macos-high-sierra-root-bug/ https://www.macrumors.com/how-to/temporarily-fix-macos-high-...
    - wslh 1y ago
sonicgear1 1y ago
I can't wait for the downfall of AI. It has become like a plague at this point.
- AbstractH24 1y ago
  Sounds like something folks would have said in the lead up to dot com bubble bursting
Beltiras 1y ago
Same as it ever was.
999900000999 1y ago
Is it too late for me to pitch my AI driven startup that just takes a very common application ( task management) and adds some API calls to LLMs ? Can I apply for YC again and get my annual rejection? So I can cry upper middle class tears. I really need a business partner to keep me focused on features people actually want. But my main business friend is focused on much more important things ( raising a new family) now. Thinking about what's more important right now, making some games I know will make no money. Creating a B2B startup that will also make no money.
- ahstilde 1y ago
  > I really need a business partner to keep me focused on features people actually want. Why can't you do this yourself?
  - 999900000999 1y ago
    Why did Woz need Jobs? I'm not business minded...
- itsafarqueue 1y ago
  This comment landed, well written.
  - 999900000999 1y ago
    I think most of us have two wolves. Startup wolf, wants to take 6 months off , build something, and pitch it non stop. Go to a random bar in SF and just sell random people on your idea. You only need one yes! Worker wolf, sit down, work your 9-5. Drive a Prius. A few of you have a 3rd wolf. Bitter Wolf. You started a company, got screwed over on some level, and now you're stuck thinking what if.
ghaff 1y ago
Anecdote != data of course but I've had multiple VCs reach out to me looking for funding and one angel investor I talked to complain about the dire situation with exits.
culebron21 1y ago
I've noticed AI evangelists -- those 2nd tier experts, who're not on every show and youtube channel, but do consulting and once in a while appear here and there -- jumped on the hype wagon 1.5-2 years ago. They'd pedal FOMO and would promise eldorado to everyone who joins. "AI will do everything for you, you'll be fired." Now I see them change the tone. It's like: "c'mon, it's a special tool, you need to use it properly, and give it what it needs." They sell quickly made courses. Same guys who in '12 would advertize "Mobile strategies" consulting (remember that thing here on HN?), then AR with Google glass in '14, then crypto in '17, then web3, and so on.
- shubb 1y ago
  I think there is something like a pyramid scheme of people who sell classes, and people who sell classes about how to sell classes. The top level slowly pull the whole chain to the next fad and then the next. Drop shipping, ghost writing books for kindle unlimited, various flavors of wellness... you can watch them flow into a space and usually destroy it. I'm curious how centralized the operation is. Individually it's a bunch of hustlers running their own little personal branding operation, but if each of them is in a masterclass, and the masterclass leaders are in a masterclass, has a small group of mega-influencers formed, and who are they?
- culebron21 1y ago
  5 hours later: Klarna changes its AI tune and again recruits humans for customer service https://news.ycombinator.com/item?id=43955374 https://news.ycombinator.com/item?id=43955374 "of course, AI is just another tool, and has its niche" :D
yhoots 1y ago
Very funny that people will buy entire domains to spout Reddit-brained anti-tech takes. Same ppl who said crypto will go to zero and self driving cars will never work. Yes many AI companies will go to zero. This is how every tech bubble works and innovation happens by ppl trying stuff and mostly failing. But in the end the survivors will remake the world for the better. Very sad to see this sort of drivel being popular here.
- deleted 1y ago
  [deleted]
- xk_id 1y ago
  > But in the end the survivors will remake the world for the better. If there’s one thing that has become abundantly clear in the past 10 years is that commercial tech is making the world abundantly worse and the only innovation is in enabling more exploitation and inequality.
jay-barronville 1y ago
Another thing I’ve observed for a while now (i.e., since everyone became obsessed with LLMs) is that a lot of founders nowadays—particularly at the pre-seed and seed stages—seem to view raising venture capital as a one-and-done type of thing. I’m not exactly sure how prevalent this mindset is, but I’ve talked with lots of founders within the past couple of years and I’ve encountered this mindset a lot, which, to me, is a huge contrast to the mindset I encountered, e.g., about ten years ago when I was a young founder and I was raising a small round (mostly from angels)—back then, it seemed like every single founder was chasing venture capital non-stop and usually was already thinking about their next round before even closing their current round. If this mindset is (or becomes) prevalent, unless a lot of these startups are quickly acquired for large sums, is venture capital, as it currently exists, ready to deal with this shift?
jimbob45 1y ago
I’m to believe cultured meat wouldn’t also hit a VC lottery ticket? Or the right mRNA vaccine?
RainyDayTmrw 1y ago
I'm not sure where this originated. During the software boom of the mid-2010s, someone told me that the vast majority of venture capitalists are lemmings[1]. That idea is as true as it ever was, and perhaps even more so in today's time of AI. [1] Implying that they blindly follow anything and everything. The origin of this metaphor has since been debunked, but the metaphor itself lives on. https://www.adfg.alaska.gov/index.cfm?adfg=wildlifenews.view_article&articles_id=56 https://www.adfg.alaska.gov/index.cfm?adfg=wildlifenews.view...
n_ary 1y ago
I am curious, if everything is going to oAI, how are Anthropic, xAI and other unknown ones being funded? That being said, I suddenly realized that, I know only of things that are heavily on the media. Other than these few, I know Meta's LLama, Google's Gemini, DeepSeek, Mistral and Qwen. Aside: I shed a few tears reading the article, since the death of n-gate.com, nothing like that existed until today I found pivot-to-ai.com.
tim333 1y ago
He seems a bit over negative on AI saying VCs are saying >Just as “internet” evolved from buzzword to business backbone, AI is following the same playbook. >No it isn’t! ... Stop saying dumb things! Meanwhile the tech is cracking along https://x.com/waitbutwhy/status/1919870578502021257 https://x.com/waitbutwhy/status/1919870578502021257
deleted 1y ago
[deleted]
josh_carterPDX 1y ago
While I agree with some of the statements made in the article, I don't think everything is doom and gloom. There is still a place for early-stage VC for founders looking to scale. While I agree that AI is making it easier to launch things, there are so many other ancillary things that require human capital that AI still hasn't solved for, and I don't see that changing in the next 10-15 years. Call me a boomer, but there are a lot of companies that need to grow, and VC funding is a great solution for them. I will say, however, seeing larger funds change to evergreen funds or even to a more PE model should make everyone pay attention. Adapt or die, right?

282 points by namanyayg 1y ago

I guess it is time to do your homework and invest in real tangible products instead of trying to make a quick buck and get out before the company fails.

mistrial9 1y ago
I can work for a year and produce something worth a few thousand dollars in profits.. meanwhile the financial grind generated that in a portion of a day. Those are the same dollars used to buy a house or save for retirement. see Thomas Piketty .. this will get worse before it gets better
- cadamsdotcom 1y ago
  What’re your thoughts on how it’ll get worse, and how it’ll get better?

oli5679 1y ago

It’s really easy to be cynical. There is a big upside potential for high growth companies taking advantage of technology trends. Today, Google’s revenue is £263.66 Billion. This is nearly 300x the revenue Google generated in 2003 ($961.9 million). The company went public on August 19, 2004, at $85 per share, valuing the company at $23 billion. After the IPO, Google reported $1.47 billion in revenue for fiscal year 2003, with a profit of $105.6 million.

snowstormsun 1y ago
Don't confuse cynical with realistic, though.
- yeeshh 1y ago
  [dead]
- AbstractH24 1y ago
  It’s literally a matter of perspective
toomuchtodo 1y ago
Is that because of innovation? Or is that because of Google’s antitrust activity the US government is currently busting? Safari default search engine deal, etc.
- bobxmax 1y ago
  "Antitrust" is just lawyer-talk for winning strategies that we later arbitrarily decide is not good for capitalism. They weren't a bunch of gremlins in a cave conspiring to commit "anti-trust violations" in 2005. They were smart as hell and invested in the right areas. Microsoft would get hit with the same anti-trust Google is being hit with if Bing and Windows Phone were successful - they're getting away with it because they're terrible.
  - deleted 1y ago
    [deleted]
  - toomuchtodo 1y ago
    > "Antitrust" is just lawyer-talk for winning strategies that we later arbitrarily decide is not good for capitalism. “I don’t like the law and its application” isn’t an argument.
    - tqi 1y ago
      These aren't like the laws of physics, there's obviously a lot of post hoc interpretation that happens.
      - toomuchtodo 1y ago
        Certainly, when a law that wasn’t applied begins to be applied again, I can see certain mental models taking issue with that. Regardless, the law and its historical application and consequences didn’t change, only a politically driven low enforcement period. That was the anomaly.
      - echelon 1y ago
matthewdgreen 1y ago
But let’s ask a different question: aside from re-allocating the economy’s marketing and advertising budget into Google (from, presumably, local newspapers and TV before Google existed) how much of that revenue comes from actual tangible new wealth creation? To put some context on this, 78% of Google’s revenue is advertising. Overall US ad spending has been increasing at about 1.6% per year since 2001, with no obvious indication of an acceleration (beyond some bumps around 2007/8.) So is there actually a success story beyond market capture here? And if all we’re doing is concentrating existing business into new channels, is this something we should be excited about?
- econ 1y ago
  You simply pay more for a product to find you. The more overpriced ones find you first. Googles business model is to make it as hard as possible for products to find you while simultaneously pretending to be the go-to place for precisely the opposite. A truly magical accomplishment. Wealth creation?
- nottorp 1y ago
  The antitrust people in various governments should definitely get excited about it :) And they apparently are indeed.
- hluska 1y ago
  This is an interesting topic and I’m not sure it has an answer. In 1995 advertising was really spray and pray. Testing ads was a really difficult proposition so we saw things like bearer coupons (mention this ad or bring in this coupon for 20% off!). The dominant advice out of radio was to play an ad constantly. That advice worked well for traditional media but not so well for advertisers. That model worked so well for advertisers that thirty years later, people around my age in my city can all sing the same five advertising jingles. Google provided a toolkit to test ads and figure out which are most effective. Now the other side of that argument is that in industry, a massive of percentage of qualified people still spray and pray. The advertising industry as a whole is far from data driven. At one point, there was an argument this was good for the planet. My newspapers are much thinner than they were 30 years ago when I could collect a metre of newsprint a month if I subscribed to the Globe and Mail plus a local. But I don’t think anyone can claim now that data centres are environmental miracles. This has also decimated local journalism to such a point that people are less aware of environmental catastrophes in their own relative backyards. It’s possible the net effect was positive and advertising is more efficient. It’s more accurate to say advertisers have a toolkit to analyze effectiveness but many don’t or aren’t capable. Edit - I’m going to give a very specific example of a radio jingle. If anyone is around forty or older and from a major city in Saskatchewan, they will be able to finish this. “I said no no no no don’t pay anymore, no GST and no money down.”
asdf6969 1y ago
Google search, google maps, gmail, YouTube, and Chrome have all been good functional products for over a decade. I genuinely don’t know what they’ve been doing since then other than milking us and getting new customers. Maybe 10% of this growth leads to a real improvement in human lives.

etaioinshrdlu 1y ago

Ignoring politics, which I think makes this article somewhat off-topic, I would argue with many of the points in this article - but just one would be that ZIRP specifically caused inflation and required higher interest rates. The way I remember it, rates were already raised substantially, during the first Trump admin, not due to inflation, lowered again during COVID, and raised due to inflation, where a likely causative factor in the inflation being high government spending and stimulus.

wombatpm 1y ago
Rate increases didn’t start until 2022. I was with a startup in the mortgage industry and got to experience that company’s first layoff followed by a layoff at a different startup 10 months later because raising another round of capital was seen as impossible. First action by the Federal Reserve March 16, 2022: Increased to 0.25%–0.50%
- etaioinshrdlu 1y ago
  In the chart in the article: https://pivot-to-ai.com/wp-content/uploads/2025/05/zirp-2005-2025-page.webp https://pivot-to-ai.com/wp-content/uploads/2025/05/zirp-2005... You can clearly see non-zero interest rates from 2016 to 2020...
  - wombatpm 1y ago
    Very slow increase to around 2 in an attempt to end QE, dipping to 1.5 before falling off a cliff with COVID. Compare to rates going back to 2000
scarface_74 1y ago
You can’t ignore politics when it’s the direct cause of this economic mess
toomuchtodo 1y ago
Broad macro inflation is due to smaller working age populations. The pandemic pulled this forward due to excess deaths and retirements (~3M). It’s also why the labor market has been so resilient (unemployment rate) in the face of so much uncertainty and volatility. There are simply not enough workers. Egg inflation is Avian flu related, housing is because of a housing shortage caused by building pipeline impairment since the 2008 GFC (which will likely never recover, due to structural demographics and no appetite to allow immigration at the level required for the construction trades). (~4M Boomers retire a year, ~11k/day, ~2M people 55+ die every year, about half of which are in the labor force; that means ~13k-14k workers leave the labor force every day in the US) https://www.axios.com/2024/06/27/labor-shortage-workforce-economy https://www.axios.com/2024/06/27/labor-shortage-workforce-ec... http://charleshughsmith.blogspot.com/2022/08/are-older-workers-propping-up-us-economy.html http://charleshughsmith.blogspot.com/2022/08/are-older-worke... https://www.stlouisfed.org/timely-topics/retirements-increased-during-pandemic https://www.stlouisfed.org/timely-topics/retirements-increas...

A_D_E_P_T 1y ago

> Here is the state of venture capital in early 2025: Venture capital is moribund except AI. AI is moribund except OpenAI. OpenAI is a weird scam that wants to burn money so fast it summons AI God. Nobody can cash out. The interesting thing, to me, is how speculative OpenAI's bet is. IIRC it was 2019 when I tinkered with the versions of GPT 2.0 that had web interfaces, and they were interesting toys. Then I began using ChatGPT since its launch, which was around Dec 2022, and that was a profound paradigm shift. It showed real emergent behavior and it was capable of very interesting things. 2019 - 2022 was three years. No hype, no trillions of dollars invested, but tremendous progress. Now, there has been progress in the part ~three years in synthetic benchmarks, but the feeling with ChatGPT 4.5 today is still the same as it was with GPT-3/GPT-4 in 2022. 4.5/o3 doesn't seem hugely more intelligent then 3.0 -- it hallucinates less, and it's capable of running web searches and doing directed research -- but it's no paradigm shift. If things keep progressing the way they're going, we'll get better interfaces and more tools, but it's far from clear that superintelligence (more-than-human insight, skill, and inventiveness,) is even possible with LLMs.

bobxmax 1y ago
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- dang 1y ago
  I get the frustration of encountering shallow dismissals and curmudgeonly comments (this is why we changed the guidelines recently - https://news.ycombinator.com/item?id=43922742 https://news.ycombinator.com/item?id=43922742). At the same time, please don't react by breaking the site guidelines yourself or by putting down the community. It doesn't help; it only makes things worse. If you know more than others do, or have something more constructive to say, that's great! Please share some of that so the rest of us can learn and converse. If you don't want to or don't have time, that's also fine, but please don't add putdowns to the thread. It's always an option to downvote and/or flag comments that are breaking the rules, but if another commenter is wrong and you don't want to post a constructive correction, it's best to just move on. https://news.ycombinator.com/newsguidelines.html https://news.ycombinator.com/newsguidelines.html

Herring 1y ago

I think the problem is businesses are tiny little fascist dictatorships. They are always trying to pay less taxes, evade regulations, layoff workers, monopolize, destroy competitors etc. This is their first time ever having to think about the public sphere, or common good, or government, or democracy, or rule of law. They suck at that, it goes against all their training and instincts.

yeeshh 1y ago
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epistasis 1y ago
I don't think that's true at all, business has had to think about the public sphere and how to shape it to their benefit since corporations started. For a long time Silicon Valley tried to avoid politics, or at least that was the vibe of everyone. But even in the 1980s, when Japan was rising and threatening to outcompete the US semiconductor industry, Captains of Industry that had been former strident libertarians went hat in hand to Uncle Sam to tilt the field to favor their survival.
- mistrial9 1y ago
  there might be insight there, but.. too broad brush. As "everyone knows" Silicon Valley started as a dot-mil fab but California invented the personal computer and sold it. Hey wait, just California?! yes, mostly.. See the West Coast Computer Fair .. shout out to Byte Magazine from New England too. "avoid politics" was true for some stripes of participants and completely not true for others.. It is true IMHO that consumer gear generated a lot of success and was largely apolitical.
- Herring 1y ago
  You missed the point. Yes I agree they're more concerned with "how to tilt the field", but that's not what good governance is (should be) about. It's a bit like a kid trying to push the bounds of acceptable behavior, versus a parent trying to figure out how to raise multiple kids well.
- 1y ago

drdrek 1y ago

I've got AI fatigue as the next guy, but this is over correcting. VC money is in a constant state of FOMO, this is nothing new. Companies dress up as AI, or web3 or web2, or fintech or what ever to more easily attract capital. If 57.9% of dollars went to AI startups this year is not because everything is AI, I would bet 25% are just companies that tacked AI on to an unrelated business model and its skewing the statistics. I'll promise you that 10 years from now 57.9% of VC funding is going to be in some other buzzword and its not going to be AI.

rco8786 1y ago
Can confirm. I’m at a startup in a pretty boring space and we’re having lots of success just by bringing modern software into the industry, but we’re gearing up for a series A and we absolutely must include AI in our pitch deck. So for the last 6-8 months we’ve just been scrambling to find some sort of reasonable use cases for AI in our product, but in reality it’s not a differentiator for us at all.
- 486sx33 1y ago
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- bo1024 1y ago
  [flagged]
  - echelon 1y ago
    It's not dishonest. It's opportunity cost.
  - rco8786 1y ago
    I mean. It’s just reality lol. We need money. We tailor our deck to what investors want to hear.
    - jeffreygoesto 1y ago
      But why do you want them in your business and will have to cash them out someday? Why not organically grow and own your business?

mapt 1y ago

> The report somehow fails to mention the bit where the Silicon Valley VC and executive crowd worked their backsides off to elect Trump and several of them sat in the front row at his inauguration. Then they were actually surprised when the leopard ate their faces too. Many of these people are still running the Trump Administration from the shadows. Elon Musk turns out to just be one example of the billionaire to right wing brainrot lunatic infohazard funnel. It mentions the Semafor story. Here's Adam Conover covering that - https://youtu.be/3_PKKUFxRyk?feature=shared https://youtu.be/3_PKKUFxRyk?feature=shared

jparishy 1y ago

IMO the best innovations tend to happen when someone has their hands bound and has no other choices but to figure out a new way or die. Now seems like an incredible time for new models and startup paradigms. To me I think VC's figured out a way to market a very specific way to build companies and convinced a lot of people it's the only way for 20-ish years. Then there was this sort of shift to selling to enterprise, I think because B2C got harder and easy money was the goal. By then a lot of enterprise design makers were probably in the networks of the people selling. There's a meme about YC-of-late being mostly companies that sell shovels to each other. But when you optimize for enterprise, I think you end up losing a lot of diversity of opinion in where the value comes from, which leads to top-heavy companies. My main issue is that after the ZIRP era I don't believe the money is gone or unavailable. It just seems to be hoarded for some reason. There is astronomical wealth out there that could be used for trying new economic models that compete with the last generation of VCs. But it isn't happening. Maybe the next era of VC decision makers, the ones who themselves were funded on big bets, just don't have the same appetite for risk? Or maybe the era of "developing your brand" has made them not want to share their success? I'm not sure but it's weird to me.

jeffreyrogers 1y ago

It's a little hard to say for sure because companies can stay private longer and in some cases don't need to go public at all, but it seems that the last wave of huge successes were founded pre-2015 and since then the industry has been looking for the next wave, first with crypto, now with AI, and there are some tentative pushes into manufacturing/defense. AI actually seems like a great fit for the VC business model, much more so than most SaaS companies are. Successes are likely to make a ton of money and they can't self finance or finance with debt because they need to spend a huge amount of money.

enahs-sf 1y ago

The article somehow misses the mark on how VC firms actually make money apart from carry, its management fees. Thus, a16z raising a 20b fund on 3% management fee and 30% carry effectively guarantees them 600M even if the fund goes to zero and they have many such funds. Sure, they would prefer to make money through carry, but the management fee is a nice downside protection.

alephnerd 1y ago
Funds like A16Z can demand a high management fee because they have shown that they can deliver reasonable exits. Most funds have management fees in the 1-2% range and a carry at around 20%. VC is a power curve, where a couple of large funds have an outsized impact. And if a fund or VC (from associate to partner) cannot deliver, your career in the space is basically over.

jgalt212 1y ago

ZIRP is gone for sure, but most of the $7T the Fed printed during COVID and the $3.5T the Fed printed post-GFC remains (net +8T). For this reason, I believe the era of VC-driven nonsense is far from over. A simple example is that stonks have recovered all of almost of all the post Liberation Day losses. This excess cash / Helicopter Money for the investor class has to go somewhere. https://fred.stlouisfed.org/series/WALCL https://fred.stlouisfed.org/series/WALCL

xk_id 1y ago
But as the graph shows, QT is well underway and it would take approx 5yr to suck the cash back in, no? It will be gradual, but we should see that risk is starting to become expensive again.
- jgalt212 1y ago
  They keep slowing down the rate of QT so who know when they'll get back to pre-GFC levels (if ever). Until then, the do nothing investor class will rule the roost, and calls to action such as "It's Time to Build" will go unheeded.

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vessenes 1y ago

This is so wrong as to be almost laughable. My VC friends are working double shifts on financing companies that are disrupting nearly every market vertical. There’s almost an infinite greenfield out there right now. Quick example : a company founded in the last three or four months that provides appointment setting and calendar management for a single healthcare vertical. They are already profitable. There are at least 5,000 market verticals like this in the US alone. Tech to provide this is going to keep commodifying and that will leave early entrants as wealthy incumbents; journalism telling people to be certain that the opposite will happen is borderline irresponsible and certainly missing the situation full stop.

moneywoes 1y ago
I seem to be bad at market research but as someone who's tried appointment setting for healthcare verticals all user interviews indicated either their EHR e.g. Cerner, Oracle, Athena or if smaller ( independent) something like Calendly worked Am I missing anything, what's the differentiation
- JohnMakin 1y ago
  imagination
- vessenes 1y ago
  Not my space, but I imagine your user interviews didn't ask questions like: "How many FTEs do you use to manage appointment setting and calendaring for your practice right now?" "What's your no-show rate?" "How much more money would you make if your most lucrative patients on average booked appointments two to four weeks earlier and your money-losing ones booked two months later?" The answers to these questions likely end up with someone realizing you could save them $100k+ a year and make them $500k+ a year (I here imagine numbers for a small practice with absolutely no knowledge) and therefore they should absolutely take a free trial and then pay you $500/month in perpetuity.
RainyDayTmrw 1y ago
Intentional or not, that sounds too uncomfortably close to personal bragging.

asdev 1y ago

the expected value of their AI bets panning out is so high that they're obligated to make those bets

TrapLord_Rhodo 1y ago

I agree with the article in faith, but i think they've gotten the cause wrong. The problem is, scaling was ALWAYS the hard part. at a certain level, you don't have to worry about sharding and replicating databases, moving over to NoSQL, async race conditions, etc. etc. Why bet the house on one business idea, when you can have 10 "Micro-SaaS's" that are all bootstrapped but might make 10-20k in MRR. In the day and age where the average business person has like 20-30 subscriptions for random tools, emails, websites, marketing, email lists, automations, SaaS products, freelancers, etc. it very much lends itself to the micro model. The 'VC' business model is starting to break down. Just by looking around youtube and Indie Hackers, most of the successful businesses now adays are bootstrapped where the founder has some kind of community where they blog, youtube, have a patreon, X, etc.. They become the brand and they have no use for VC's. As soon as they launch a new app idea, they have 200K people on twitter, 150k people on youtube that will atleast give the app a look.

wslh 1y ago
I agree that today's focus is more on integration than relying on a single "corporate" system. However, I believe a major issue with micro-SaaS in general is security. While even FAANG companies face security challenges, relying on many smaller SaaS providers introduce weak points into your system, and security is a challenging factor for small company budgets.
- benoau 1y ago
  This isn't exclusively or particularly solved by VC-funded or giant tech companies - Dropbox once deployed a bad build that accepted any password, Apple accidentally had a blank root password, I'm sure there are many more embarrassing tales like this. https://techcrunch.com/2011/06/20/dropbox-security-bug-made-passwords-optional-for-four-hours/ https://techcrunch.com/2011/06/20/dropbox-security-bug-made-... https://www.macrumors.com/how-to/temporarily-fix-macos-high-sierra-root-bug/ https://www.macrumors.com/how-to/temporarily-fix-macos-high-...
  - wslh 1y ago

sonicgear1 1y ago

I can't wait for the downfall of AI. It has become like a plague at this point.

AbstractH24 1y ago
Sounds like something folks would have said in the lead up to dot com bubble bursting

Beltiras 1y ago

Same as it ever was.

999900000999 1y ago

Is it too late for me to pitch my AI driven startup that just takes a very common application ( task management) and adds some API calls to LLMs ? Can I apply for YC again and get my annual rejection? So I can cry upper middle class tears. I really need a business partner to keep me focused on features people actually want. But my main business friend is focused on much more important things ( raising a new family) now. Thinking about what's more important right now, making some games I know will make no money. Creating a B2B startup that will also make no money.

ahstilde 1y ago
> I really need a business partner to keep me focused on features people actually want. Why can't you do this yourself?
- 999900000999 1y ago
  Why did Woz need Jobs? I'm not business minded...
itsafarqueue 1y ago
This comment landed, well written.
- 999900000999 1y ago
  I think most of us have two wolves. Startup wolf, wants to take 6 months off , build something, and pitch it non stop. Go to a random bar in SF and just sell random people on your idea. You only need one yes! Worker wolf, sit down, work your 9-5. Drive a Prius. A few of you have a 3rd wolf. Bitter Wolf. You started a company, got screwed over on some level, and now you're stuck thinking what if.

ghaff 1y ago

Anecdote != data of course but I've had multiple VCs reach out to me looking for funding and one angel investor I talked to complain about the dire situation with exits.

culebron21 1y ago

I've noticed AI evangelists -- those 2nd tier experts, who're not on every show and youtube channel, but do consulting and once in a while appear here and there -- jumped on the hype wagon 1.5-2 years ago. They'd pedal FOMO and would promise eldorado to everyone who joins. "AI will do everything for you, you'll be fired." Now I see them change the tone. It's like: "c'mon, it's a special tool, you need to use it properly, and give it what it needs." They sell quickly made courses. Same guys who in '12 would advertize "Mobile strategies" consulting (remember that thing here on HN?), then AR with Google glass in '14, then crypto in '17, then web3, and so on.

shubb 1y ago
I think there is something like a pyramid scheme of people who sell classes, and people who sell classes about how to sell classes. The top level slowly pull the whole chain to the next fad and then the next. Drop shipping, ghost writing books for kindle unlimited, various flavors of wellness... you can watch them flow into a space and usually destroy it. I'm curious how centralized the operation is. Individually it's a bunch of hustlers running their own little personal branding operation, but if each of them is in a masterclass, and the masterclass leaders are in a masterclass, has a small group of mega-influencers formed, and who are they?
culebron21 1y ago
5 hours later: Klarna changes its AI tune and again recruits humans for customer service https://news.ycombinator.com/item?id=43955374 https://news.ycombinator.com/item?id=43955374 "of course, AI is just another tool, and has its niche" :D

yhoots 1y ago

Very funny that people will buy entire domains to spout Reddit-brained anti-tech takes. Same ppl who said crypto will go to zero and self driving cars will never work. Yes many AI companies will go to zero. This is how every tech bubble works and innovation happens by ppl trying stuff and mostly failing. But in the end the survivors will remake the world for the better. Very sad to see this sort of drivel being popular here.

deleted 1y ago
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xk_id 1y ago
> But in the end the survivors will remake the world for the better. If there’s one thing that has become abundantly clear in the past 10 years is that commercial tech is making the world abundantly worse and the only innovation is in enabling more exploitation and inequality.

jay-barronville 1y ago

Another thing I’ve observed for a while now (i.e., since everyone became obsessed with LLMs) is that a lot of founders nowadays—particularly at the pre-seed and seed stages—seem to view raising venture capital as a one-and-done type of thing. I’m not exactly sure how prevalent this mindset is, but I’ve talked with lots of founders within the past couple of years and I’ve encountered this mindset a lot, which, to me, is a huge contrast to the mindset I encountered, e.g., about ten years ago when I was a young founder and I was raising a small round (mostly from angels)—back then, it seemed like every single founder was chasing venture capital non-stop and usually was already thinking about their next round before even closing their current round. If this mindset is (or becomes) prevalent, unless a lot of these startups are quickly acquired for large sums, is venture capital, as it currently exists, ready to deal with this shift?

jimbob45 1y ago

I’m to believe cultured meat wouldn’t also hit a VC lottery ticket? Or the right mRNA vaccine?

RainyDayTmrw 1y ago

I'm not sure where this originated. During the software boom of the mid-2010s, someone told me that the vast majority of venture capitalists are lemmings[1]. That idea is as true as it ever was, and perhaps even more so in today's time of AI. [1] Implying that they blindly follow anything and everything. The origin of this metaphor has since been debunked, but the metaphor itself lives on. https://www.adfg.alaska.gov/index.cfm?adfg=wildlifenews.view_article&articles_id=56 https://www.adfg.alaska.gov/index.cfm?adfg=wildlifenews.view...

n_ary 1y ago

I am curious, if everything is going to oAI, how are Anthropic, xAI and other unknown ones being funded? That being said, I suddenly realized that, I know only of things that are heavily on the media. Other than these few, I know Meta's LLama, Google's Gemini, DeepSeek, Mistral and Qwen. Aside: I shed a few tears reading the article, since the death of n-gate.com, nothing like that existed until today I found pivot-to-ai.com.

tim333 1y ago

He seems a bit over negative on AI saying VCs are saying >Just as “internet” evolved from buzzword to business backbone, AI is following the same playbook. >No it isn’t! ... Stop saying dumb things! Meanwhile the tech is cracking along https://x.com/waitbutwhy/status/1919870578502021257 https://x.com/waitbutwhy/status/1919870578502021257

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josh_carterPDX 1y ago

While I agree with some of the statements made in the article, I don't think everything is doom and gloom. There is still a place for early-stage VC for founders looking to scale. While I agree that AI is making it easier to launch things, there are so many other ancillary things that require human capital that AI still hasn't solved for, and I don't see that changing in the next 10-15 years. Call me a boomer, but there are a lot of companies that need to grow, and VC funding is a great solution for them. I will say, however, seeing larger funds change to evergreen funds or even to a more PE model should make everyone pay attention. Adapt or die, right?