5 ms·

Money is not given to good ideas (though, it doesn’t hurt). Money is given to friends. If you look at how VC (or really any network) funding circulates, it’s ju

by Eufrat 6mo ago

Money is not given to good ideas (though, it doesn’t hurt). Money is given to friends. If you look at how VC (or really any network) funding circulates, it’s just people who are allowed to enter that circle and money just flows between them constantly. On one hand, you have trusted people who you are willing to give money, on the other hand, this inherently creates a clique. It reminds me how the Bohemian Club’s slogan, “Weaving Spiders Come Not Here” is a bit farcical given that it is impossible for the club members not to engage in commerce.

echelon 6mo ago
> Money is given to friends. Money is given to ideas that might become billion dollar businesses and teams that look like they can do it. Pedigree, domain expertise, previous exits.
- imp0cat 6mo ago
  So it will be exactly like git, but with a monthly subscription fee.
  - abc123abc123 6mo ago
    And AI... always add AI!
    - ratmeadow 6mo ago
      Upon every commit, AI will review your code to check if it's worth committing or not (after all, disk space is expensive these days!). If the AI finds the code is not up to scratch, it will be reverted and you'll be given a chance to try again. Then, we will develop (read: sell) AI agents that will ingest a proposed code change (created by your front-line agent), and iteratively refactor it until the commit agent accepts it.
      - EliRivers 6mo ago
        If the AI finds the code is not up to scratch, it will be reverted and you'll be given a chance to try again. That's the Platinum Premier tier. If you're on the regular tier, paying the minimum, the AI will silently fix all that right up for you.
      - baobun 6mo ago
        Should have known better than asking the monkey paw for more decentralized compute.
    - jordand 6mo ago
      And regular subscription price increases. They never forget those!
- abc123abc123 6mo ago
  This is the way!
- yread 6mo ago
  or at least should be
- nikitau 6mo ago
  That works under the assumption of the "wisdom of the markets", and we assume VC possesses that wisdom, but laid bare it's just as vulnerable to cronyism as any other institution.
- UqWBcuFx6NV4r 6mo ago
  Yeah, OK. There’s a lot hidden in that word, “pedigree”.
  - echelon 6mo ago
    If you're being handed millions of dollars in early venture capital and don't have revenue/pmf to show, they're going to want to see a top university, FAANG, relevant industry experience, etc. How else would they underwrite the risk? Team matters. What other proxies are there?
    - otikik 6mo ago
      Skin color, political tendencies, gender. Lately, for founders, to which prison they went.
robbbbbbbbbbbb 6mo ago
"Money is given to friends." While that's completely true, I do think it misses a key underlying point: VCs (and many breeds of investor) are not ultimately selecting for value creating ideas, or for their friends: they're selecting for investments they believe _other people_ will pay more for later. In the case of startups, those people are most likely other VCs (at later rounds), private equity (at private sale) or retail investors (at IPO). Very rarely is the actual company profitable at any of those stages, demonstrably and famously. So the whole process is selecting for hype-potential, which itself is somewhat correlated to the usual things people get annoyed about with startup cliches: founders who went to MIT; founders who are charismatic; founders who are friends with VCs; etc... So yeah, they invest in their friends, but not because they're their friends. Because they know they can more reliably exit those investments at a higher value.
api 6mo ago
The reason “ideas don’t get funding” is usually (but not always) true is that usually a good idea alone doesn’t mean much. So usually you have to have good idea plus something else the investor feels is a proof point or evidence you can execute. The clearest of these is that you have already built it, or an MVP of it that is more than just smoke and mirrors, and there’s users and customers. If you have excellent proof points and actual revenue growth, you could show up with no pants smelling like weed and somebody might fund you. Then they’d call their press people to do an “eccentric genius founder” piece about the person who showed up stoned with no pants and their pitch was that good. That’s cause if your graph goes up and to the right you’re not crazy, you’re “eccentric.” If you don’t have any proof they fall back on secondary evidence, like credentials and schools and vibes. The latter, yes, often overlaps with cronies. And unfortunately that by necessity includes most ideas that cost a lot to prototype, which means credentialism and croneyism tends to gate keep fields with a high cost of entry.
- uffr 6mo ago
  Ideas shouldn’t get funding - ideas are just mere results of thought that haven’t been played through in depth. Do you need a working product to get funding? No. But you do need a compelling investment thesis - which takes months and even years of deep thought to come to fruition. Of course you can shortcut this process by smooching but only a select few can pull that off.
staticassertion 6mo ago
I'm sure VCs give money to friends but I didn't know any investors when I raised millions. They invested money because they thought it was a good idea.
- kakwa_ 6mo ago
  More like an idea decently likely to be resold for more. Good ideas are a decent subset, but you could also have a bit of "Greater Fool Theory" compliant ideas.
  - staticassertion 6mo ago
    Sure, but that doesn't really change anything. The poster plainly states: > Money is not given to good ideas (though, it doesn’t hurt). Money is given to friends. I have an obvious counter example. I'm sure money is invested for all sorts of reasons to all sorts of people. I'm also sure that money is not exclusively invested based on friendships, and I'm quite sure that money is at times invested based on the merits of an idea. Obviously those merits have to correspond to the ability to form the basis of a successful company, unless it's a philanthropic investment.
    - Eufrat 6mo ago
      What I meant is that yes, good ideas will get funding, if they like you and if you are a good ROI (though, not all are required). This also may allow you to enter the clique/network. However, a lot of this money circulates between the same network. Convincing the right person of the value of your idea can enable you to join the network and access that money at a much, much lower threshold later on. Obviously, it is not that cut and dry, but it is kind of impressive how much of the money circulating around is between the same people. I’m not really condemning it. I think it is a natural consequence because humans trust other humans they know. People should be more aware of it and need to make sure they keep it in check. Otherwise, you eventually start getting high on your own supply.
rowanG077 6mo ago
I don't think describing them as friends is entirely correct. People give money to people they trust. And friends often are in that subset of people. But that's not a strict requirement.
- cmrdporcupine 6mo ago
  They trust people who look and smell like them or the people they golf or drink with or are part of the same fraternity or tennis club.
  - rowanG077 6mo ago
    I'm not sure what your point is. Of course people who see and observe others on a daily basis in the flesh can determine much better whether they are trustworthy or not. They sure as hell don't think some random person who has no credibility is trustworthy.
    - cmrdporcupine 6mo ago
      The point is the definition of trust is flawed if what you're trying to measure is technical impact and quality or ability to execute?
      - rowanG077 6mo ago
        [dead]
ghywertelling 6mo ago
> money just flows between them constantly This is also true for how HFT guys make money. It's not that they are very good in investments. The Fed injects money constantly from the top which gets distributed or trickle down to such firms. Because in a tight economy which is not akin to gambling, it should be near to impossible to make money so easily.
mbesto 6mo ago
The founder of GitButler is the co-founder of GitHub. It doesn't matter what he builds, the VC is going to throw money at them.
tencentshill 6mo ago
It hasn't been organically popular here[0] among people who would be forced to actually use it, so they have to build hype from investors instead. [0] https://hn.algolia.com/?q=gitbutler https://hn.algolia.com/?q=gitbutler
ndiddy 6mo ago
Another thing I've noticed is how when you go on the website for a VC funded B2B startup and look at the customers or testimonies they have listed, most of them will be other B2B startups funded by the same VC. It makes me wonder how much of that market is essentially a few friends standing in a circle and passing a $100 bill around, but on a larger scale.

by Eufrat 6mo ago

echelon 6mo ago

> Money is given to friends. Money is given to ideas that might become billion dollar businesses and teams that look like they can do it. Pedigree, domain expertise, previous exits.

imp0cat 6mo ago
So it will be exactly like git, but with a monthly subscription fee.
- abc123abc123 6mo ago
  And AI... always add AI!
  - ratmeadow 6mo ago
    Upon every commit, AI will review your code to check if it's worth committing or not (after all, disk space is expensive these days!). If the AI finds the code is not up to scratch, it will be reverted and you'll be given a chance to try again. Then, we will develop (read: sell) AI agents that will ingest a proposed code change (created by your front-line agent), and iteratively refactor it until the commit agent accepts it.
    - EliRivers 6mo ago
      If the AI finds the code is not up to scratch, it will be reverted and you'll be given a chance to try again. That's the Platinum Premier tier. If you're on the regular tier, paying the minimum, the AI will silently fix all that right up for you.
    - baobun 6mo ago
      Should have known better than asking the monkey paw for more decentralized compute.
  - jordand 6mo ago
    And regular subscription price increases. They never forget those!
abc123abc123 6mo ago
This is the way!
yread 6mo ago
or at least should be
nikitau 6mo ago
That works under the assumption of the "wisdom of the markets", and we assume VC possesses that wisdom, but laid bare it's just as vulnerable to cronyism as any other institution.
UqWBcuFx6NV4r 6mo ago
Yeah, OK. There’s a lot hidden in that word, “pedigree”.
- echelon 6mo ago
  If you're being handed millions of dollars in early venture capital and don't have revenue/pmf to show, they're going to want to see a top university, FAANG, relevant industry experience, etc. How else would they underwrite the risk? Team matters. What other proxies are there?
  - otikik 6mo ago
    Skin color, political tendencies, gender. Lately, for founders, to which prison they went.

robbbbbbbbbbbb 6mo ago

"Money is given to friends." While that's completely true, I do think it misses a key underlying point: VCs (and many breeds of investor) are not ultimately selecting for value creating ideas, or for their friends: they're selecting for investments they believe _other people_ will pay more for later. In the case of startups, those people are most likely other VCs (at later rounds), private equity (at private sale) or retail investors (at IPO). Very rarely is the actual company profitable at any of those stages, demonstrably and famously. So the whole process is selecting for hype-potential, which itself is somewhat correlated to the usual things people get annoyed about with startup cliches: founders who went to MIT; founders who are charismatic; founders who are friends with VCs; etc... So yeah, they invest in their friends, but not because they're their friends. Because they know they can more reliably exit those investments at a higher value.

api 6mo ago

The reason “ideas don’t get funding” is usually (but not always) true is that usually a good idea alone doesn’t mean much. So usually you have to have good idea plus something else the investor feels is a proof point or evidence you can execute. The clearest of these is that you have already built it, or an MVP of it that is more than just smoke and mirrors, and there’s users and customers. If you have excellent proof points and actual revenue growth, you could show up with no pants smelling like weed and somebody might fund you. Then they’d call their press people to do an “eccentric genius founder” piece about the person who showed up stoned with no pants and their pitch was that good. That’s cause if your graph goes up and to the right you’re not crazy, you’re “eccentric.” If you don’t have any proof they fall back on secondary evidence, like credentials and schools and vibes. The latter, yes, often overlaps with cronies. And unfortunately that by necessity includes most ideas that cost a lot to prototype, which means credentialism and croneyism tends to gate keep fields with a high cost of entry.

uffr 6mo ago
Ideas shouldn’t get funding - ideas are just mere results of thought that haven’t been played through in depth. Do you need a working product to get funding? No. But you do need a compelling investment thesis - which takes months and even years of deep thought to come to fruition. Of course you can shortcut this process by smooching but only a select few can pull that off.

staticassertion 6mo ago

I'm sure VCs give money to friends but I didn't know any investors when I raised millions. They invested money because they thought it was a good idea.

kakwa_ 6mo ago
More like an idea decently likely to be resold for more. Good ideas are a decent subset, but you could also have a bit of "Greater Fool Theory" compliant ideas.
- staticassertion 6mo ago
  Sure, but that doesn't really change anything. The poster plainly states: > Money is not given to good ideas (though, it doesn’t hurt). Money is given to friends. I have an obvious counter example. I'm sure money is invested for all sorts of reasons to all sorts of people. I'm also sure that money is not exclusively invested based on friendships, and I'm quite sure that money is at times invested based on the merits of an idea. Obviously those merits have to correspond to the ability to form the basis of a successful company, unless it's a philanthropic investment.
  - Eufrat 6mo ago
    What I meant is that yes, good ideas will get funding, if they like you and if you are a good ROI (though, not all are required). This also may allow you to enter the clique/network. However, a lot of this money circulates between the same network. Convincing the right person of the value of your idea can enable you to join the network and access that money at a much, much lower threshold later on. Obviously, it is not that cut and dry, but it is kind of impressive how much of the money circulating around is between the same people. I’m not really condemning it. I think it is a natural consequence because humans trust other humans they know. People should be more aware of it and need to make sure they keep it in check. Otherwise, you eventually start getting high on your own supply.

rowanG077 6mo ago

I don't think describing them as friends is entirely correct. People give money to people they trust. And friends often are in that subset of people. But that's not a strict requirement.

cmrdporcupine 6mo ago
They trust people who look and smell like them or the people they golf or drink with or are part of the same fraternity or tennis club.
- rowanG077 6mo ago
  I'm not sure what your point is. Of course people who see and observe others on a daily basis in the flesh can determine much better whether they are trustworthy or not. They sure as hell don't think some random person who has no credibility is trustworthy.
  - cmrdporcupine 6mo ago
    The point is the definition of trust is flawed if what you're trying to measure is technical impact and quality or ability to execute?
    - rowanG077 6mo ago
      [dead]

ghywertelling 6mo ago

> money just flows between them constantly This is also true for how HFT guys make money. It's not that they are very good in investments. The Fed injects money constantly from the top which gets distributed or trickle down to such firms. Because in a tight economy which is not akin to gambling, it should be near to impossible to make money so easily.

mbesto 6mo ago

The founder of GitButler is the co-founder of GitHub. It doesn't matter what he builds, the VC is going to throw money at them.

tencentshill 6mo ago

It hasn't been organically popular here[0] among people who would be forced to actually use it, so they have to build hype from investors instead. [0] https://hn.algolia.com/?q=gitbutler https://hn.algolia.com/?q=gitbutler

ndiddy 6mo ago

Another thing I've noticed is how when you go on the website for a VC funded B2B startup and look at the customers or testimonies they have listed, most of them will be other B2B startups funded by the same VC. It makes me wonder how much of that market is essentially a few friends standing in a circle and passing a $100 bill around, but on a larger scale.