8 ms·

VC isn't VC anymore

315 points by cdrnsf 1mo ago

palata 1mo ago
Let's keep praying for fewer and fewer regulations, it's going great! I didn't know that VCs were ever "not cancer", I've always known them like that. Also my experience with startups is that it is a big scam for employees, but I understand it's not always the case (maybe it depends on where in the world?). I have been an early employee in multiple startups that got the founders rich, and what I got from the stocks didn't compensate for the low salary while working there. Do I understand correctly that when VCs invest, they dilute the employees and somehow the founders can get away without being diluted? That's the only way I could explain the difference between what the employees get and what the founders get if the startup is successful. And young people are super excited to work in startups because of old stories like "early employees at Google/Facebook became rich", I guess.
- tistoon 1mo ago
  Just move to EU, you will have all the regulations you want (maybe even more) :-)
  - johnnyanmac 1mo ago
    It's an increasingly enticing offer. But they aren't exactly that open to immigration either as of late.
- cratermoon 1mo ago
  Startups define different classes of stock. The class A shareholders are the founders and investors. Everyone else gets class B shares. The A class shares don't get diluted, and they are inherently worth more anyway.
  - palata 1mo ago
    So fundamentally, "everyone else" is scammed. Unless the class A scammers get so, so rich that everyone else gets rich as well. In which case it's still a scam, but the "everyone else" are happy anyway.
    - sershe 1mo ago
      Why is that a scam? Nobody ever promises you any specific valuation or fraction of the company. When I joined a company relatively late but well before IPO, some funny number of shares at 12 cents or whatever each did not even enter my calculation any more than "oh and they also give me a free lottery ticket". In my case depending on when one sold after IPO they would have been in the range centered around about compensating for the salary differential I think, but nobody promises you they'd ever be worth more than Monopoly money
      - palata 1mo ago
        > Nobody ever promises you any specific valuation or fraction of the company Would you mind asking before saying what I have been promised? Also it feels like you have never been in a startup. The whole language of growth everywhere, the "billion-dollar startup", the "becoming a unicorn", this is all suggesting that "you're part of it and it matters to you if it becomes a unicorn". But it doesn't, really. Because you get diluted.
        BeetleB 1mo ago
        > But it doesn't, really. Because you get diluted. At this day and age, if you don't understand dilution before you join, it's entirely on you. This isn't a new concept - it was the case decades ago. Even when I left school over 15 years ago, the standard advice when trying to get a job with a startup was "Get a good salary and value the equity at zero." And class A vs class B isn't even a rich vs everyone else thing. I have class A shares in an LLC, where even the (richer) founders are class B. The operating agreement is that we class A folks are "guaranteed" a fixed rate of return on our investment, and the class B folks don't get anything unless we get at least that rate of return. This is very normal in that industry.
  - cyberax 1mo ago
    Anti-dilution shares were extremely uncommon.
  - slowin 1mo ago
    This is not standard. Normally founders and employees get common stock and investors get preferred stock. Founders may get more stock issued in a round, and VCs/founders can pretty much rework the cap table to their liking if they really want to. The difference in return between founders and employees is down to percentages. Founders get 25-75% where employees get 0.01-1%, maybe a bit more if they're lucky.
    - palata 1mo ago
      > Founders get 25-75% where employees get 0.01-1%, maybe a bit more if they're lucky. So that's a scam by the founders to the employees, in my book. It's fine, it's just that I am not sure young professionals joining a startup know that. Said differently, if you join a startup, you should not work too much without compensation, and you should not care about making it super valuable, because you don't benefit from it. If you have a super good idea or realise you have expertise that would make the startup valuable, you should leave and become a founder yourself.
      - slowin 1mo ago
        I agree it's a scam. I just wanted to point out the way the scam works, by ownership percentage and new shares issued during new rounds (and cap table shenanigans), not generally through a different class of stock issued to founders vs employees. That's much more rare.
  - robocat 1mo ago
    Founders get common stock - class A voting. VCs get preferential shares, not common. Preferential shares have economic rights to protect the investors, but more importantly they usually have extra control rights like veto abilities, board seats, IPO control, or ability to sack the founder (which may even cut out the founder's voting rights by sunsetting their class A common into class B common shares). Employees get a third tier of stock (e.g. options that convert to non-voting class B common shares). After IPO the preferential sheets becomes common shares. The dual A class may be removed or have sunset clauses because large public investors prefer one plain common share class. Not a VC - so take above as written by a student. Founders in zero sense have the same voting control as VCs. Edit: VCs play the same game over and over again, against different innocent founders. VCs know how to stack everything in their favour - especially using social cues and "norms" that benefit them. My favourite article on this is: https://siliconhillslawyer.com/2019/02/18/relationships-and-power-startup-ecosystems/ https://siliconhillslawyer.com/2019/02/18/relationships-and-...
    - cratermoon 28d ago
      I got the details about classes of shares and preferential stuff technically wrong, it’s true. I still got the gist of the arrangement correct: VCs and founders get the pizza, everyone else gets the crusts
  - barchar 1mo ago
    Pref shares do get diluted, they are however senior to common stock so they get money FIRST if there’s not enough to go around. There is some cap on this and sometimes it’s pretty high. Huge pref overhangs are, indeed, a problem. Pref shares with a 1x preference are still worth like 10x common stock in early stage companies and it’s common for employed to get fucked by this. Founders don’t get preferred shares (I think it’s really, really rare). There is founder pref stock, which is somewhat different. It’s common for founders to cash out some shares along the way, though.
    - robocat 1mo ago
      Founders that take a pay cut from a high paying job should demand preferential shares to the value they are giving up. If they were in job where they were saving $50k a year, then after becoming a founder they should be getting $50k worth of preferential shares per year because they are investing that much in the business. Not that I've actually ever heard of founders getting preferential shares to match their dollars invested.
- carlosjobim 1mo ago
  Everything which is not your salary is completely speculative, and should be valued at near-zero. That you wanted to gamble on that was your own decision and your own fault. You have nobody to blame but yourself. If you had gotten rich from the stocks you wouldn't have complained here.
  - palata 1mo ago
    > If you had gotten rich from the stocks you wouldn't have complained here. Duh. > That you wanted to gamble on that What makes you think I gambled at all?
    - carlosjobim 1mo ago
      You said that you worked for a low salary at startups and feel scammed because of that. You could have worked somewhere else instead for a higher salary if you weren't gambling. Or if nobody would have hired you for a higher salary somewhere else, then maybe your salary at the startups wasn't so low after all?
      - palata 1mo ago
        If you want to go with that tone... I wonder if you did not understand my English or if you lack basic logic? I did not say that I felt scam because of my low salary. I said that I felt scam because the founders got rich and what I got didn't compensate the low salary. Said differently, the founders got rich and I didn't get much at all. When I say "not much", it means "not nothing, but not a lot".
        carlosjobim 1mo ago
        You took a gamble on a lower salary with the expectation that it would be compensated by your company stock going up in value. I told you that there is no such guarantee, the only thing guaranteed is the salary you agree on. Everything else is speculative = gambling. Which is your decision, but don't cry later that you got scammed and that VC are cancer and so on. But there's no reason for me to teach you, because you already learned it the hard way.
RicoElectrico 1mo ago
Likewise, stock market IPOs are a parody now - not means of getting financing, but dumping the paper on the retail after for the insiders and VCs to realize their gains.
- lstodd 1mo ago
  But serioslly when IPOs were not a sad joke? In early 1990s? But I think never.
  - swozey 1mo ago
    In my ~20 year career half of which were well funded startups I made it to one IPO (multiple sole proprietor sales) with a bigcorp and my prize was having 3 years to buy my stock options at the IPO day strike-price, which was higher than the stock ever was in my last 2-3 years there. In the end I made my million(th) sitting behind a cubicle collecting 401k which none of those startups gave me.
    - lstodd 1mo ago
      At this point we must have a drink to that.
- Analemma_ 1mo ago
  Yes, it's downright stupid to buy into any tech IPO these days. The fundraising and all the growth were done by the A-M rounds, while the IPO is the bag-dump for the last few rounds of investors. Stay far away.
- cbg0 1mo ago
  Aren't all the insiders restricted from dumping their shares for a set number of months?
  - SwellJoe 1mo ago
    They're solving that problem. Look at Spacex. They not only got the rules changed for fast-tracked inclusion in Nasdaq and Russell indexes to pump the price on their garbage asset, they changed the rules so insiders could bail early. It was a one-two punch in service of making insiders richer at the expense of retail investors. Transparent corruption, where a few billionaires write the rules that allow them to reach into regular folks pockets. https://www.cnbc.com/2026/05/21/spacex-insiders-will-get-to-sell-shares-earlier-than-usual-after-the-ipo.html https://www.cnbc.com/2026/05/21/spacex-insiders-will-get-to-...
mikeaskew4 1mo ago
This reads like someone who can’t make smart bets “before it’s obvious.” Lots of VCs out there still taking big gambles on the agendaless and unproven ideas.
- deleted 1mo ago
  [deleted]
saasisdead 1mo ago
VC is basically just plowing capital into people that went to prestigious schools or maybe were at a top company. They collect fees and every once in a while a company hits. Any analysis on the asset class is moot. Most of the VC media is aimed at hiding the fact that its a lottery machine for a pre selected group
- shimman 1mo ago
  You should add that they use pension funds to do this too. Easy to make stupid bets when it's not your money.
- 4d4m 1mo ago
  I think the letter V should be removed from VC to better reflect your point that these are barely ventures - they're more like a rigged casino spin for those that don't have the talent to do the building themselves.
  - SpicyLemonZest 1mo ago
    That's what the letter V was historically understood to mean. As the article says, venture capital used to be a small segment of the capital markets for the uncommon set of companies who can't prove their idea is any good until they get more capital than their friends and family have to offer. The idea that venture funding is supposed to be anything more than a rigged casino spin is upstream of quite a lot of the problems people have with modern VC.
  - bobbane 1mo ago
    I learned to pronounce the V in VC as 'vulture' back in the 1980's.
- 4lx87 1mo ago
  VC is also exercising incredible power over media and politics. That's part of the article's point: VC isn't just about VC anymore.
- Henchman21 1mo ago
  I'll say it directly, as _they have_: they are attempting to recreate fuedalism. Those folks are in these comments. They'll get their pitchforks and torches eventually.
0gs 1mo ago
i can't believe the whole blog post was just the tldr. this is going to be a legendary series of blog posts! j/k i WOULD like to read the long version of this but i probably won't remember to go back to this blog.
exceptione 1mo ago
> Since the Cancer Capital firms have become so powerful, the overall balance of power between founders and VCs has flipped; instead of founders having a company that VCs would try to fund, now VCs publish extremist political manifestos, and “founders” are just the people who are selected to carry out parts of those plans > The rest of the world doesn’t know: New founders and workers entering the tech industry are unaware that Cancer Capital has taken over, so many are still trying to play by the old rules, and can’t figure out why their ideas are being pushed into serving the goals of the Cancer Capital firms > These days, venture firms are increasingly getting their funds from pension funds and retail retirement accounts, meaning the public (you!) are increasingly holding the bag for the parts of their portfolios that actually have some risk, even if you never intentionally made that choice > Part of why this has gotten so corrupt is the way the Cancer Capital firms have transformed themselves into their post-VC forms. Because they’re not legally VC firms anymore, they’re free to buy shares directly from founders, or hold unlimited amounts of publicly-traded stock — exactly what they couldn’t do as regular VCs. They can even sell their investment in a company as an asset to another one of their own funds, and then book the increase in value as a profit, all without the company ever having made a penny. Another racket: a company that’s raised a bunch of cash in a funding round can buy out its early investors if they’re one of these post-VCs, so they can get paid off even if their portfolio company has never made a penny in profits or revenues. Aka the classic dynamic of wealth concentration resulting in power concentration. Great article. One thing it does not mention is how much this small circle of people have gotten zero-sum leverage over the whole country, because when the surveillance economy collapses, America collapses. This wouldn't be the first time the oligarchy triggers a crisis with reckless financial games.
- sghiassy 1mo ago
  It’s the second gilded age Hopefully this one will pass, just as the first did
  - rglover 1mo ago
    All things pass. The question is what the fallout will look like for everyone who doesn't have their hand in the cookie jar.
skybrian 1mo ago
I’m skeptical of the implicit claim that they’re all the same. It seems rather difficult to prove?
- cjkaminski 1mo ago
  There is an explicit claim in the essay that says they aren't all the same. Third bullet point says "a handful of venture capital firms have become 'do everything' funds that combine private equity with their existing VC businesses".
bko 1mo ago
[flagged]
- 4lx87 1mo ago
  "politics the author doesn't agree with" = racism, hatred, calls for ethnic cleansing, dismantling of the democratic government, open support for fascism... all being coordinated and advanced by a cabal of extremely wealthy VCs. Yeah those politics.
- exceptione 1mo ago
  > And did you know pension funds invest in this stuff?(which is bad?) Not if this were something healthy. This wouldn't be the first time joe average is holding the bag when the rich set the house on fire again. The USA economy is particularly brittle (as in: not diversified) in that regard. I can understand how the article might conflict with personally held notions and thus might look odd, especially as the weird dealings of the tech accelerationists do not find much press coverage. The only thing I can do is recommending to keep your mind open for new info, the article mentions he will follow up on the bullet points. The author has another previous article [1] that references Paul Krugman's article "The rich are crazier than you and me"[2], that might be an interesting read alongside the other pointers. As an aside, I also recommend to watch the video at the end that goes into Andreessen hiring murderer Daniel Penny. 1. https://www.nytimes.com/2023/07/06/opinion/robert-kennedy-jr-silicon-valley.html https://www.nytimes.com/2023/07/06/opinion/robert-kennedy-jr... 2. https://www.anildash.com/2023/07/07/vc-qanon/ https://www.anildash.com/2023/07/07/vc-qanon/
  - blasphemers 1mo ago
    It's not like pension funds are forced to invest in VC funds. It's the unions decision too, so ultimately if they are bad investments, it's average joe union workers fault they voted for shitty leadership.
    - exceptione 1mo ago
      The shit happens from how these funds are bound by their statutes to buy into index funds. A while back, there has been some insightful commentaries here on HN regarding the spacex IPO and the subversion of stock exchange.
52ahf 1mo ago
Anil Dash writes what people want to hear (except for boring medical analogies). He writes against Big-AI, but supports AI (small?) and copyright theft at the EFF, where he is a board member. I'm getting tolerated opposition vibes here.
- random3 1mo ago
  So A16Z is the largest spender on politics, but Anil Dash's "momma is.." https://techcrunch.com/2026/08/31/a-group-funded-by-andreessen-horowitz-and-brockman-plan-data-center-ads-to-sway-midterms/ https://techcrunch.com/2026/08/31/a-group-funded-by-andreess... https://www.nytimes.com/2026/05/13/technology/andreessen-horowitz-politics.html https://www.nytimes.com/2026/05/13/technology/andreessen-hor...
  - agfs 1mo ago
    Do you think people who suspect tolerated opposition would not also criticize A16Z? How about investigating controlled opposition financed by A16Z or others?
    - random3 1mo ago
      I don't understand what you're saying. Can you clarify your question?
hirako2000 1mo ago
> But a cancer grows from a cell that a body needs in small, healthy amounts, and that turns deadly when it grows without limit until it harms, or even kills, its host I thought a cancer grew from a defective cell that is able to divide and grow to over take the healthy ones.
- megagpt6 1mo ago
  [dead]
- pazimzadeh 1mo ago
  I would not focus on individual cells but the ability to grow super fast, which itself is not a defect since it's important during development, but the checks on this ability can be removed by later mutations/metabolic issues
  - lotsofpulp 1mo ago
    The problem is using cancer as a singular noun in this context. >a cancer grows from a cell that a body needs in small, healthy amounts "A" cancer does not grow from a cell, a cell is a cancer cell if it keeps dividing when it should not. The cancer cells as a collective are the disease referred to as "cancer". If they had written "cancer grows from cells that a body needs in small, healthy amounts, and that turns deadly when it grows without limit until it harms, or even kills, its host" that would have made more sense to me.
bix6 1mo ago
I’m a VC and agree with much of this. The mega firms have totally warped VC and the desire for massive cash appreciation has led to a host of bad characters getting involved. I still love working with early stage companies but it is hard to cut your own lane when these mega groups control so many aspects of the stack and have such outsized capital and political influence. There are so many issues destroying early stage VC right now. We need major policy change / guardrails but that won’t happen.
- Henchman21 1mo ago
  Y'all need ethics is what ya need.
  - bix6 1mo ago
    I agree. Ethics is at the forefront of everything I do both personally and professionally. I used to serve on an ethics in business council. All the investments we make are grounded in genuinely improving the world. It’s unfortunate that so much money flows to certain VC firms when people like me exist since I reckon I’m much more aligned with what the general population wants.
    - bluefirebrand 1mo ago
      > It’s unfortunate that so much money flows to certain VC firms when people like me exist since I reckon I’m much more aligned with what the general population wants. You sound like a pretty good dude The study of Ethics is such a double edged sword. On one hand you have people who study ethics to think about how to treat people well, on the other hand you have people who study ethics in order to treat people as poorly as possible while still being "ethical" I don't have a ton of firsthand exposure to the decision making process of huge corporations, but I imagine they mostly listen to the second group of ethicists
      - bix6 1mo ago
        I’m trying. I love startups and want as many good entrepreneurs to succeed as possible. All the VC drama causes people to forget the whole point. It’s inherent with true capitalism. You have to be willing to forego some profit to actually treat people right and for some that’s just too much.
aliasxneo 1mo ago
I've been in an interesting spot the last few months. I've pitched probably two dozen or so VCs and, and while almost every case showed interest, it was quickly followed by "rules" and "desires" that were antithetical to the product. The product I am building is a decentralized trust system. The word "trust" is literally in the name. It requires very specific decisions and a very specific organizational and legal structure to be successful. Why? Because anything else doesn't breed trust. But that's actually the problem. The VCs don't like those things, because in almost every case it relinquishes their control/power. Or, they ask us to do something either questionably or blatantly unethical in order to sweeten the pot. I was one of those founders "unaware of the Cancer Capital situation." After six months of pitching, it's become extremely obvious to me that the current VC system is incapable of funding anything ethical or long-term. I don't know what the right answer is from here. Our current attempt is founding a syndicate of like-minded individuals to bootstrap a pre-seed. It seems like the only possibility where you might be able to maintain an ethical vision without fighting a cancerous overlord. We'll see how it goes.
- ericd 1mo ago
  Well, is there a clear route to being a >$10B business? If not, it's probably not a good match for VC. But that's OK.
- xyst 1mo ago
  Unfortunately your product doesn’t fit into Peter Thiel’s "vision" of the world.
- lorepieri 1mo ago
  I'd be interested to hear how it goes.
- r_lee 1mo ago
  I'm not saying the VC scene is great, but I mean what's in this for them?
- PaulRobinson 1mo ago
  Yeah, you need to look away from private equity investment. Mutuals, co-ops, LLPs, there's lots of other models, but VC and PE money is not where you want to be.
vrganj 1mo ago
Maybe VC always has been VC? Maybe the cancer was always inherent to the system and the author only just now noticed it?
fhub 1mo ago
I was living in SF Bay Area when a16z started. They had good marketing and a good reputation. Their analyst posts were insightful and well received here. My perception of a16z has changed drastically. I’m ashamed just how badly that marketing worked on me in the early years.
- clarkmoody 1mo ago
  To be fair to yourself, a16z could have changed over that time, and the marketing was honest early on.
  - r_lee 1mo ago
    I suspect this is what it is, the money got to everyone's head not too long ago we were amazed at Apple hitting $1 trillion mkt cap and elon reaching $100 bil now we're waiting for the first trillionaires to show up
    - bluefirebrand 1mo ago
      Elon Musk was already minted the worlds first trillionaire back in June wasn't he? Pretty insane from 100 billion in 2020 to 1 trillion in 2026. Not a sign of a supremely broken system at all
      - r_lee 1mo ago
        yup. how are you ever supposed to compete with that capital moat? and I'm not an Elon hater, I just don't see how this system can be sustained
        baron3dl 1mo ago
        it's easy, just eat cake.
- BeetleB 1mo ago
  Indeed. I was once an Andreesen fan (many years ago). I've been trying to like him despite all the negatives for many years, but reading this I just can't any more.
deleted 1mo ago
[deleted]
xyst 1mo ago
VC, private equity, angel investor, vulture capitalist. All the same to me. All of these entities have ruined previous workplaces in one way or another. Effectively stealing years of my life that I put my labor into. These rich cunts are the reason everything is shittier and the term "enshittification" exists in our modern vernacular
- SoftTalker 1mo ago
  > Effectively stealing years of my life You got a paycheck, no?
alexashka 1mo ago
VC was good when a guy with no technical skills raised 10s of millions of dollars. That was when VC was good, right? This guy has been grifting his entire career but it's those other people who are the problem, guys! He's not wrong about VC but he's another Chamath - a guy who grifts a thing to death, moves on to the next grift and goes 'look, that grift I'm no longer doing - it's bad, very bad!'
- anildash 1mo ago
  You should ask Chamath how he feels about empowering workers through unions.
  - alexashka 1mo ago
    Is that supposed to work? When you get caught stealing candy, saying 'look, he stole more than me!' doesn't work. Were you raised in a human society? I thought people learned these things when they were 7.
    - anildash 1mo ago
      If you’re arguing he and I are the same thing, though he’s a VC and spends his time being a podcaster who advocates for the venture industry, and I’m someone who is talking about how power actually works in society, I proposed an easy test of your assertion. Let me know what results you find.
      - alexashka 1mo ago
        > and I’m someone who is talking about how power actually works in society He also does this. That's... the entire point of the comparison. Nice try. Shall we continue to where I start copy/pasting an LLM explaining it to you until you can't pretend to not understand any longer and move on to some other bad faith tactic? I want to see your most advanced bad faith attempt - deflection and playing dumb are for juniors. Show me something good.
garrickvanburen 1mo ago
For a couple years, I officed out of a VC firm. It was terribly helpful in taking off the shine.
rconti 1mo ago
I was thinking about this the other day in regard to Flock. There's simply no way this company will fail, despite the public outcry, because the rich people in charge will not _let_ it fail.
- toomuchtodo 1mo ago
  Strong agree, spot on. There will always be wealthy folks behind the scenes who will arrange for the capital theatrics to land the way they want (Loopt was a failure and Sam Altman still ended up running YC because of vibes, Leopold Aschenbrenner blew up Situational Awareness and wealthy friends [Griffin and Citadel] bailed him out, for example). The best you can do is political recourse (note the wide social efforts to vote out folks who support data centers, and to have Flock contracts cancelled) and decouple from needing anything from any company who is controlled by these folks through cap tables, network, etc. The game is rigged, operate accordingly. You are managing risk and threat exposure against threat actors who want to obtain and maintain control, influence, and power.
  - zipy124 1mo ago
    Griffin and citadel less bailed him out, and more circled like sharks and made out with a good deal TBF.
    - toomuchtodo 1mo ago
      That's a fair point. I suppose the difference is if a rando is about to get blown out of the water, no one is coming to save them. If someone connected is going to get blown out of the water, calls are going to be made, people are going to meet, and it's going to "be taken care of" even if it's a good deal for whomever is Winston 'The Wolf' Wolf in the situation. Caveat being that sometimes, even if well connected, you're still toast (Archegos Capital Management and Bill Hwang).
- dv_dt 1mo ago
  Of course it can fail, just like the AI circular investment moves can fail just like the Soviet Union failed. Too much decisive power in too few hands, disconnected from reality, disconnected from competition, disconnected from outside community criticism. It fails open loop. A lot of money can temporarily buffer the failure, but already we see world wide inflation and interest rate increases from the open loop decisions of the most powerful class.
reasonableklout 1mo ago
Wow, TIL a16z hired the NYC subway guy as a partner purely as a political stunt. This on top of the $115M in the midterms, them no longer legally being a VC firm, and recent discussion on dark patterns in their portfolio [1]. I'm inclined to agree with the thesis of the article especially with regards to this firm. Looking forward to the other articles in the series. [1]: https://news.ycombinator.com/item?id=49416055 https://news.ycombinator.com/item?id=49416055
- jansport123 1mo ago
  a16z has always struck me as the shadiest vc - i associate them with NFT's, crypto and god knows what. They personify the amorality of chasing money over anything (Maybe indicative of SV culture these days in general).
  - Daishiman 1mo ago
    I don't think anything that could even be mentioned as VC despises its own clients as much as a16z. Trying to sell investors on NFTs in 2026 should be criminal.
  - JumpCrisscross 1mo ago
    They are. The fact that they LPs escape any peril for financing nonsense morals and returns is something of a marketing miracle.
  - mhitza 1mo ago
    As someone reading much of what Molly White publishes, there is no short supply of people in crypto that give of the same aura and are f̵i̵n̵a̵n̵c̵i̵n̵g̵ donating to someone that will push their crypto regulation agenda https://hachyderm.io/@molly0xfff/117191164732599820 https://hachyderm.io/@molly0xfff/117191164732599820
  - xpct 1mo ago
    a16z is one of the firms whose influencers I mute on sight on twitter. Far too many grifters shilling dubious products.
euio757 1mo ago
> Those firms also stop legally even being venture capital firms We need an equivalent of the "Fiduciary" word for financial advisors ... but applied to VCs. "Are you an Artisanal, Free-Range, Fair-Trade™ VC?"
- WhatsTheBigIdea 1mo ago
  VC General Partners (managers of the VC fund) are already fiduciaries with responsibility to the fund's Limited Partners (people and institutions which invest in VCs). Their fiduciary responsibility is to maximize return on investment.
megagpt1 1mo ago
all of the institutions that built our current era of prosperity have been corrupted.
wseqyrku 1mo ago
Speaking of accountability, if you look around and see the tech enshitified you have no one else to blame but the biggest investors in the vicinity. Like it or not they are building your future and more often than not it's just a byproduct of whatever the hell they think they're doing, not a deliberate milestone, which makes it even worse.
christkv 1mo ago
The root of the problem I think was caused by allowing institutional funds to invest money in VC firms. You combine that with the majority of the value being generated before they go public and you have a stock market which no longer works as a way to raise money for the company but as a way for VC´s to exit their positions and offloading companies on the public and funds.
danieltk76 1mo ago
yea but part of this is the consolidation of funding too. Standards to raise seed capital are soooo lofty now compared to 3 years ago. If you are in your in, if not good luck.
piker 1mo ago
While Anil makes a lot of great comments about VC's shift towards institutional PE, the legal issues he harps on are insignificant. Until 2012 or so there was no legal concept of "venture capital". Around that time, the SEC adopted some new rules in response to the GFC. In those rules came the "venture capital adviser" exemption. To be a "venture capital adviser", a firm needed to avoid doing a lot of things that looked like private equity investments or hedge fund management. The only consequence of falling awry of the new "venture capital adviser" definition was registration as an "investment adviser" with the SEC. The important anti-fraud provisions of the Advisers Act still apply to "venture capital advisers" even though they aren't registered, and most big VC shops would have probably been pushed to register for other reasons anyway. The legal stuff is nearly irrelevant here.
zackmorris 1mo ago
We need something like an open source model or guild for VC, where successful people can put money into a pool that is generally accessible to anyone, with little friction. The idea would be to join the guild and gain access to funding, with a contract to contribute back some percentage of gross revenue and/or net profit, depending on how many people game the rules. Honestly, wealth inequality has reached such epic proportions, that if someone came up with an alternative funding model, they could make VC lock-in obsolete. This is simultaneously extremely easy and extremely difficult to pull off. Money talks yes, but sometimes saying "your money's no good here" is more empowering.
- Karrot_Kream 1mo ago
  There is something like this with crowdfunding called Reg CF (Regulation Crowdfunding) but it comes with many limitations. Ultimately the worry is that less wealthy people will invest their life savings in a scam and be rugpulled. Groups of accredited investors can, and definitely, do this. The problem is that these large funds have lost their scruples and it's hard to compete against a large fund that can outspend and out market a smaller one.
jeffreyrogers 1mo ago
Not really unique to VC, similar things are happening to private equity with secondary funds.
chris_marino 1mo ago
The article does not mention or address an important contributor to the current state of VC. The increase in regulations, post GFC, made it impractical/impossible for small companies to go public. And, until recently M&A was actively avoided. The alternative was to stay private longer offering higher returns for private investors wanting to capture a (previously non-existent) illiquidity premium. The co-dependency of companies and growth VC fueled an entirely new asset class (that many still call VC). As well as 100s of overfunded zombie unicorns. Today, the AI boom is a perfect storm of opportunity to put $Ts to work in frontier model AI Cos. "In recent years, as private markets inflated, the default behavior switched to remaining private and absorbing more capital (to justify more VC fee income). This has resulted in fewer IPOs, and worsening prospects post-IPO for venture-backed companies." https://x.com/credistick/status/2092259921177804930 https://x.com/credistick/status/2092259921177804930 So, maybe more regulation is not the answer.
- Karrot_Kream 1mo ago
  Yes this is something I think a lot about. The issues raised in this article are very real but even aside from that, you end up enabling a class of zombie companies that have no pressure to succeed. Their founders raise and end up as advisors and LPs themselves eventually while employees at these companies receive equity that will never be liquid and will rarely be worth anything. At best the equity in these companies will be realized at steep discounts as the lack of liquid markets makes it very easy for private companies to claim that a company was valued at a certain amount at a certain time with scant certainty of what happens next. Companies stay unprofitable and private for decades, relying on private markets to stay solvent. Pre-GFC plenty of undisciplined, unprofitable companies would IPO. While some did take public money then eventually go under, most just made their underwriters lose money. With pressure to trade publicly and put sunshine on company books, losers lost and winners won. The result is a K-shaped economy. Private capital appreciates on paper and private capital holders take out loans on the inflated value of their equities. Meanwhile public markets are more discriminating and fiscally tight by necessity. A private company may eventually go under but cheap loans collateralized on private capital may be paid back before there's any financial reckoning.
- unknownfuture 1mo ago
panabee 1mo ago
I think a lot about fixing broken VC-founder dynamics, and this post by Marc Pincus (https://x.com/markpinc/status/2089572143344599079 https://x.com/markpinc/status/2089572143344599079) crystallized one plank of the platform. The principle is simple. VCs are soccer stars, but founders play basketball. Basketball and soccer share much in common. For instance, both involve teams dribbling, passing, and shooting a round ball. But successful abilities and traits in one may not translate to the other. Think of each profession as a different sport. Venture, growth, and value investing all differ, and all differ from founding. VCs are all driven and highly intelligent, but so are lawyers, bankers, and consultants. Talent isn't the issue. Capital confers authority, but not expertise. Based on resume alone, 80% of VCs would not earn board seats at their portfolio companies. Their experience and skills, much like consultants and value investors, were honed on a field different from the basketball arena where founders compete. Here's a quick heuristic: sans capital, would you still hire the VC to sit on the board? If yes, wonderful. This is no slight and works in reverse: 80% of founders would not earn the right to direct VC investments. To clarify, great VCs are absolutely worth the premium and can reshape a startup's trajectory as all great advisors can. If you find a great VC, do not haggle. Strike a deal, and return to building. The greatest VCs exhibit the same pattern, understanding their role on the startup team as advisors, not alphas. They are often understated and work tirelessly on behalf of their clients. The worst VCs exhibit the inverse pattern and imagine themselves as the alpha, not appreciating how a talented peer could have replaced them without changing the exit. They are loud on social media and assume accomplishments from finance or FAANG map to the startup arena. These VCs should run funds on Wall Street, not advise founders in Silicon Valley. How do we highlight good VCs without attacking bad ones? Many good VCs, as with many good advisors, prefer subdued profiles and dislike self-promotion. This is the challenge. The original idea was to flag bad VCs, but such a system grants founders too much power to levy unjust charges and settle feuds. After all, many disputes are legitimate and reflect bad founders. Founders, like all professionals, sit on a spectrum. The surge of big money has spawned plenty of bad ones who, sadly enough, do not represent the best of tech and innovation but rather greed and self-aggrandizement. The Pincus post sparked a cleaner iteration. The proposal is a public page/spreadsheet where only founders can post, only after an outcome or a certain number of years, and only with affirmative assessments. Nothing negative, nothing anonymous. Posts must certify no quid pro quo or other VC prodding. Topics could include responsiveness, support during dark days, absence of alpha syndrome, and other key considerations. Over time, good VCs should reveal a clear pattern and attract new founders: founders trusting them again with repeat business and consistent high marks across the portfolio, not only unicorns. Arguably, the strongest signal will radiate from the worst outcomes. Critically, this system won't incite mob justice or expose VCs to unfair accusations, but can still suggest who to diligence more deeply. The purpose is to spotlight good VCs who advance innovation and startups over time, letting their body of work rise to the top and garner proper recognition. Of course, it penalizes newer investors and is vulnerable to gaming like any system, but it plugs a small gap. Founders want to find good investors based on data, but good investors dislike boasting.
andix 1mo ago
I think tech founders need to think smaller. Build software for a few thousand people and make a profit from it. Something niche. Something that is sustainable with a small team. VC eats up everything that's becoming bigger. And they will kill it. Their goal is not to run a healthy business that serves their customers. They try to take out as much money as possible and then trash it.
- conqrr 1mo ago
  This is it. Sustainability. Not everything has to be about more money quickly. You don't even need VCs for that. More win to bootstrappers! I see a lot of folks bootstrapping in the LLM era, but that can be defeaned in the VC noise.
  - danaris 1mo ago
    Exactly. And the dangerous mindset tends to be worse than just "more money quickly": it's far too commonly "if this can't become the next Facebook/iPhone/ChatGPT, it's not worth doing." The only options are "take over the world" or "fail"; there's no room (in many people's heads) for a product that makes a decent, steady profit and continues to do so over the course of many years.
    - 4er_transform 1mo ago
      There is, is just different capital for those companies (debt, growth equity, angels, grants) and less attention. There’s far more of these types of companies too.
- sensanaty 1mo ago
  They don't give a shit about making a good product, the literal only thing any of these ghouls care about is line going up in the short term, because if line goes up they can dump their investments and move on to the next entity that they can get their greedy claws on and devour.
  - andix 1mo ago
jgord 1mo ago
I think the current gold-rush of nearly all money into GPU Datacenter and frontier LLMs is essentially starving the economy of innovation. Academics and founders who might work on developing practical products using NN / ML / RL techniques to solve a realworld problem in engineering/logistics/medicine are not getting investment money. VCs and most people are blind to the fact there is AI outside of LLMs, despite the fact that we have seen AlphaGo and AlphaFold as evidence of non-LLM AI progress in hard domains. This is perhaps a sub-problem of a larger issue - hyper-inequality means that capital is not allocated to talent [ capital is localized, talent is more widely spread throughout the population ]. We are not getting money to things that will grow our future such as : - small innovative startups - university science research - people who are young enough to have kids, being able to afford them - new garage bands / authors / musicians / photographers - public works / infrastructure / libraries - local retail : bookshop, artisanal bakery, cafe My thesis is that during the 70s-90s we had higher tax, lower inequality, lower median income to median house price ratio, higher levels of innovation and more original art, literature and music being made. AI could be a golden age of human flourishing - but thats not where we are heading, what we are seeing is a territory rush by the megacorps. The fact that RAM and GPU prices have risen so fast, is evidence of supply and demand effect where inequality steals resources from the commons [ middle of the economy ]. Can a talented garage inventor / math or arts student afford a Ryzen AI dev platform, let alone a DGX spark on which to create the next important technology innovation ?
486sx33 1mo ago
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jongjong 1mo ago
I've been feeling this for years. From my perspective, the purpose of VCs was to: - Waste my time filling out forms to participate in incubators they would always reject me for. - Fund my competitors so much as to drive up CPC for any given keyword as to make make ROI on ads impossible. - Monopolize all tech markets through a variety of ways including contributing to the culture of making it taboo for companies to purchase solutions from small vendors who aren't funded by them. My friend who did get into the club described the ecosystem as 'incestuous'. The circular deals we saw going on with AI companies and hardware companies recently are not new; just the same thing they always did, on a bigger scale. I entered the industry in 2012 so for me it has always been like this. That said, it's really a deeper system issue which allows this.
ivraatiems 1mo ago
Working as designed? Wasn't "become massively rich by controlling wealthy companies" alwayes the point of capital investment? What is it that Anil Dash thought the purpose of these firms was?
kingkandu 1mo ago
The 2 groups getting fucked with the stay private longer trend are the LPs and the startup employees. We should insist on public policy forcing public money into only public assets. It's the obvious sensible rule. And company safes need to start including a clause where all classes of vested equity are offered buyouts in equal proportions. So VCs can't keep paying founders/each other on the way up while zeroing out common stock and eventually selling company IP for around the liquidity preference to some "totally unrelated" entity. Realistically this will only happen if YC gets onboard but I doubt Garry tan is the guy who can show this kind of spine.
vivzkestrel 1mo ago
- you need 2 hands to clap, dont want a data center i ll give you a plan - stop using claude - stop using open AI - guess what happens? - user base drops to 0 - demand drops to 0 - both companies go bankrupt - no need for data centers anymore? see its that simple - in the first step, convince all the HN guys to cancel their subscriptions
- crote 1mo ago
  A huge chunk of the demand is already fake. It's why there are so many auto-enabled "helpers", blinking nag buttons, and popups begging you to pleasepleaseplease use their new AI feature. The vast majority of people are simply ambivalent about the vast majority of AI integrations, so companies have to take increasingly-desperate measures to artificially keep their MAU up and pretend that they haven't wasted a huge amount of money. And all of that is before we get into the heavily-subsidized LLM subscriptions for the people who do want to use it. User base and demand are irrelevant when it comes to a bubble. People invest because Line Goes Up, which in turn makes Line Goes Up, convincing people to invest. As the saying goes: markets can remain irrational a lot longer than you and I can remain solvent.
  - vivzkestrel 1mo ago
    I am going to need a little more evidence for your claim that says "a huge chunk of demand is fake"
    - crote 1mo ago
      How many of the apps you use on a daily base have some form of AI integration? In my experience, outside of FLOSS software it is approaching 100%. How many of those did you intentionally enable it? In my experience, basically 0%. Even worse, after manually disabling it many of them re-enable it after an update! If, say, Google publishes a claim that "95% of Google Search users have adopted AI", that does not mean that 95% of Google Search users think AI is a core feature of Search they would potentially pay extra for - which is what the massive valuations are based on. The AI Mode is auto-enabled, so the only thing it tells you is that 5% of users are annoyed enough by it that they take the time to disable it. Some people of course genuinely like it and would indeed pay extra for AI-enhanced search, but a huge chunk of users simply does not care either way. They wouldn't pay a dime for AI, just like they wouldn't pay a dime for the ability to re-arrange the letters in the Google logo into "Oggoel". If AI were default-off, they would not bother enabling it. That is fake demand.
ozozozd 1mo ago
Man, this guy’s writing must be at a peak. It was already great when I first read it ~10 years ago. And his linked post about VCs writing extremist manifestos from 2023 is arguably better than this one. But this post is amazing as well. I wonder how many iterations it takes to remove all the extra words and reach this 0% fat state. Both articles also brought me to a peak / cliff hanger type of place. The post from 2023 doesn’t even have a follow up! Though I didn’t like the repetition of the phrase (“cancer capital”) he clearly wants to coin. It’s Trump-like. More importantly, it’s the kind of thing simpletons do. Or people who think of their audience as simpletons.
zaptheimpaler 1mo ago
> This is how brazen, how toxic and destructive, we’ve allowed the industry formerly known as venture capital to become. We must understand that it is no longer a financial machine that is used to fund startups, but a political and social machine focused on dismantling democracy and civil society. And it’s time to act accordingly. Its at least heartening to see a broad recognition across many circles and communities of how insane wealth/power concentration, corruption and insane laws like Citizens United are dismantling democracy today. But a16z and others are still pushing their own techno-utopia anti-doomer message that a lot of useful idiots buy into, even though it serves to detract from the political and social root causes of our problems today and instead says even more technology will fix it all.
thoughtpeddler 1mo ago
Reminds me of this post from earlier in the year (from a VC, Michael Dempsey) titled "VC-Backed Startups are Low Status"[0], which I'm inclined to agree with, having been in the industry for over 15 years now and witnessing how the vibe shifted from "techies are good" to "techies are bad" over this period. I graduated into a tech workforce that was a celebrated part of society (i.e. "high status") to one that is decidedly not (and I'd say it's grown to deserve this disrepute). The first main wave of the vibe going negative (at least at the heart of the 'imperial core' in the SF Bay Area) was around ~2013/14 (the 'tech co bus protests'), then again around ~2018 ("don't call SF General 'Zuck General'"), and now it's kicked into a much higher gear during this current AI wave. It spans big tech co's to startups to everything in between. Anil's post speaks to this too, when he says: > Politicians and media still look at VC as if it works like it did 10 or 20 years ago, and cheer them on ... when their primary goal is concentrating power and wealth It's not just VC per se, but the 'managerial class' within tech rotted into mostly career-climbing types that were a far cry from impassioned creative technologists aiming to 'do good' with tech. It became the same status-bound competition you'd find on Wall Street and elsewhere (which the Dempsey post describes well). I have a mentality and overall life orientation that is aligned with Anil and celebrates the open web, public interest technology, and so forth, and many of my peers in tech (often from elite universities and backgrounds) look at me as a strange creature. I'll bring up the need to increase awareness about Public AI and boosting AI literacy among citizens, and I hear, "Wow, you like, really care about like, people. That's so interesting." It's unbelievable, I wish I was kidding. Thanks for writing this Anil. I wish for better days. [0] https://mhdempsey.substack.com/p/vc-backed-startups-are-low-status https://mhdempsey.substack.com/p/vc-backed-startups-are-low-...

315 points by cdrnsf 1mo ago

Let's keep praying for fewer and fewer regulations, it's going great! I didn't know that VCs were ever "not cancer", I've always known them like that. Also my experience with startups is that it is a big scam for employees, but I understand it's not always the case (maybe it depends on where in the world?). I have been an early employee in multiple startups that got the founders rich, and what I got from the stocks didn't compensate for the low salary while working there. Do I understand correctly that when VCs invest, they dilute the employees and somehow the founders can get away without being diluted? That's the only way I could explain the difference between what the employees get and what the founders get if the startup is successful. And young people are super excited to work in startups because of old stories like "early employees at Google/Facebook became rich", I guess.

tistoon 1mo ago
Just move to EU, you will have all the regulations you want (maybe even more) :-)
- johnnyanmac 1mo ago
  It's an increasingly enticing offer. But they aren't exactly that open to immigration either as of late.
cratermoon 1mo ago
Startups define different classes of stock. The class A shareholders are the founders and investors. Everyone else gets class B shares. The A class shares don't get diluted, and they are inherently worth more anyway.
- palata 1mo ago
  So fundamentally, "everyone else" is scammed. Unless the class A scammers get so, so rich that everyone else gets rich as well. In which case it's still a scam, but the "everyone else" are happy anyway.
  - sershe 1mo ago
    Why is that a scam? Nobody ever promises you any specific valuation or fraction of the company. When I joined a company relatively late but well before IPO, some funny number of shares at 12 cents or whatever each did not even enter my calculation any more than "oh and they also give me a free lottery ticket". In my case depending on when one sold after IPO they would have been in the range centered around about compensating for the salary differential I think, but nobody promises you they'd ever be worth more than Monopoly money
    - palata 1mo ago
      > Nobody ever promises you any specific valuation or fraction of the company Would you mind asking before saying what I have been promised? Also it feels like you have never been in a startup. The whole language of growth everywhere, the "billion-dollar startup", the "becoming a unicorn", this is all suggesting that "you're part of it and it matters to you if it becomes a unicorn". But it doesn't, really. Because you get diluted.
      - BeetleB 1mo ago
        > But it doesn't, really. Because you get diluted. At this day and age, if you don't understand dilution before you join, it's entirely on you. This isn't a new concept - it was the case decades ago. Even when I left school over 15 years ago, the standard advice when trying to get a job with a startup was "Get a good salary and value the equity at zero." And class A vs class B isn't even a rich vs everyone else thing. I have class A shares in an LLC, where even the (richer) founders are class B. The operating agreement is that we class A folks are "guaranteed" a fixed rate of return on our investment, and the class B folks don't get anything unless we get at least that rate of return. This is very normal in that industry.
- cyberax 1mo ago
  Anti-dilution shares were extremely uncommon.
- slowin 1mo ago
  This is not standard. Normally founders and employees get common stock and investors get preferred stock. Founders may get more stock issued in a round, and VCs/founders can pretty much rework the cap table to their liking if they really want to. The difference in return between founders and employees is down to percentages. Founders get 25-75% where employees get 0.01-1%, maybe a bit more if they're lucky.
  - palata 1mo ago
    > Founders get 25-75% where employees get 0.01-1%, maybe a bit more if they're lucky. So that's a scam by the founders to the employees, in my book. It's fine, it's just that I am not sure young professionals joining a startup know that. Said differently, if you join a startup, you should not work too much without compensation, and you should not care about making it super valuable, because you don't benefit from it. If you have a super good idea or realise you have expertise that would make the startup valuable, you should leave and become a founder yourself.
    - slowin 1mo ago
      I agree it's a scam. I just wanted to point out the way the scam works, by ownership percentage and new shares issued during new rounds (and cap table shenanigans), not generally through a different class of stock issued to founders vs employees. That's much more rare.
- robocat 1mo ago
  Founders get common stock - class A voting. VCs get preferential shares, not common. Preferential shares have economic rights to protect the investors, but more importantly they usually have extra control rights like veto abilities, board seats, IPO control, or ability to sack the founder (which may even cut out the founder's voting rights by sunsetting their class A common into class B common shares). Employees get a third tier of stock (e.g. options that convert to non-voting class B common shares). After IPO the preferential sheets becomes common shares. The dual A class may be removed or have sunset clauses because large public investors prefer one plain common share class. Not a VC - so take above as written by a student. Founders in zero sense have the same voting control as VCs. Edit: VCs play the same game over and over again, against different innocent founders. VCs know how to stack everything in their favour - especially using social cues and "norms" that benefit them. My favourite article on this is: https://siliconhillslawyer.com/2019/02/18/relationships-and-power-startup-ecosystems/ https://siliconhillslawyer.com/2019/02/18/relationships-and-...
  - cratermoon 28d ago
    I got the details about classes of shares and preferential stuff technically wrong, it’s true. I still got the gist of the arrangement correct: VCs and founders get the pizza, everyone else gets the crusts
- barchar 1mo ago
  Pref shares do get diluted, they are however senior to common stock so they get money FIRST if there’s not enough to go around. There is some cap on this and sometimes it’s pretty high. Huge pref overhangs are, indeed, a problem. Pref shares with a 1x preference are still worth like 10x common stock in early stage companies and it’s common for employed to get fucked by this. Founders don’t get preferred shares (I think it’s really, really rare). There is founder pref stock, which is somewhat different. It’s common for founders to cash out some shares along the way, though.
  - robocat 1mo ago
    Founders that take a pay cut from a high paying job should demand preferential shares to the value they are giving up. If they were in job where they were saving $50k a year, then after becoming a founder they should be getting $50k worth of preferential shares per year because they are investing that much in the business. Not that I've actually ever heard of founders getting preferential shares to match their dollars invested.
carlosjobim 1mo ago
Everything which is not your salary is completely speculative, and should be valued at near-zero. That you wanted to gamble on that was your own decision and your own fault. You have nobody to blame but yourself. If you had gotten rich from the stocks you wouldn't have complained here.
- palata 1mo ago
  > If you had gotten rich from the stocks you wouldn't have complained here. Duh. > That you wanted to gamble on that What makes you think I gambled at all?
  - carlosjobim 1mo ago
    You said that you worked for a low salary at startups and feel scammed because of that. You could have worked somewhere else instead for a higher salary if you weren't gambling. Or if nobody would have hired you for a higher salary somewhere else, then maybe your salary at the startups wasn't so low after all?
    - palata 1mo ago
      If you want to go with that tone... I wonder if you did not understand my English or if you lack basic logic? I did not say that I felt scam because of my low salary. I said that I felt scam because the founders got rich and what I got didn't compensate the low salary. Said differently, the founders got rich and I didn't get much at all. When I say "not much", it means "not nothing, but not a lot".
      - carlosjobim 1mo ago
        You took a gamble on a lower salary with the expectation that it would be compensated by your company stock going up in value. I told you that there is no such guarantee, the only thing guaranteed is the salary you agree on. Everything else is speculative = gambling. Which is your decision, but don't cry later that you got scammed and that VC are cancer and so on. But there's no reason for me to teach you, because you already learned it the hard way.

RicoElectrico 1mo ago

Likewise, stock market IPOs are a parody now - not means of getting financing, but dumping the paper on the retail after for the insiders and VCs to realize their gains.

lstodd 1mo ago
But serioslly when IPOs were not a sad joke? In early 1990s? But I think never.
- swozey 1mo ago
  In my ~20 year career half of which were well funded startups I made it to one IPO (multiple sole proprietor sales) with a bigcorp and my prize was having 3 years to buy my stock options at the IPO day strike-price, which was higher than the stock ever was in my last 2-3 years there. In the end I made my million(th) sitting behind a cubicle collecting 401k which none of those startups gave me.
  - lstodd 1mo ago
    At this point we must have a drink to that.
Analemma_ 1mo ago
Yes, it's downright stupid to buy into any tech IPO these days. The fundraising and all the growth were done by the A-M rounds, while the IPO is the bag-dump for the last few rounds of investors. Stay far away.
cbg0 1mo ago
Aren't all the insiders restricted from dumping their shares for a set number of months?
- SwellJoe 1mo ago
  They're solving that problem. Look at Spacex. They not only got the rules changed for fast-tracked inclusion in Nasdaq and Russell indexes to pump the price on their garbage asset, they changed the rules so insiders could bail early. It was a one-two punch in service of making insiders richer at the expense of retail investors. Transparent corruption, where a few billionaires write the rules that allow them to reach into regular folks pockets. https://www.cnbc.com/2026/05/21/spacex-insiders-will-get-to-sell-shares-earlier-than-usual-after-the-ipo.html https://www.cnbc.com/2026/05/21/spacex-insiders-will-get-to-...

mikeaskew4 1mo ago

This reads like someone who can’t make smart bets “before it’s obvious.” Lots of VCs out there still taking big gambles on the agendaless and unproven ideas.

deleted 1mo ago
[deleted]

saasisdead 1mo ago

VC is basically just plowing capital into people that went to prestigious schools or maybe were at a top company. They collect fees and every once in a while a company hits. Any analysis on the asset class is moot. Most of the VC media is aimed at hiding the fact that its a lottery machine for a pre selected group

shimman 1mo ago
You should add that they use pension funds to do this too. Easy to make stupid bets when it's not your money.
4d4m 1mo ago
I think the letter V should be removed from VC to better reflect your point that these are barely ventures - they're more like a rigged casino spin for those that don't have the talent to do the building themselves.
- SpicyLemonZest 1mo ago
  That's what the letter V was historically understood to mean. As the article says, venture capital used to be a small segment of the capital markets for the uncommon set of companies who can't prove their idea is any good until they get more capital than their friends and family have to offer. The idea that venture funding is supposed to be anything more than a rigged casino spin is upstream of quite a lot of the problems people have with modern VC.
- bobbane 1mo ago
  I learned to pronounce the V in VC as 'vulture' back in the 1980's.
4lx87 1mo ago
VC is also exercising incredible power over media and politics. That's part of the article's point: VC isn't just about VC anymore.
Henchman21 1mo ago
I'll say it directly, as _they have_: they are attempting to recreate fuedalism. Those folks are in these comments. They'll get their pitchforks and torches eventually.

0gs 1mo ago

i can't believe the whole blog post was just the tldr. this is going to be a legendary series of blog posts! j/k i WOULD like to read the long version of this but i probably won't remember to go back to this blog.

exceptione 1mo ago

> Since the Cancer Capital firms have become so powerful, the overall balance of power between founders and VCs has flipped; instead of founders having a company that VCs would try to fund, now VCs publish extremist political manifestos, and “founders” are just the people who are selected to carry out parts of those plans > The rest of the world doesn’t know: New founders and workers entering the tech industry are unaware that Cancer Capital has taken over, so many are still trying to play by the old rules, and can’t figure out why their ideas are being pushed into serving the goals of the Cancer Capital firms > These days, venture firms are increasingly getting their funds from pension funds and retail retirement accounts, meaning the public (you!) are increasingly holding the bag for the parts of their portfolios that actually have some risk, even if you never intentionally made that choice > Part of why this has gotten so corrupt is the way the Cancer Capital firms have transformed themselves into their post-VC forms. Because they’re not legally VC firms anymore, they’re free to buy shares directly from founders, or hold unlimited amounts of publicly-traded stock — exactly what they couldn’t do as regular VCs. They can even sell their investment in a company as an asset to another one of their own funds, and then book the increase in value as a profit, all without the company ever having made a penny. Another racket: a company that’s raised a bunch of cash in a funding round can buy out its early investors if they’re one of these post-VCs, so they can get paid off even if their portfolio company has never made a penny in profits or revenues. Aka the classic dynamic of wealth concentration resulting in power concentration. Great article. One thing it does not mention is how much this small circle of people have gotten zero-sum leverage over the whole country, because when the surveillance economy collapses, America collapses. This wouldn't be the first time the oligarchy triggers a crisis with reckless financial games.

sghiassy 1mo ago
It’s the second gilded age Hopefully this one will pass, just as the first did
- rglover 1mo ago
  All things pass. The question is what the fallout will look like for everyone who doesn't have their hand in the cookie jar.

skybrian 1mo ago

I’m skeptical of the implicit claim that they’re all the same. It seems rather difficult to prove?

cjkaminski 1mo ago
There is an explicit claim in the essay that says they aren't all the same. Third bullet point says "a handful of venture capital firms have become 'do everything' funds that combine private equity with their existing VC businesses".

bko 1mo ago

[flagged]

4lx87 1mo ago
"politics the author doesn't agree with" = racism, hatred, calls for ethnic cleansing, dismantling of the democratic government, open support for fascism... all being coordinated and advanced by a cabal of extremely wealthy VCs. Yeah those politics.
exceptione 1mo ago
> And did you know pension funds invest in this stuff?(which is bad?) Not if this were something healthy. This wouldn't be the first time joe average is holding the bag when the rich set the house on fire again. The USA economy is particularly brittle (as in: not diversified) in that regard. I can understand how the article might conflict with personally held notions and thus might look odd, especially as the weird dealings of the tech accelerationists do not find much press coverage. The only thing I can do is recommending to keep your mind open for new info, the article mentions he will follow up on the bullet points. The author has another previous article [1] that references Paul Krugman's article "The rich are crazier than you and me"[2], that might be an interesting read alongside the other pointers. As an aside, I also recommend to watch the video at the end that goes into Andreessen hiring murderer Daniel Penny. 1. https://www.nytimes.com/2023/07/06/opinion/robert-kennedy-jr-silicon-valley.html https://www.nytimes.com/2023/07/06/opinion/robert-kennedy-jr... 2. https://www.anildash.com/2023/07/07/vc-qanon/ https://www.anildash.com/2023/07/07/vc-qanon/
- blasphemers 1mo ago
  It's not like pension funds are forced to invest in VC funds. It's the unions decision too, so ultimately if they are bad investments, it's average joe union workers fault they voted for shitty leadership.
  - exceptione 1mo ago
    The shit happens from how these funds are bound by their statutes to buy into index funds. A while back, there has been some insightful commentaries here on HN regarding the spacex IPO and the subversion of stock exchange.

52ahf 1mo ago

Anil Dash writes what people want to hear (except for boring medical analogies). He writes against Big-AI, but supports AI (small?) and copyright theft at the EFF, where he is a board member. I'm getting tolerated opposition vibes here.

random3 1mo ago
So A16Z is the largest spender on politics, but Anil Dash's "momma is.." https://techcrunch.com/2026/08/31/a-group-funded-by-andreessen-horowitz-and-brockman-plan-data-center-ads-to-sway-midterms/ https://techcrunch.com/2026/08/31/a-group-funded-by-andreess... https://www.nytimes.com/2026/05/13/technology/andreessen-horowitz-politics.html https://www.nytimes.com/2026/05/13/technology/andreessen-hor...
- agfs 1mo ago
  Do you think people who suspect tolerated opposition would not also criticize A16Z? How about investigating controlled opposition financed by A16Z or others?
  - random3 1mo ago
    I don't understand what you're saying. Can you clarify your question?

hirako2000 1mo ago

> But a cancer grows from a cell that a body needs in small, healthy amounts, and that turns deadly when it grows without limit until it harms, or even kills, its host I thought a cancer grew from a defective cell that is able to divide and grow to over take the healthy ones.

megagpt6 1mo ago
[dead]
pazimzadeh 1mo ago
I would not focus on individual cells but the ability to grow super fast, which itself is not a defect since it's important during development, but the checks on this ability can be removed by later mutations/metabolic issues
- lotsofpulp 1mo ago
  The problem is using cancer as a singular noun in this context. >a cancer grows from a cell that a body needs in small, healthy amounts "A" cancer does not grow from a cell, a cell is a cancer cell if it keeps dividing when it should not. The cancer cells as a collective are the disease referred to as "cancer". If they had written "cancer grows from cells that a body needs in small, healthy amounts, and that turns deadly when it grows without limit until it harms, or even kills, its host" that would have made more sense to me.

bix6 1mo ago

I’m a VC and agree with much of this. The mega firms have totally warped VC and the desire for massive cash appreciation has led to a host of bad characters getting involved. I still love working with early stage companies but it is hard to cut your own lane when these mega groups control so many aspects of the stack and have such outsized capital and political influence. There are so many issues destroying early stage VC right now. We need major policy change / guardrails but that won’t happen.

Henchman21 1mo ago
Y'all need ethics is what ya need.
- bix6 1mo ago
  I agree. Ethics is at the forefront of everything I do both personally and professionally. I used to serve on an ethics in business council. All the investments we make are grounded in genuinely improving the world. It’s unfortunate that so much money flows to certain VC firms when people like me exist since I reckon I’m much more aligned with what the general population wants.
  - bluefirebrand 1mo ago
    > It’s unfortunate that so much money flows to certain VC firms when people like me exist since I reckon I’m much more aligned with what the general population wants. You sound like a pretty good dude The study of Ethics is such a double edged sword. On one hand you have people who study ethics to think about how to treat people well, on the other hand you have people who study ethics in order to treat people as poorly as possible while still being "ethical" I don't have a ton of firsthand exposure to the decision making process of huge corporations, but I imagine they mostly listen to the second group of ethicists
    - bix6 1mo ago
      I’m trying. I love startups and want as many good entrepreneurs to succeed as possible. All the VC drama causes people to forget the whole point. It’s inherent with true capitalism. You have to be willing to forego some profit to actually treat people right and for some that’s just too much.

aliasxneo 1mo ago

I've been in an interesting spot the last few months. I've pitched probably two dozen or so VCs and, and while almost every case showed interest, it was quickly followed by "rules" and "desires" that were antithetical to the product. The product I am building is a decentralized trust system. The word "trust" is literally in the name. It requires very specific decisions and a very specific organizational and legal structure to be successful. Why? Because anything else doesn't breed trust. But that's actually the problem. The VCs don't like those things, because in almost every case it relinquishes their control/power. Or, they ask us to do something either questionably or blatantly unethical in order to sweeten the pot. I was one of those founders "unaware of the Cancer Capital situation." After six months of pitching, it's become extremely obvious to me that the current VC system is incapable of funding anything ethical or long-term. I don't know what the right answer is from here. Our current attempt is founding a syndicate of like-minded individuals to bootstrap a pre-seed. It seems like the only possibility where you might be able to maintain an ethical vision without fighting a cancerous overlord. We'll see how it goes.

ericd 1mo ago
Well, is there a clear route to being a >$10B business? If not, it's probably not a good match for VC. But that's OK.
xyst 1mo ago
Unfortunately your product doesn’t fit into Peter Thiel’s "vision" of the world.
lorepieri 1mo ago
I'd be interested to hear how it goes.
r_lee 1mo ago
I'm not saying the VC scene is great, but I mean what's in this for them?
PaulRobinson 1mo ago
Yeah, you need to look away from private equity investment. Mutuals, co-ops, LLPs, there's lots of other models, but VC and PE money is not where you want to be.

vrganj 1mo ago

Maybe VC always has been VC? Maybe the cancer was always inherent to the system and the author only just now noticed it?

fhub 1mo ago

I was living in SF Bay Area when a16z started. They had good marketing and a good reputation. Their analyst posts were insightful and well received here. My perception of a16z has changed drastically. I’m ashamed just how badly that marketing worked on me in the early years.

clarkmoody 1mo ago
To be fair to yourself, a16z could have changed over that time, and the marketing was honest early on.
- r_lee 1mo ago
  I suspect this is what it is, the money got to everyone's head not too long ago we were amazed at Apple hitting $1 trillion mkt cap and elon reaching $100 bil now we're waiting for the first trillionaires to show up
  - bluefirebrand 1mo ago
    Elon Musk was already minted the worlds first trillionaire back in June wasn't he? Pretty insane from 100 billion in 2020 to 1 trillion in 2026. Not a sign of a supremely broken system at all
    - r_lee 1mo ago
      yup. how are you ever supposed to compete with that capital moat? and I'm not an Elon hater, I just don't see how this system can be sustained
      - baron3dl 1mo ago
        it's easy, just eat cake.
BeetleB 1mo ago
Indeed. I was once an Andreesen fan (many years ago). I've been trying to like him despite all the negatives for many years, but reading this I just can't any more.

deleted 1mo ago

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xyst 1mo ago

VC, private equity, angel investor, vulture capitalist. All the same to me. All of these entities have ruined previous workplaces in one way or another. Effectively stealing years of my life that I put my labor into. These rich cunts are the reason everything is shittier and the term "enshittification" exists in our modern vernacular

SoftTalker 1mo ago
> Effectively stealing years of my life You got a paycheck, no?

alexashka 1mo ago

VC was good when a guy with no technical skills raised 10s of millions of dollars. That was when VC was good, right? This guy has been grifting his entire career but it's those other people who are the problem, guys! He's not wrong about VC but he's another Chamath - a guy who grifts a thing to death, moves on to the next grift and goes 'look, that grift I'm no longer doing - it's bad, very bad!'

anildash 1mo ago
You should ask Chamath how he feels about empowering workers through unions.
- alexashka 1mo ago
  Is that supposed to work? When you get caught stealing candy, saying 'look, he stole more than me!' doesn't work. Were you raised in a human society? I thought people learned these things when they were 7.
  - anildash 1mo ago
    If you’re arguing he and I are the same thing, though he’s a VC and spends his time being a podcaster who advocates for the venture industry, and I’m someone who is talking about how power actually works in society, I proposed an easy test of your assertion. Let me know what results you find.
    - alexashka 1mo ago
      > and I’m someone who is talking about how power actually works in society He also does this. That's... the entire point of the comparison. Nice try. Shall we continue to where I start copy/pasting an LLM explaining it to you until you can't pretend to not understand any longer and move on to some other bad faith tactic? I want to see your most advanced bad faith attempt - deflection and playing dumb are for juniors. Show me something good.

garrickvanburen 1mo ago

For a couple years, I officed out of a VC firm. It was terribly helpful in taking off the shine.

rconti 1mo ago

I was thinking about this the other day in regard to Flock. There's simply no way this company will fail, despite the public outcry, because the rich people in charge will not _let_ it fail.

toomuchtodo 1mo ago
Strong agree, spot on. There will always be wealthy folks behind the scenes who will arrange for the capital theatrics to land the way they want (Loopt was a failure and Sam Altman still ended up running YC because of vibes, Leopold Aschenbrenner blew up Situational Awareness and wealthy friends [Griffin and Citadel] bailed him out, for example). The best you can do is political recourse (note the wide social efforts to vote out folks who support data centers, and to have Flock contracts cancelled) and decouple from needing anything from any company who is controlled by these folks through cap tables, network, etc. The game is rigged, operate accordingly. You are managing risk and threat exposure against threat actors who want to obtain and maintain control, influence, and power.
- zipy124 1mo ago
  Griffin and citadel less bailed him out, and more circled like sharks and made out with a good deal TBF.
  - toomuchtodo 1mo ago
    That's a fair point. I suppose the difference is if a rando is about to get blown out of the water, no one is coming to save them. If someone connected is going to get blown out of the water, calls are going to be made, people are going to meet, and it's going to "be taken care of" even if it's a good deal for whomever is Winston 'The Wolf' Wolf in the situation. Caveat being that sometimes, even if well connected, you're still toast (Archegos Capital Management and Bill Hwang).
dv_dt 1mo ago
Of course it can fail, just like the AI circular investment moves can fail just like the Soviet Union failed. Too much decisive power in too few hands, disconnected from reality, disconnected from competition, disconnected from outside community criticism. It fails open loop. A lot of money can temporarily buffer the failure, but already we see world wide inflation and interest rate increases from the open loop decisions of the most powerful class.

reasonableklout 1mo ago

Wow, TIL a16z hired the NYC subway guy as a partner purely as a political stunt. This on top of the $115M in the midterms, them no longer legally being a VC firm, and recent discussion on dark patterns in their portfolio [1]. I'm inclined to agree with the thesis of the article especially with regards to this firm. Looking forward to the other articles in the series. [1]: https://news.ycombinator.com/item?id=49416055 https://news.ycombinator.com/item?id=49416055

jansport123 1mo ago
a16z has always struck me as the shadiest vc - i associate them with NFT's, crypto and god knows what. They personify the amorality of chasing money over anything (Maybe indicative of SV culture these days in general).
- Daishiman 1mo ago
  I don't think anything that could even be mentioned as VC despises its own clients as much as a16z. Trying to sell investors on NFTs in 2026 should be criminal.
- JumpCrisscross 1mo ago
  They are. The fact that they LPs escape any peril for financing nonsense morals and returns is something of a marketing miracle.
- mhitza 1mo ago
  As someone reading much of what Molly White publishes, there is no short supply of people in crypto that give of the same aura and are f̵i̵n̵a̵n̵c̵i̵n̵g̵ donating to someone that will push their crypto regulation agenda https://hachyderm.io/@molly0xfff/117191164732599820 https://hachyderm.io/@molly0xfff/117191164732599820
- xpct 1mo ago
  a16z is one of the firms whose influencers I mute on sight on twitter. Far too many grifters shilling dubious products.

euio757 1mo ago

> Those firms also stop legally even being venture capital firms We need an equivalent of the "Fiduciary" word for financial advisors ... but applied to VCs. "Are you an Artisanal, Free-Range, Fair-Trade™ VC?"

WhatsTheBigIdea 1mo ago
VC General Partners (managers of the VC fund) are already fiduciaries with responsibility to the fund's Limited Partners (people and institutions which invest in VCs). Their fiduciary responsibility is to maximize return on investment.

megagpt1 1mo ago

all of the institutions that built our current era of prosperity have been corrupted.

wseqyrku 1mo ago

Speaking of accountability, if you look around and see the tech enshitified you have no one else to blame but the biggest investors in the vicinity. Like it or not they are building your future and more often than not it's just a byproduct of whatever the hell they think they're doing, not a deliberate milestone, which makes it even worse.

christkv 1mo ago

The root of the problem I think was caused by allowing institutional funds to invest money in VC firms. You combine that with the majority of the value being generated before they go public and you have a stock market which no longer works as a way to raise money for the company but as a way for VC´s to exit their positions and offloading companies on the public and funds.

danieltk76 1mo ago

yea but part of this is the consolidation of funding too. Standards to raise seed capital are soooo lofty now compared to 3 years ago. If you are in your in, if not good luck.

piker 1mo ago

While Anil makes a lot of great comments about VC's shift towards institutional PE, the legal issues he harps on are insignificant. Until 2012 or so there was no legal concept of "venture capital". Around that time, the SEC adopted some new rules in response to the GFC. In those rules came the "venture capital adviser" exemption. To be a "venture capital adviser", a firm needed to avoid doing a lot of things that looked like private equity investments or hedge fund management. The only consequence of falling awry of the new "venture capital adviser" definition was registration as an "investment adviser" with the SEC. The important anti-fraud provisions of the Advisers Act still apply to "venture capital advisers" even though they aren't registered, and most big VC shops would have probably been pushed to register for other reasons anyway. The legal stuff is nearly irrelevant here.

zackmorris 1mo ago

We need something like an open source model or guild for VC, where successful people can put money into a pool that is generally accessible to anyone, with little friction. The idea would be to join the guild and gain access to funding, with a contract to contribute back some percentage of gross revenue and/or net profit, depending on how many people game the rules. Honestly, wealth inequality has reached such epic proportions, that if someone came up with an alternative funding model, they could make VC lock-in obsolete. This is simultaneously extremely easy and extremely difficult to pull off. Money talks yes, but sometimes saying "your money's no good here" is more empowering.

Karrot_Kream 1mo ago
There is something like this with crowdfunding called Reg CF (Regulation Crowdfunding) but it comes with many limitations. Ultimately the worry is that less wealthy people will invest their life savings in a scam and be rugpulled. Groups of accredited investors can, and definitely, do this. The problem is that these large funds have lost their scruples and it's hard to compete against a large fund that can outspend and out market a smaller one.

jeffreyrogers 1mo ago

Not really unique to VC, similar things are happening to private equity with secondary funds.

chris_marino 1mo ago

The article does not mention or address an important contributor to the current state of VC. The increase in regulations, post GFC, made it impractical/impossible for small companies to go public. And, until recently M&A was actively avoided. The alternative was to stay private longer offering higher returns for private investors wanting to capture a (previously non-existent) illiquidity premium. The co-dependency of companies and growth VC fueled an entirely new asset class (that many still call VC). As well as 100s of overfunded zombie unicorns. Today, the AI boom is a perfect storm of opportunity to put $Ts to work in frontier model AI Cos. "In recent years, as private markets inflated, the default behavior switched to remaining private and absorbing more capital (to justify more VC fee income). This has resulted in fewer IPOs, and worsening prospects post-IPO for venture-backed companies." https://x.com/credistick/status/2092259921177804930 https://x.com/credistick/status/2092259921177804930 So, maybe more regulation is not the answer.

Karrot_Kream 1mo ago
Yes this is something I think a lot about. The issues raised in this article are very real but even aside from that, you end up enabling a class of zombie companies that have no pressure to succeed. Their founders raise and end up as advisors and LPs themselves eventually while employees at these companies receive equity that will never be liquid and will rarely be worth anything. At best the equity in these companies will be realized at steep discounts as the lack of liquid markets makes it very easy for private companies to claim that a company was valued at a certain amount at a certain time with scant certainty of what happens next. Companies stay unprofitable and private for decades, relying on private markets to stay solvent. Pre-GFC plenty of undisciplined, unprofitable companies would IPO. While some did take public money then eventually go under, most just made their underwriters lose money. With pressure to trade publicly and put sunshine on company books, losers lost and winners won. The result is a K-shaped economy. Private capital appreciates on paper and private capital holders take out loans on the inflated value of their equities. Meanwhile public markets are more discriminating and fiscally tight by necessity. A private company may eventually go under but cheap loans collateralized on private capital may be paid back before there's any financial reckoning.
unknownfuture 1mo ago

panabee 1mo ago

I think a lot about fixing broken VC-founder dynamics, and this post by Marc Pincus (https://x.com/markpinc/status/2089572143344599079 https://x.com/markpinc/status/2089572143344599079) crystallized one plank of the platform. The principle is simple. VCs are soccer stars, but founders play basketball. Basketball and soccer share much in common. For instance, both involve teams dribbling, passing, and shooting a round ball. But successful abilities and traits in one may not translate to the other. Think of each profession as a different sport. Venture, growth, and value investing all differ, and all differ from founding. VCs are all driven and highly intelligent, but so are lawyers, bankers, and consultants. Talent isn't the issue. Capital confers authority, but not expertise. Based on resume alone, 80% of VCs would not earn board seats at their portfolio companies. Their experience and skills, much like consultants and value investors, were honed on a field different from the basketball arena where founders compete. Here's a quick heuristic: sans capital, would you still hire the VC to sit on the board? If yes, wonderful. This is no slight and works in reverse: 80% of founders would not earn the right to direct VC investments. To clarify, great VCs are absolutely worth the premium and can reshape a startup's trajectory as all great advisors can. If you find a great VC, do not haggle. Strike a deal, and return to building. The greatest VCs exhibit the same pattern, understanding their role on the startup team as advisors, not alphas. They are often understated and work tirelessly on behalf of their clients. The worst VCs exhibit the inverse pattern and imagine themselves as the alpha, not appreciating how a talented peer could have replaced them without changing the exit. They are loud on social media and assume accomplishments from finance or FAANG map to the startup arena. These VCs should run funds on Wall Street, not advise founders in Silicon Valley. How do we highlight good VCs without attacking bad ones? Many good VCs, as with many good advisors, prefer subdued profiles and dislike self-promotion. This is the challenge. The original idea was to flag bad VCs, but such a system grants founders too much power to levy unjust charges and settle feuds. After all, many disputes are legitimate and reflect bad founders. Founders, like all professionals, sit on a spectrum. The surge of big money has spawned plenty of bad ones who, sadly enough, do not represent the best of tech and innovation but rather greed and self-aggrandizement. The Pincus post sparked a cleaner iteration. The proposal is a public page/spreadsheet where only founders can post, only after an outcome or a certain number of years, and only with affirmative assessments. Nothing negative, nothing anonymous. Posts must certify no quid pro quo or other VC prodding. Topics could include responsiveness, support during dark days, absence of alpha syndrome, and other key considerations. Over time, good VCs should reveal a clear pattern and attract new founders: founders trusting them again with repeat business and consistent high marks across the portfolio, not only unicorns. Arguably, the strongest signal will radiate from the worst outcomes. Critically, this system won't incite mob justice or expose VCs to unfair accusations, but can still suggest who to diligence more deeply. The purpose is to spotlight good VCs who advance innovation and startups over time, letting their body of work rise to the top and garner proper recognition. Of course, it penalizes newer investors and is vulnerable to gaming like any system, but it plugs a small gap. Founders want to find good investors based on data, but good investors dislike boasting.

andix 1mo ago

I think tech founders need to think smaller. Build software for a few thousand people and make a profit from it. Something niche. Something that is sustainable with a small team. VC eats up everything that's becoming bigger. And they will kill it. Their goal is not to run a healthy business that serves their customers. They try to take out as much money as possible and then trash it.

conqrr 1mo ago
This is it. Sustainability. Not everything has to be about more money quickly. You don't even need VCs for that. More win to bootstrappers! I see a lot of folks bootstrapping in the LLM era, but that can be defeaned in the VC noise.
- danaris 1mo ago
  Exactly. And the dangerous mindset tends to be worse than just "more money quickly": it's far too commonly "if this can't become the next Facebook/iPhone/ChatGPT, it's not worth doing." The only options are "take over the world" or "fail"; there's no room (in many people's heads) for a product that makes a decent, steady profit and continues to do so over the course of many years.
  - 4er_transform 1mo ago
    There is, is just different capital for those companies (debt, growth equity, angels, grants) and less attention. There’s far more of these types of companies too.
sensanaty 1mo ago
They don't give a shit about making a good product, the literal only thing any of these ghouls care about is line going up in the short term, because if line goes up they can dump their investments and move on to the next entity that they can get their greedy claws on and devour.
- andix 1mo ago

jgord 1mo ago

I think the current gold-rush of nearly all money into GPU Datacenter and frontier LLMs is essentially starving the economy of innovation. Academics and founders who might work on developing practical products using NN / ML / RL techniques to solve a realworld problem in engineering/logistics/medicine are not getting investment money. VCs and most people are blind to the fact there is AI outside of LLMs, despite the fact that we have seen AlphaGo and AlphaFold as evidence of non-LLM AI progress in hard domains. This is perhaps a sub-problem of a larger issue - hyper-inequality means that capital is not allocated to talent [ capital is localized, talent is more widely spread throughout the population ]. We are not getting money to things that will grow our future such as : - small innovative startups - university science research - people who are young enough to have kids, being able to afford them - new garage bands / authors / musicians / photographers - public works / infrastructure / libraries - local retail : bookshop, artisanal bakery, cafe My thesis is that during the 70s-90s we had higher tax, lower inequality, lower median income to median house price ratio, higher levels of innovation and more original art, literature and music being made. AI could be a golden age of human flourishing - but thats not where we are heading, what we are seeing is a territory rush by the megacorps. The fact that RAM and GPU prices have risen so fast, is evidence of supply and demand effect where inequality steals resources from the commons [ middle of the economy ]. Can a talented garage inventor / math or arts student afford a Ryzen AI dev platform, let alone a DGX spark on which to create the next important technology innovation ?

486sx33 1mo ago

[dead]

jongjong 1mo ago

I've been feeling this for years. From my perspective, the purpose of VCs was to: - Waste my time filling out forms to participate in incubators they would always reject me for. - Fund my competitors so much as to drive up CPC for any given keyword as to make make ROI on ads impossible. - Monopolize all tech markets through a variety of ways including contributing to the culture of making it taboo for companies to purchase solutions from small vendors who aren't funded by them. My friend who did get into the club described the ecosystem as 'incestuous'. The circular deals we saw going on with AI companies and hardware companies recently are not new; just the same thing they always did, on a bigger scale. I entered the industry in 2012 so for me it has always been like this. That said, it's really a deeper system issue which allows this.

ivraatiems 1mo ago

Working as designed? Wasn't "become massively rich by controlling wealthy companies" alwayes the point of capital investment? What is it that Anil Dash thought the purpose of these firms was?

kingkandu 1mo ago

The 2 groups getting fucked with the stay private longer trend are the LPs and the startup employees. We should insist on public policy forcing public money into only public assets. It's the obvious sensible rule. And company safes need to start including a clause where all classes of vested equity are offered buyouts in equal proportions. So VCs can't keep paying founders/each other on the way up while zeroing out common stock and eventually selling company IP for around the liquidity preference to some "totally unrelated" entity. Realistically this will only happen if YC gets onboard but I doubt Garry tan is the guy who can show this kind of spine.

vivzkestrel 1mo ago

- you need 2 hands to clap, dont want a data center i ll give you a plan - stop using claude - stop using open AI - guess what happens? - user base drops to 0 - demand drops to 0 - both companies go bankrupt - no need for data centers anymore? see its that simple - in the first step, convince all the HN guys to cancel their subscriptions

crote 1mo ago
A huge chunk of the demand is already fake. It's why there are so many auto-enabled "helpers", blinking nag buttons, and popups begging you to pleasepleaseplease use their new AI feature. The vast majority of people are simply ambivalent about the vast majority of AI integrations, so companies have to take increasingly-desperate measures to artificially keep their MAU up and pretend that they haven't wasted a huge amount of money. And all of that is before we get into the heavily-subsidized LLM subscriptions for the people who do want to use it. User base and demand are irrelevant when it comes to a bubble. People invest because Line Goes Up, which in turn makes Line Goes Up, convincing people to invest. As the saying goes: markets can remain irrational a lot longer than you and I can remain solvent.
- vivzkestrel 1mo ago
  I am going to need a little more evidence for your claim that says "a huge chunk of demand is fake"
  - crote 1mo ago
    How many of the apps you use on a daily base have some form of AI integration? In my experience, outside of FLOSS software it is approaching 100%. How many of those did you intentionally enable it? In my experience, basically 0%. Even worse, after manually disabling it many of them re-enable it after an update! If, say, Google publishes a claim that "95% of Google Search users have adopted AI", that does not mean that 95% of Google Search users think AI is a core feature of Search they would potentially pay extra for - which is what the massive valuations are based on. The AI Mode is auto-enabled, so the only thing it tells you is that 5% of users are annoyed enough by it that they take the time to disable it. Some people of course genuinely like it and would indeed pay extra for AI-enhanced search, but a huge chunk of users simply does not care either way. They wouldn't pay a dime for AI, just like they wouldn't pay a dime for the ability to re-arrange the letters in the Google logo into "Oggoel". If AI were default-off, they would not bother enabling it. That is fake demand.

ozozozd 1mo ago

Man, this guy’s writing must be at a peak. It was already great when I first read it ~10 years ago. And his linked post about VCs writing extremist manifestos from 2023 is arguably better than this one. But this post is amazing as well. I wonder how many iterations it takes to remove all the extra words and reach this 0% fat state. Both articles also brought me to a peak / cliff hanger type of place. The post from 2023 doesn’t even have a follow up! Though I didn’t like the repetition of the phrase (“cancer capital”) he clearly wants to coin. It’s Trump-like. More importantly, it’s the kind of thing simpletons do. Or people who think of their audience as simpletons.

zaptheimpaler 1mo ago

> This is how brazen, how toxic and destructive, we’ve allowed the industry formerly known as venture capital to become. We must understand that it is no longer a financial machine that is used to fund startups, but a political and social machine focused on dismantling democracy and civil society. And it’s time to act accordingly. Its at least heartening to see a broad recognition across many circles and communities of how insane wealth/power concentration, corruption and insane laws like Citizens United are dismantling democracy today. But a16z and others are still pushing their own techno-utopia anti-doomer message that a lot of useful idiots buy into, even though it serves to detract from the political and social root causes of our problems today and instead says even more technology will fix it all.

thoughtpeddler 1mo ago

Reminds me of this post from earlier in the year (from a VC, Michael Dempsey) titled "VC-Backed Startups are Low Status"[0], which I'm inclined to agree with, having been in the industry for over 15 years now and witnessing how the vibe shifted from "techies are good" to "techies are bad" over this period. I graduated into a tech workforce that was a celebrated part of society (i.e. "high status") to one that is decidedly not (and I'd say it's grown to deserve this disrepute). The first main wave of the vibe going negative (at least at the heart of the 'imperial core' in the SF Bay Area) was around ~2013/14 (the 'tech co bus protests'), then again around ~2018 ("don't call SF General 'Zuck General'"), and now it's kicked into a much higher gear during this current AI wave. It spans big tech co's to startups to everything in between. Anil's post speaks to this too, when he says: > Politicians and media still look at VC as if it works like it did 10 or 20 years ago, and cheer them on ... when their primary goal is concentrating power and wealth It's not just VC per se, but the 'managerial class' within tech rotted into mostly career-climbing types that were a far cry from impassioned creative technologists aiming to 'do good' with tech. It became the same status-bound competition you'd find on Wall Street and elsewhere (which the Dempsey post describes well). I have a mentality and overall life orientation that is aligned with Anil and celebrates the open web, public interest technology, and so forth, and many of my peers in tech (often from elite universities and backgrounds) look at me as a strange creature. I'll bring up the need to increase awareness about Public AI and boosting AI literacy among citizens, and I hear, "Wow, you like, really care about like, people. That's so interesting." It's unbelievable, I wish I was kidding. Thanks for writing this Anil. I wish for better days. [0] https://mhdempsey.substack.com/p/vc-backed-startups-are-low-status https://mhdempsey.substack.com/p/vc-backed-startups-are-low-...