Join the discussion
Write your take first — we'll ask for email only when you're ready to publish.
- Hacker News
- Maybe VC always has been VC? Maybe the cancer was always inherent to the system and the author only just now noticed it?by vrganj
- 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.by fhub
- 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.by BeetleB
- To be fair to yourself, a16z could have changed over that time, and the marketing was honest early on.by clarkmoody
- 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.
by zackmorris - 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.by Karrot_Kream
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.> 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.by exceptione- It’s the second gilded age
Hopefully this one will pass, just as the first did
by sghiassy - 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.
by palata - Just move to EU, you will have all the regulations you want (maybe even more) :-)by tistoon
- 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.by cratermoon
- 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.by carlosjobim
- 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 :
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.- 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, cafeAI 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 ?
by jgord - 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.
- My absolute regret is that I used to look up to Marc and Ben, in the sense that I felt we were on the same team, trying to build cool new technology. That was a long time ago. It appears now that they've completely lost their way, or they never had a moral compass in the first place. Having met some of the people in those circles, I've never come away with the thought that they were nefarious cartoonishly evil, but this incident with Penny certainly seems to confirm that they in fact, are. What a world. I will now burn their books in my campfire out back, and continue my hopeless search for tech people who have a shred of humanity and compassion.
- 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).by jansport123
- 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.by christkv
- 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.by bix6
- Based on my experience on the fundraising side, I'm inclined to agree with your perspective. One small nit to pick: I think policy changes can happen. However, it's hard for me to imagine meaningful change occurring before a catastrophic event. How big would the blast radius be? Obviously no one knows, but I hope it's closer in scope to "The Collapse of Silicon Valley Bank" as opposed to "The Collapse of Lehman Brothers".by cjkaminski
- Hate to sound like a Marxist but... this is what happens when capital has this much power concentrated in so few people. Eventually the system eats itself.
If you're in the right elite at the right time though, you can make a lot of money while everything falls apart underneath
by ifwinterco - Is it possible to list the mega firms?by sneilan1
- Y'all need ethics is what ya need.by Henchman21
- I'm guessing you located are in the bay area? If so, that is one thing under your control that you could change. The early SV VCs didn't build the industry by staying in NY (where the capital concentration at that time was). They had to get away from that scene to do what they did. It might be easier to cut your own lane if you weren't sharing the same turf.by FiatLuxDave
- Sometimes I wonder if people will one day wake up and just ditch all the tech. That's seems to be the only way to be out of this mess.by quaintdev
- I'm in a startup, and we are (somewhat lazily) trying to do Series A fundraising. We _are_ a company that has AI as a part of our app, but not an LLM company.
The advice from our early investors was to basically overhype ourselves, telling that we can transform the world overnight. And also to remove any mentions of our _actual_ product that has real paying users because it can muddy the grand vision.
Another hot thing in the startup world is what I'm calling the "vibe income". It's potential income from a signed MOU or contingent on the success of some trial. So we have to compete with companies saying that they're already having $500k in "income" after just a few months. We naïvely thought that our GAAP income is more important.
I have really bad feelings about this whole situation.
by cyberax - I think “regular” VCs are one of the cohorts of people I feel worst for! I have a lot of friends who got into the business wanting to help entrepreneurs, and now they’re stuck on a cap table with folks who they’d never want to do business with. It’s not any different than the founders or employees who don’t want to be saddled with these guys, either.
The hard part is figuring out how to change these structures so that people can actually extract themselves and still build stuff that isn’t toxic and destructive.
by anildash - 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.
by piker - 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.
by andix - In that environment the founder has no hope or reason to go public, making equity in the company worthless.
VC used to push to public exits in order to maximize the founders and VCs stake which turned employees equity to a liquid asset. Truly aligning everyones interests, nowadays not so much.
- 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.by sensanaty