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> Imagine that $15 million dollar invested in $50k USD increments into 300 startup ideas, the jobs that will be created, increased human capital and impact on their respective local economies, that are not there because of risk adversity (it still amazes me VCs would shun risk but still throw around "venture") towards people of lower class then them.

That comparison isn't apples to apples as there are 299 other seemingly viable ideas that you're including in the latter category. Assuming they're good enough to warrant someone investing $50K, they have an inherent value as well.

> It's hard to feel any sympathy.

I believe the emotion most feel in regards to all things Theranos is schadenfreude[1].

[1]: https://en.wikipedia.org/wiki/Schadenfreude

Upvoted for schadenfreude. I feel HN shows this whenever I read something about Yahoo, Twitter or Theranos. With Facebook and Uber, it's hate.

To be fair, Theranos likely needed a large capital investment to bring its (described complex) product to market. The model you suggest is simply another/different model, but investing large amounts of money in a startup that in theory will need large amounts of money is a very smart thing to do if you believe the market you're addressing is long, and wide enough to one day sustain the returns needed.

If you reread his comment, it is clear his point is not that there shouldn't be large investments. His point was that this was a bad investment chosen due to who the CEO was, and that so much more good could have potentially been done with that money if it didn't flow "to people not based on merits but by their socioeconomic lineage."

Seems like a lot of conflation going on there!

> Imagine that $15 million dollar invested in $50k USD increments into 300 startup ideas, the jobs that will be created, increased human capital and impact on their respective local economies, that are not there because of risk adversity (it still amazes me VCs would shun risk but still throw around "venture") towards people of lower class then them. For example, somebody coming straight out of university vs. the daughter of a CEO at a large company who also attends the same country_club/religious functions, suddenly looks like a safer bet.

This doesn't make sense. I'm fairly certain that a random person graduating college is a worse bet than a random person who is graduating college and is also socially well-connected. I imagine that 300 startups started by people who are both college graduates and socially well-connected have better odds of success than 300 startups started by randomly-chosen college graduates.

Great point. Presumably a good number of these "back room deals" work out and people never hear of them.

This one blows up and then, to a certain extent, it exposes the cozy interconnections of "socioeconomic lineage"

http://www.espn.com/30for30/film?page=bigshot

Is a great example of just how much you can get away with if the right person just assumes you're rich.

>Imagine that $15 million dollar invested in $50k USD increments into 300 startup ideas

Startups aren't immune to fraud, stupidity and waste. In fact, regarding the latter two, startups are probably more prone. With hindsight it's easy to say throwing money at Theranos was a bad idea, but the same can be said for the vast majority of startups.

"Crony capitalism" specifically refers to favors aided by government power.

Fine. Cronyism.

> Imagine that $15 million dollar invested in $50k USD increments into 300 startup ideas, the jobs that will be created...

That sounds pretty naive. $15 million isn't a huge amount of money in business, and in most parts of the country $50k isn't a livable salary. I'm sure people can scrape by on that, but don't pretend it'd be doing them a huge favor.

The more I think about it, the more exploitive it seems. Great for tricking recent college grads into wasting a few years to build a website, but not so great for actually developing new technology.

> That sounds pretty naive. $15 million isn't a huge amount of money in business, and in most parts of the country $50k isn't a livable salary.

Who's being naive?

The median net compensation last year in the U.S. was $29,930.13, meaning half of all wage earners earned less.

Median income for an entire household (ie more than one person) in the US is about $51k. Meaning about half of all households make less than that.

Assuming half the population of the country doesn't die suddenly in the next three weeks it's fair to say that $50k is "livable"

It also depends where you live: http://www.seattletimes.com/seattle-news/data/80000-median-w...

Consider that YC will throw you 200k but you're going to be moving to an area where the median income is $90k

This of course wouldn't be an issue if people didn't insist on living in the bay area, but nobody takes you as seriously if you're remote.

> It also depends where you live

Sure, but that doesn't change the actual...you know... averages the parent cited. For every household with over $51k, there was a household with under $51k.

Pointing out that some corner of the US is expensive hardly changes the point.

I'm not debating the definition of the median... I assume everyone knows how percentiles work. I'm debating the idea that its meaningful to use the median income of the entire united states as a comparison.

Prices in San Jose aren't brought down by prices being lower elsewhere because location is basically the most important dimension in real estate.

The median house being 188k in america means nothing when all the houses you can choose from cost over 1mil. And you're stuck there because the bay area has a near monopoly on startups, especially if you receive funding from a bay area accelerator.

Let me take the parent's comment to the next level:

"The median net compensation last year in the world was around $1,200, meaning half of all wage earners earned less. Assuming half the population of the planet doesn't die suddenly in the next three weeks it's fair to say that $50k is "livable""

Equally inapplicable to someone who lives in the bay area.

Okay, have fun being an edge case I guess.

I don't live in San Jose but my city's on its way there so thanks ;)

We're all edge cases in the world as a whole.

Quite a few people are nitpicking the "$50k isn't a livable wage" comment, but nobody's really challenged the underlying point that $50k isn't a lot of money if it's the only money available to start a company with.

Even if a person does live in part of the country where $50k is a decent salary, it still doesn't leave them much left over to start a company. And living away from urban areas will bring its own challenges, like networking, marketing, advertising, etc.

Just an example, how do you think Uber would have turned out if they started in Pierre, South Dakota?

And good luck buying any kind of machinery, expanding beyond a lone developer, etc. with only $50k.

The median household income is about 50k/yr in the US, so "livable" or not, it's being lived on by (more than) half the population.

Plenty of people would jump at being paid $35k for a year plus have $15k in tooling + materials. Lots of craftsmen would be able to establish a new business with that level of funding.

I think you have unrealistic beliefs about how things work.

> I think you have unrealistic beliefs about how things work.

Do I? What percentage of VC money goes to people living in areas where $50k would be a good year's salary? It's practically 0. YCombinator won't even invest in companies that won't move to the valley. http://www.ycombinator.com/faq/#q21

A small but not trivial amount of VC capital, but that's not what people are responding to. For somewhere like Seattle or Las Vegas, 50k/year is a reasonable seed round salary.

However, most people are just commenting that you're wrong about 50k/year not being livable for most of the country. Almost everywhere, including places like Seattle, 50k/year is what half the households make, so works for an individual salary. It's the vast minority where 50k/year isnt livable for a single person.

Of course, that's also partly what people are calling out elsewhere in the thread: high VC spending close to them is about social connections rather than what makes economic sense.

I expect that if you had the capital, you could eat most VC's lunch by just spending everywhere but those hyper expensive areas.

Founders need to live in the Bay Area during the 3-month period in which they're participating in the YC batch, but I believe companies are free to move to wherever they'd like once that period is over. I can think of a couple that were based in Chattanooga (median income ~36k) and moved back there after YC.