Capital-As-a-Service: A New Operating System for Early Stage Investing

This might sound a bit cynical but it seems we are at a stage where using the words - data, ML or AI seems enough.

The post while being vague constantly throws around the word - "data". What data really? If the Anti Portfolio discussion from yesterday (https://news.ycombinator.com/item?id=15547136) is any indication, it is difficult to predict growth - data or not. For example, there already was Friendster. What data will help in deciding whether to invest in early stage Facebook? Or what data will help in decide investing in Uber? Today's startup are about growing, engagement and then possibly trying to make money. The truth remains even the best will fail at the last step.

It's not really clear from the write up exactly what they're offering... How is this different from any other VC outfit?

IndieVC[0] is the only really interesting spin on investing I've seen out there and they open-sourced their terms sheet publicly at launch.

[0] http://www.indie.vc/

1. Good companies won't pitch you, it's common for VCs to reach out to the top companies while they are not raising funding. So good luck running your analysis on data you don't have.

2. There are no metrics that identify a good from a bad investment. Maybe this would work in some cases for later stage investments. But even at the later stage the metrics are all over the place.

3. Companies applying to this VC fund will game the system

4. This is not a new thing, every VC firm looks at your metrics.

The flaw here is using the wrong metrics. Once a company has found a repeatable and growing business model, it’s trivial to raise money and there’s no reason to pick Social Capital over anyone else.

The big market opportunity is to fund startups at the very earliest signs of success. When all they have to show is some code and a few Hacker News upvotes or GitHub stars.

Someone is going to make YCs returns look weak by funding this early. And nothing would do more for diversity than a low barrier test that is 100% blind and meritocratic.

It's hard to know what they are actually doing since the blog post doesn't explain what Capital-as-a-service is. But, if this works for them, I bet it is because it increases their deal flow. With this system and their marketing of it they can get more founders to submit company data to them and see companies that are outside their network. It would be much easier to filter through a bunch of business data submitted via a web form rather than going through pitchdecks that founders e-mail them.

Flagged because this says nothing and is just blah blah blah endless advertising copy. Probably bought half those upvotes, or do you HNers upvote without reading the article?

Genius. Finally, someone it taking a "moneyball" approach to VC. The critical comments on this thread have missed the point.

Although the author is vague, it sounds like they built a system to analyze company metrics and thus screen investments at scale. This enables them to see more investments around the world, and makes it easier for entrepreneurs to "pitch" them, because they don't need to do the time consuming, typical Silicon Valley pitch process. Many more companies can get funded this way. And those investments will be less competitive and garner lower valuations (implying better returns). Again... genius.

I submit the central problem is that a lot of things don't scale smoothly, and figuring out what doesn't scale costs money. Discovering how to transition from 10 to 100 is easy. 100 to 10,000 might be a 9 figure problem, but everything after 10,000 is vertical growth until you hit 10M.

The other issue is that some great ideas need $10M or $100M or $1B up front. Google's TPUs are probably a 9-10 figure investment, with zero dollars income until the whole system is deployed at scale. But it becomes a money printing machine after that.

So, a bank?

Full page modal asking for me to sign up. Medium has jumped the shark.

internet company are global by default now, however VC are not . Social capital is going global from day one. One of the first startup that applied to social capital was a Mexican startup. It was much easier for a Mexican company to get in touch social capital than a local mexican vc. Makes perfect sense. Social capital will go where no VC will go . Mongolia may be next

The argument they are making is that they can leverage data about a company to determine how it should be invested in and what steps need to be taken to ensure success. This will supposedly be scalable and reach areas where venture capital is not available. Reminds me of Accelerando.

I don't see how it's an operating system. Did I miss something in the article?

If it’s semi automated with humans making decisions in the background it could make sense.

I guess the value it could bring is low friction yes/no without wasting the founders time.

It’s the time suck that is such a negative aspect of seeking capital!

Genuinely - can someone TLDR this? I read it and don’t grok.

Sounds ... vacuous. I don’t think some kind of revolution in finance is needed. This sounds like spin.