Comment by rdlecler1 | Hacker News Reader

Comment by rdlecler1 | Hacker News Reader

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The irony about VC is that they don’t invest in lifestyle business (except their own). Building your own CRM isn’t really rocket science. We’ve built automation and AI into our deal flow and company tracking and a bespoke search engine to help with competitive market analysis.

Want to be different? Run a VC firm like a startup: build proprietary technology to outcompete incumbents and scale in a way not possible without technology. It does’t even sound like they have a FT engineer.... Imagine investing in a startup that didn’t have a FT engineer! But that’s exactly what they (and most VCs) are asking of their Limited Partners! Sounds like a puffy and carefully managed PR piece with a complicit journalist to prime the raise of their next fund without triggering a Reg D 506c registration..

They may have great returns, smarter than most, and have higher conviction, but it’s pretty much same old same old of catching the wave of good deal flow from your celebrity network. Nothing innovative here.

Actually I am an engineer, as is Vince and Brett in our partnership. Brett and I implemented much of the software that runs YC today including the application process and the internal social network.

From the article, it mentions Matthew coming through a cold pitch but then later on it also states that he went through a referral process to get to the cold pitch.

Are you guys doing anything to vet startups minus the referrals?

Lot’s of VC partners are engineers. I’m specifically talking about the commitment to building technology in house as a core part of the business —- like Social Capital —- not a side project. You guys have celebrity brand and a great insider network so you’re already ahead but it’s likely not sufficient if you want to build a firm for the next 100 years.

How often do VC firms develop their own tech to drive research? Just curious what the split might be between firms that follow the lead of others vs firms that due their own research.

I would love to know this, but also how often VC firms build their own tech to improve their daily processes and workflow, as well as develop their community of founders.

Building their own tech is very rare.

That's what I would imagine. Doesn't seem to be a good investment to build their own tech unless it's research focused.

Why? I think the real issue is that historically small VCs don’t make enough in management fees to support engineers, no one wants to sell part of the GP to invest in growth and scale, and large VCs make so much money from management fee and carry that they don’t care about the complexity. I’d be surprised if a16z didn’t have a few engineers in staff, but I know several of the big firms definetly don’t. It’s going to take a new commer stealing away their LPs to get them to change.

Could you enlighten me on your thoughts on what the engineers at a16z would do if not for focusing on getting better insight to vet deals?

Agreed on what you said, change doesn't come unless there's a burning bridge. If the firms have a current process that gets them to where they are today, they will just keep doing what they are already doing.

Perhaps a business opportunity to target the small VCs to help give them an edge.

It's more common than you'd think.

I built one of the first in-house VC research platforms at Index Ventures back in 2012 (+am now starting a new early-stage VC firm in Europe where we're building our own tech to aide sourcing/workflow).

Since 2012 most of the top VCs (or at least those with the management fees to afford it) have evaluated/experimented going down this route to some extent with varying degrees of success.

Some like Social Capital have been relatively open about it (at least in parts) but generally most have kept a low profile to avoid giving away techniques they use to get a competitive edge.

Not every startup needs engineers. Not every valuable business has an engineering problem at it's heart. VC is fundamentally about capital allocation - funds don't necessarily need scalable or innovative internal tech to do a really great job at this. I know a fund of 6 people with no particular tech skills who are killing it because they're really smart investors.

There's a huge bias in the Valley (and obviously on here) towards hiring rockstar engineers and then trying to figure out problems to point them at. Isn't it way better to actually figure out a valuable problem first, and then hire the right mix of people (including engineers, but all the other skills also) to solve that problem?

Just in case you think I'm anti-engineer: I have been a software engineer my whole working life. My father is a chemical engineer and his father was a mechanical engineer. I love engineers, but sheesh - not everyone has to be an engineer, and not all value is created by engineers.

Walmart must have thought the same thing. Then along came Amazon. In a decade every company will need to be a tech company.

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