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It's pretty clear in hindsight that taking note of who PG was hanging out with was a very investable strategy. In fact, one of my batchmates had some money to put into other companies in our batch, and when he asked me for my opinion of who to invest in, that's exactly what I told him. I just did some quick math and would estimate that his ROI today is somewhere in the 1,000x range.

That’s hilarious. Cheers! I never thought of a person’s movements as an investment signal, but in hindsight it certainly must’ve been.

A strategy as old as hedge funds themselves: https://www.bloomberg.com/news/articles/2019-07-02/hedge-fun...

That sounds like a self-fulfilling prophecy: If a lot of investors and angels want them succeed, they will succeed. I doubt that it is always hard work and passion that make the difference in whom to invest, I think there are other variables that are less talked about (e.g. sympathy).

> That sounds like a self-fulfilling prophecy: If a lot of investors and angels want them succeed, they will succeed.

This is nonsense. VCs do not have that kind of power to will something into existence. They can pour money into it, but they can't make a company successful. And if they continually spend more than they make...they don't get to stay VCs for very long.

But how many of startups are self-fulfilling prophecies? Runaway success? Where by "success" I mean growth and ultimately good return for investors. The way it's achieved is by... perpetually operating at a loss, burning VC dollars from follow-up rounds. It has that nice pyramid scheme flavor to it, where the final investors - or the public - are the ultimate parties left holding the bag. Such a scheme can indeed be willed into existence if enough push is made to set up an initial feedback loop.

I think what you're describing is WeWork and Theranos. So, sure, they happen, but they get found out eventually, and in both cases, they were found out before they went public.

Looking at the list of "Former Unicorns" on this page [1], I can't see many that fit your description. Sure, there's a handful, inevitably, but it's far from the norm. Most of them have grown into real businesses making real revenues. And sure, some of them may be still making losses but that's a valid strategy where there is still growth potential in the market.

Granted, Uber is a big question mark; it remains to be seen whether they will ever turn out to be profitable. But everyone knows what the strategy and the bet is, it's just a matter of waiting to see if the bet pays off. But no serious commentator could dispute that Uber's founders and present executives are talented people, building a company of substance.

So, if the claim is that it's commonplace for unskilled/disingenuous founders to build huge, successful-seeming companies just through huge sums of VC money being pumped in, then exiting and fleeing the scene before they get found out - there don't seem to be many real examples of that happening as far as I can tell.

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

For your self-fulfilling prophecy theory to be valid, venture capital would have to be able to ensure that your contribution margin is staying constant. Eg: if you make $1 per sale in CM at $1m in revenue in 2020, will you also make $1 per sale in CM at $100m in revenue in 2025? The reality is that unit economics change massively with scale and with time, and only a select few companies get the contribution margin to be constant (and even fewer achieve a constant contribution margin that's in the right ballpark). Therefore, venture capital can accelerate a successful company or delay the demise of an unsuccessful one, but it won't change the eventual outcome.

If you need mathematical proof for this, just ask yourself how many net new customers would you have to add to a business every year if you are at $100m in revenue and have an annual churn of 10%. Yep - you'll be running out of your TAM pretty quickly at that rate. And then add to that the fact that each new net customer will likely keep getting more expensive to acquire [1]. To get to $100m and stay there of even grow beyond that figure, the business fundamentals (first and foremost: churn) need to be good.

You can also think about it from this angle: why is it so rare for the same founder to continuously churn out one IPO after another? With each next attempt, they should be getting better at it and have more people willing to support them. The answer is - it takes a ton of stars to align correctly, and money alone won't fix your unit economics at a moment in time, let alone over many years and 100x growth in revenue.

[1] https://andrewchen.co/the-law-of-shitty-clickthroughs/

Or he makes winners rather than picking them by giving them extra attention, recommending them to fellow VCs and being willing to go further on the whole "disruption" (Aka law breaking) front for them.