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Comment by bix6 | Hacker News Reader

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.

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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.

Great write up anil!

Agreed it’s so difficult. And every time I think we have things all figured out, someone flips the table!

I’ve seen some ruthless terms for angels too. My buddy took an uncapped SAFE to get in a deal while the deal runners gave themselves a cap.

One thing that always exists in financial markets is cycles. It just might last longer than we care for.

I’m a small biz guy and not interested in VC. Very boring.

I think the root problem is it takes a lot more money and resources to compete now than it did before. Before, due to broadband being new, everyone not already having high performance computing devices, and the quickly decreasing costs of hardware, it was possible to use a skeleton crew and barebones resources to do something impactful. Or you have to be a very, very exceptional performer.

bix6 alludes to it another comment:

https://news.ycombinator.com/item?id=49554814

I don't feel bad for VCs. Venture capital has turned the old style of startup entrepreneurship into a financial hustle of Startupism that is about trading equity value and not about venture creation. Maybe it always was about that, but at least in the 1960s-early 2010s it seemed at least somewhat more about business and value creation. Now it all just seems like a financial hustle. I hope we see VC become the minority way that businesses are built and financed as it used to be in the tech industry.

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.

Most of the industry is running on bullshit. The concept of running a productive service that meets genuine user needs in a clever, delightful, and satisfying way has been replaced by grifting, scamming, hyping, manipulating, and outright lying - a headless chicken voodoo dance to attract moar moneyz and worship the blind, idiot god Number Go Up.

I have so many thoughts about this, I'm not sure where to start.

Doing a raise has always been weird, there are lots of things that impact it, and different players in PE have totally different theses and motivations.

As a founder, finding the right investment partner has always been one of the most important and difficult things.

As a rule of thumb, I recommend to founders that only about 50% of the value of the investor is their cash investment. In many cases, less than that.

The things that are at least as important are their advisors (who open doors for you), their portfolio companies that can partner with you, and the alignment of their thesis and worldview.

I don't see any of that as having really changed much recently, other than a tightnening of capital for non-AI companies, but I suspect we're going to see a big shift there over the next 18-24 months, as the pressure from the LPs to deploy stays the same, but fingers get burnt from this bubble.

Also, don't forget family offices and industry VCs (Optum Ventures, etc...) that have a lot of these features built in to their structure, not just the fund.

It's not our first fundraise, and not our first startup. But something _is_ distinctly different this time. People are no longer willing to wait for years and are betting on nebulous claims in hopes of a huge payout.

And I feel that this goes far beyond the usual VC risk-taking.

Interesting, I'm curious about the changes - I know AI has drawn most of the pump & dump sharks, just like crypto before it, but there were always a set of responsible holdouts that resisted fad-tech for real value opportunities.

Are you seeing a difference there?

Yes, we are working with responsible VCs: endowments and large well-established companies in the field.

It's as if the whole industry is suffering from a high fever. This is purely my personal vibe, perhaps others might chime in with their subjective opinions.

Also a founder raising currently and big +1. VCs are off their fucking rockers.

Mad FOMO, listening to, believing, and benchmarking against actual liars (both obvious and non-obvious).

Is it different than the crypto days?

I was part of a couple raises back then and I remember every founder was being forced to find some blockchain application, no matter how inappropriate, to get any attention from the fad-tech VCs

AI is sucking up orders of magnitude more capital than blockchain. So it's not like there is a segment of VCs who are fad-tech and obsessed with AI. The entire ecosystem is distorting around mega-companies and people who can believably say (usually by lying) that they will be a mega-company. And "mega-company" means something much much much bigger than it did even 5 years ago.

I think society at large is increasingly hitting a gambling mindset fueled by algorithms murdering everyone's attention spans and dopamine receptors. Life is also expensive and it's NOT getting cheaper. Combine thag with endless stories of the rich and powerful getting away with heinous acts and most people have stopped caring. They stop caring about the future, they stop caring about any kind of long term thinking, because why would they?

You’re better off bootstrapping/self-funding and just being a humble old business, not a startup.

Don't take any sort of business advice from VCs. They aren't even competent at running their own business, which is a financial play, not an operational business building and selling products or services. 90% of VC firms don't provide a net positive return to their own investors. That should tell you something. Their advice is self-serving to help inflate your equity value and has nothing to do with your current or future business.

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.

yes but there is helpful tech! We’re just over focused on SaaS and now AI (new SaaS).

I do find myself enjoying my computer / phone less these days though.

I find it very useful to be able to look up information at a moment's notice, whether or not a store has something in stock and where it is in the store before I go, doing group chats and video calls with family and friends almost anywhere I am, being able to get a taxi at a known price and see it arrive on a map, etc.

I just had a medical emergency in a foreign country and was able to navigate it with relative ease and almost no cost using translation features. I was able to scan and OCR documents with my phone camera which let me easily submit insurance claims, yada yada, a lot of things are much easier and cheaper in this day and age.

I stay away from the "news" websites (ironic given this site is called Hacker News, but it's not as monetized, so I guess it still works) and instagram/tiktok/youtube shorts/x style stuff.

Hard disagree. Societal change and more inventions are needed, not a degrowth attitude.

What's the difference between the two exactly?

I wouldn't lump up all inventions into this. The incentives are warped and we're too focused on adtech and filling human lives with screentime. It should be entirely possible to live a fulfilling life without having to carry a phone everywhere you go.

Like Dear Alice. https://www.youtube.com/watch?v=z-Ng5ZvrDm4

What societal change and what inventions, exactly? Some societal changes are for the better, others for the worst. We are heading toward the "worst" direction in full speed.

Some inventions are for the better, other mostly don't matter and yet others make the world actively worst. And the "for the better" things dont seem to come from our industry anymore. Nor for rich VCs, nor from private equity investments etc.

I know milenimals who know how everything works but only check messages every 2 weeks and dont answer if anyone calls. Might play a game once per month, might watch one movie per week.

One guy boots up his pc, looks at one website, closes the tab, closes the browser, shuts down the pc and switches the monitor off. I have to admit the technology looks terrible if used like that.

That's like waiting for domesticated animals to walk of the farm by themselves. Mess resolves itself the same way throughout history when different camps within the elite start saying enough. But there is a process just like abolishing slavery or getting kings to hand over money printing to the central bank. Wasn't driven by the plebs. It takes time because the different camps have to align. The parasites get reigned in eventually because they are in the minority camp.

Lol that would lead to billions of deaths

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.

I left the bay many years ago :)

Y'all need ethics is what ya need.

I agree. Ethics is at the forefront of everything I do both personally and professionally. I used to serve on an ethics in business council. All the investments we make are grounded in genuinely improving the world. It’s unfortunate that so much money flows to certain VC firms when people like me exist since I reckon I’m much more aligned with what the general population wants.

> It’s unfortunate that so much money flows to certain VC firms when people like me exist since I reckon I’m much more aligned with what the general population wants.

You sound like a pretty good dude

The study of Ethics is such a double edged sword. On one hand you have people who study ethics to think about how to treat people well, on the other hand you have people who study ethics in order to treat people as poorly as possible while still being "ethical"

I don't have a ton of firsthand exposure to the decision making process of huge corporations, but I imagine they mostly listen to the second group of ethicists

I’m trying. I love startups and want as many good entrepreneurs to succeed as possible. All the VC drama causes people to forget the whole point.

It’s inherent with true capitalism. You have to be willing to forego some profit to actually treat people right and for some that’s just too much.

> You have to be willing to forego some profit to actually treat people right

I wish they taught this in business schools. I get the impression they really don't, based on my experiences with business grads

Judging from the handful of B school professors I’ve interacted with, I’d be surprised if they didn’t.

Judging from the many HBS students I’ve interacted with, the takeaway seems to be judiciously avoiding treating people fairly.

I'm someone in the startup space that's sworn off raising capital and talks to a lot of founders. I can say that if you're willing to take an anti-Zionist position, you will get incredible deal flow from frustrated founders and definitely make your own lane. I know how difficult that is in this space though.

Why is anti-Zionism necessary if your business fundamentals are strong?

Some of us care about the ethics of those we work with. Being a Zionist is also a brand risk. Just look at Vercel when their CEO met with Netanyahu. Many people canceled their accounts and now will never use Vercel. Mainly I don't want to work with people who are enthusiastic about committing genocide, as so many VCs are.

I don’t follow the logic. Since when does the act of meeting with someone mean you’ve adopted their beliefs? Do you adopt the beliefs of everyone you’ve met?

What if you've met both a Zionist and an anti-Zionist? What does that make you?

Raising money from someone and putting them on your board is more than "meeting with them".

For sure. But that's not what you said before. And Netanyahu isn't on Vercel's board, nor did Netanyahu raise money for him. The only news I see about this is a brouhaha over a selfie and a meeting in NYC with different tech business leaders.

So I don't quite know what you're on about.

Oh yes, I wouldn't ever work with anyone who met with Netanyahu. That's ridiculous. Vercel's CEO even went to Israel to do it (that wasn't in NYC -- not that that would make it ok). I'll never use one of their products.

Would you work with someone who took a selfie with Hitler? This is the 21st century equivalent.

This is a really dumb take. You're relying on a straw man (nobody claimed the CEO adopted his beliefs; they're talking about brand risk) and a category mistake (treating a high-level corporate photo-op like bumping into someone at a coffee shop). You can do better.

People have the responsibility to say what they mean and make their arguments clear and well understood.

He said that being a Zionist is a brand risk. The implication is that the CEO of Vercel is a Zionist.

The CEO of Vercel is a Zionist:

https://x.com/rauchg/status/1972669025525158031

Also your original comment was a non sequitur. I replied to a VC saying they could make their own lane by being ethical and being anti-Zionist and you replied asking about business fundamentals, which had nothing to do with what we were discussing.

That post does not establish the connection that you think it does. There was no language of agreement with Natanyahu’s political views therein. In fact his language was inclusive (“peace for Israel AND its neighbors”). You drew a contrary conclusion yourself (as did anyone else who thinks similarly).

It’s fair to question whether a VC should care about a founder’s position on Zionism (or vice versa). If you don’t like it, that’s on you.

A Zionist is someone who thinks Israel should exist, and here he is wishing for "greatness" for Israel. He is a Zionist.

> It’s fair to question whether a VC should care about a founder’s position on Zionism (or vice versa). If you don’t like it, that’s on you.

Re-read the thread. No one was talking about what VCs want, I was talking about what founders want. VC opinions on founders aren't part of this discussion.

I think Israel should exist. So I’m a Zionist and therefore persona non grata, even if I disagree with much of what Israel has done? If so, that is a very interesting and hard line perspective. Perhaps people should conclude you are a Jew hater and a racist based on this evidence alone?

I’m sure your customers would find this interesting. Do you disclose your position to them before they agree to do business with you? Are you also refusing to do business with them or unilaterally canceling existing contracts if you learn that they too believe that Israel should exist?

> No one was talking about what VCs want, I was talking about what founders want.

You do know what “or vice versa” means, right?

> I think Israel should exist. So I’m a Zionist and therefore persona non grata, even if I disagree with much of what Israel has done? If so, that is a very interesting and hard line perspective.

Yes.

> You do know what “or vice versa” means, right?

You know your comment about business fundamentals is a non sequitur right? The comment you were replying to had nothing to do with that or the point of view of venture capitalists with regard to entrepreneurs.

If you say so, dude.

Ethics are always forced. In a society that does not force ethics in one way or another they will cease to exist.

Ethics come directly from first principles.

Go on…

I'm afraid the only ethics some of them believe in is the Friedman Doctrine.

Is it possible to list the mega firms?

There’s lists out there but it’s $10B+ AUM like Andreeseen, sequoia, GC, etc.

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

>> Eventually the system eats itself.

Can it please finish itself before it eats the table, chairs, and dishes?

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".

I don’t really have hope because big money controls politics. Everything gets steered towards capital’s interest instead of humanity’s.

At the Federal level, absolutely. I could imagine that California and New York could work together to affect meaningful change. It would still be tough because specialty finance regulation is unlikely to generate the type of constituent response usually required for government action, but it's not impossible.

That said, reform would be a Herculean task under the best conditions. Effective change would never be a "one and done" operation. It would be great to have a non-profit like the Electronic Frontier Foundation to carry the mantle.

Apparently The Collapse of Silicon Valley Bank is not enough to force change.

The Collapse of Lehman Brothers is also not enough for long term change, also apparently.

I don’t think collapse is by itself a good predictor of change. People in collapse just bow easier. Change of this scale unfortunately comes from terminal and collective despair. Let’s not rule out either normal change, not every marginal action needs to make things worse. The system might have enough variation still to turn around. In short, despair or its anticipation are not optimal strategies.

  > 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

Are you able to shed some light on this? It would be interesting to hear what people like you come across.

There’s a lot so we would need to talk in person. But basically the power law is way too powerful right now. The impact that a small group of people can have is too much and it’s distorting things. This is not unique to VC, the concentration is insane right now across the board.

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