Comment by michaelochurch | Hacker News Reader

Comment by michaelochurch | Hacker News Reader

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The problem with VCs is not that they're dumb. I'm a pretty severe VC-istan critic and I would never say that lack of IQ is their problem.

Their problem is that they're ill-equipped to make the judgments necessary to solve half the problem. They know business and acquisition structures and legal pitfalls, but in order to really get signal on the judgment of people-- I'm ignoring the judgment of ideas because I don't think anyone has that down-- they need to hire someone like me to vet technical choices, talent strategy, culture, etc. because an iPhone app is not going to give them that kind of data.

How do you find that kind of person if you're not that kind of person? I think it's almost impossible. How are they going to tell the people like me from the many who claim they are? Likewise, I'd be incapable of vetting them for whether they're good at their jobs for the exact same reason. I'm not superior to them in any way; we just excel at different things and it's very hard for one side to judge the other.

Perhaps the best way to start a venture fund is to have the selection made not by permanent VCs judging "the team" but by top-notch programmers who do the vetting part-time (no more than 10 hours per week). That way, they don't lose their technical touch and can tell based on technical choices whether a company has a future. (How would a VC know that a company running a typical enterprise Java stack is doomed? It's not his job.)

By the way, the reason VC-istan sucks is not that VCs are evil or stupid people, because they're not. It's that humans are bad judges of character and VCs are no exception. When you can't judge expertise (and they can't evaluate technical expertise) you miss out on the associated proof-of-work and default to social polish, which means that you're going from a slightly positive correlation to what really matters (character) to a slightly negative one. VC-istan generates some awful startups, but not because VCs are bad people.

VCs already do this.

0) VCs with technical/operating background. I'd put a lot of faith in e.g. pmarca's evaluation of a team. 1) EIRs 2) Outside advisors 3) Portfolio companies (you do some pre-screening, then have your existing portfolio CEOs meet with the founders of non-competitive new ventures. It's win/win, because the portfolio companies may have some useful business relationship, or if the founders can't raise, might be a good hire.

They're not doing it successfully. They could be.

They pick advisors who know how to do what they already know how to do, to validate their decisions. That leads to some improvement in the process, but they're not picking people who complement their skill sets. They're picking less shiny versions of themselves.

The funds where I know EIRs and VPs with tech experience don't really fall into that; there are absolutely funds which are horrible and have horrible portfolio execs, eirs, and advisors, but I think if you talk to the really top ones, you'd be surprised by the quality of talent. The weakness is that a lot of funds can't/don't hyper-specialize in specific technology, but for instance there's a VC who has made a lot of security investments who has l0pht people on the team.

Are you suggesting that someone like me should become EIR?

I've seen the quality of people who get EIR roles. They're not slouches, but I could do better than most of them, and that includes the ones at top firms. I can actually detect things like what kind of programmers your tech stack will attract; non-technical executives are better with general-purpose marketing, but the 10X factor with regard to programming talent is black-magic to them.

Even rarer than 10X programmers are people with enough experience and insight to know what brings "10X" into being and what smothers it. It's not just about the people; conditions and configuration play a gigantic role.

I've avoided exploring the VC route (as in, becoming one) because I want to keep my technical skills intact. Also, I'd be +5 sigma great at one part of it (evaluating technical choices and judging talent) but I have no idea if I'd be any good at the other (also critical) aspects of the business. I also feel like if I committed full-time to nontechnical stuff, I'd lose that +5 sigma edge. Right now, I know that if you're using Clojure and your competition is setting up the Java/Maven/IDE environment, you'll almost certainly win. I might not be able to pick that sort of thing out, in 20 years, if I step away from using technology on a day-to-day basis.

Right now, I could grep a codebase and tell you better than almost anyone out there if a company has the technical mettle it needs. ("Visitor" or "AbstractFactory" = bad, "mapcat" or "flatMap" = good.) I wouldn't have that if I sat out of the technical game for 20 years, because the signs and terms would be different.

Honestly, I think you're too bitter/pessimistic, even if more than sufficiently technically competent, to be an effective EIR (or VC/angel, or founder of a VC-funded company), at least now. But you probably recognize that :)

But yes, a less-bitter version of you might be a good EIR, although I think it usually comes from "founder of a company funded by the firm has a midsize exit", not out of the blue.

Three of my friends were EIRs, and two are now founders of great companies (although not hardcore tech companies). The other has run off to Spain for a while, after ~15 years of doing startups, for something of a sabbatical. They're all at the "code for days straight", graduated from top engineering programs (in contexts like being in India or ~20 years ago where that mattered, unlike the US today), etc.

The whole point of EIR is that it's revolving door -- you do it for a year or two, then go back to startups. It's both a way to take a break, and get exposed to new stuff. You still use some of your tech skills, and often end up working on side projects, so I don't think a year off is going to kill your technical competence.

As for the quality of portfolio company review/advice: one top one sent me to do an interview/etc. with probably the best operating executive in the security industry, one of their portfolio companies. I learned a lot, and decided we should hold off on raising as a result (this was ~2 years ago, about a month after I finished YC).

Being an actual full-time VC probably does hurt your technical skills, and I don't think having just fairly narrow programming or programming tech skills is a useful background for a VC, although "ability to pick winning teams" is essentially the definition of a successful accelerator or seed stage investor (but, on more axes than just "can program well"). Something a bit broader and maybe less deep is good, although in cleantech having postdoc level expertise might make sense. I think I have more than enough security industry experience to be an effective security vc, but not enough in the programming tools space, and somewhere in the middle on deployment/automation/networking tools.

I've talked to VC Principals/Venture Partners who are what I'd consider top-50 domain experts in specific things (payment regulations), and some Partners who are top-500 on networking or certain parts of security.

The other thing is it's usually better to have domain expertise in the founding team than implementation perfection, so at seed, a PHP hacked together piece of crap that works is probably fine, as long as what they're doing 1) has a market 2) is possible. At Series A, they should probably have some competence in the team, and after, sure.

Honestly, I think you're too bitter/pessimistic, even if more than sufficiently technically competent, to be an effective EIR (or VC/angel, or founder of a VC-funded company), at least now.

I actually think that a bit of so-called "depressive realism" is in order. Sure, it needs to be tempered with some optimism, but you need at least one guy with the winter-traveler insight and the courage to say, "Groupon for cat food sounds like a terrible idea!" Sadly, people like us are not well-received because we tend to haul out the truth when it's not wanted.

But yes, a less-bitter version of you might be a good EIR, although I think it usually comes from "founder of a company funded by the firm has a midsize exit", not out of the blue.

So you have to be born into the club to have that option? Not surprising.

Like I said, the future's not going to come from the people born into VC connections. I don't know where it's going to start and when, but I'm optimistic enough to believe that Real Technology is coming back. I see it already, but not in the high cost-of-living areas.

"Born into the club" is probably overstating it.

"Pay your dues", perhaps, but competent person -> funded (or employee at funded company, or just someone known for doing something awesome) -> EIR, could be 2-4 years.

VCs are probably less stupid about credentials than e.g. Google under Mayer with the "core schools" crap. Maybe less stupid than "core schools" in admittance. I suspect being a Thiel fellowship person, a core developer on a really popular open source project (nginx dude for sure, probably Ver if he wanted to do something in bitcoin on his own, etc.) would be more than adequate. Or YC/500 Startups/etc.

I don't think that being an employee at a funded company gets a person anything. Companies don't just let engineers have investor contact. The one case I saw where an engineer got investor contact was someone who was so unethical and incompetent that he got his mentor (the CTO) fired. (This was that startup from hell that I worked at in the winter of 2011-12. Initials TSS.)

You basically have to play degenerate political games to get investor contact as an employee of a funded startup. It really is a two-class world these days.

My experience is based on what I've seen in New York, but everything I've heard about the Valley is that it's the same. Well-connected douches will always have a competitive advantage over real people. We get our shot when tech becomes uncool/nerdy again and those assholes go back to whatever douche Valhalla they return to.

That's different from my experience in Silicon Valley, although I've never worked in NYC. As an employee at a post-Series A company in an industry I knew approximately fuck-all about (Internet advertising for Facebook), the CEO introduced me (and other engineers) to VC partners and press whenever they visited, and if I'd had anything interesting to talk to them at the time, could have (and that same guy is happy to introduce me to people now, years later). This was at a ~25 person company. I could see it being less common at a 400 person company, but probably more common at a 5-10 person company.

I've seen other companies with a variety of weirdly dysfunctional ways of treating employees, but what's the Tolstoy quote? "Happy families are all alike; every unhappy family is unhappy in its own way." If you have a decent network in Silicon Valley, and/or are willing/able to bounce once a situation seems bad, it's pretty easy to stay in "Happy families" only.

It sounds like you met a lot of good people. Unfortunately, the bad kind seem more common, at least from where I'm standing.

I don't think Silicon Valley vs. New York has a lot to do with it.

The problem is that when you run into bad people and they ruin your career or steal your future, then good people don't want anything to do with you (or, at least, have you at arms' length, and that gets annoying) so you get a string of more bad people (who are always happy to take advantage of your weakened position).

Maybe the good people would be a bit less likely to keep you at arm's length if you didn't come off as assuming by default that founders and VCs are out to get you, which is pretty annoying and self destructive.

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