Cause Or Effect?

In the wake of Erin Griffith’s piece in the NY Times suggesting that venture capital is toxic for some entrepreneurs, there has been a fair bit of debate about the causes of that situation.

Dan Primack tweeted this yesterday:

I pushed back on that notion in a series of tweets yesterday morning:

It is tempting to look at what is going on in the startup/tech landscape and say that the growing amount of capital under management is the problem.

But the capital market for startups is a complex system and I don’t think it is as simple as that.

It may well be that as entrepreneurs have had more negotiating leverage over the last twenty+ years, they have pushed valuations up significantly and the capital markets (ie VCs) have reacted to that by accumulating more capital so that they can try to buy the same amount of ownership at the higher prices.

That hasn’t really worked and the VC industry typically owns a lot less of a company at exit and the founders and team own a lot more versus 25 years ago. We have seen that clearly in our own portfolios over the last fifteen years and I would assume that is true across the industry.

So while it is tempting to suggest that big bad VCs are the reason for all the problems in the startup sector, I would caution everyone from coming to that conclusion. Like all relationships, it takes two to tango, and both sides have had something to do with where we are right now.

#VC & Technology

Comments (Archived):

  1. Pointsandfigures

    It’s not a vacuum. People forget that. There are other places to invest.For the last 9 years, we have had the equivalent of 0% interest rates and QE forever. That has changed risk profiles. The Fed is pulling back, and that will take some air out of the bubble. At the same time, more money was raised in VC-increasing demand for deals and competition for “great” deals. Don’t forget, over the past two years, there was an ICO market available as well. “I don’t like your terms Mr. VC, I’ll just ICO.”As an angel, I have an excellent track record. But the math is a bit different. I also don’t have to pay LPs, so I keep 100% with no fees to cover.As a smaller fund manager, the math is unforgiving. I need to own a minimum of 5% of a $225MM to return our fund once. 3x is the goal, so I need to do that 3 times. Figure 66% dilution over time. We write big checks, $500k. We reserve $1MM for Series A. At 1.5MM per deal it means we can do 6-7 deals in this fund. Roughly 50% need to hit. (So far, companies we invested in are doing well, but it’s early) Figure that top line revenue of the company has to be $45MM to be valued at $225MM. OR, there is so much demand in the later stages for the company that other VCs drive up the valuation ahead of revenue. See the scooter companies and some others.Why smaller fund managers write small checks I have no idea given the math.As a billion dollar fund manager, I don’t know how you get there. At $100MM, it can happen but you need a lot of ownership and a billion+ dollar exit.I don’t need a unicorn, but it most certainly would help.

    1. TeddyBeingTeddy

      I think the drug user is more to blame than the drug dealer. I have no empathy for lack of discipline, it helps with Darwinism.

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    2. JamesHRH

      I think the entire Angel / Seed ecosystem is headed for the end.Semiconductors drove this massive wave.What biotech or materials or energy game changer will unlock the next major wave? I don’t know but I bet it will take HUGE amounts of startup capital.VC will go back to the ’70’s for those – clubby, big $, $ calls all/most of the shots.

  2. LE

    So while it is tempting to suggest that big bad VCs are the reason for all the problems in the startup sector, I would caution everyone from coming to that conclusion. Like all relationships, it takes two to tango, and both sides have had something to do with where we are right now.Of course it’s not any individual VC it’s the dynamic as a result of having so many VC’s and uncontrollable competition. ‘You can only be as honest as your competition’.There are vastly more ‘notable’ firms (and unknown firms) giving out money now then there was 20 years ago. So it makes sense that with so many visible and easy to find investors and no way for the investors to collude (like big steel used to do; meet in the Poconos) and control % would be driven down. It’s not airlines and landing slots no way to ‘follow the leader to profitability’ [1]This is also the paradox of to much visible success as well. It’s good to make money and it’s good to get publicity. But when you make to much (or appear to make to much) you invite competition and then things get much harder.I would love to see what the old school VC’s (like Euclid) observed over time. I am sure it wasn’t anything similar to what is happening or has been happening in tech VC. [2][1] With airlines or hotels – ‘ok you add that fee then so will I’. I read where even non resort hotels are now adding ‘resort’ fees.[2] For that matter is this even happening outside of the types of deals that the current tech VC’s invest in?

  3. William Mougayar

    Well, money isn’t the only thing that VCs bring. Brad Feld wrote on his blog yesterday, “Money Doesn’t Solve Problems. People Solve Problems.” – a quote from VC Jon Callaghan. It is for that reason that VC is helpful, not just the money part.

    1. LE

      I wonder to what extent VC’s actually do that. I mean sure they do but given how they are spread over so many investments and given that they aren’t the only investors [1] I wonder how it isn’t similar to the back in the day car salesman who told you that their service department was the best and that if your car was in for service he would lend you his car for the day (I remember this distinctly growing up).[1] My point is there would seem to be a tendency to not want to put in effort that benefits other less involved investors.

      1. William Mougayar

        But the alternatives aren’t always great, at least not according to historical trends. Having the right VC at the right stage matters as well.

    2. awaldstein

      While of course I agree with the thought, as you know damn well as an entrepreneur that when you can’t make payroll, money does indeed solve problems.Anyone who has ever been in that situation, sleepless and foraging for a bridge loan, knows I am correct on this.

      1. Joseph K Antony

        Money solves the ‘money problem’ as Naval Srikant likes to say

        1. awaldstein

          Problems are hierarchical by nature in business.I’m not a beginner and a btw a fan of Naval.But saying that money doesn’t solve all problems is no more or less profound than saying that money can’t buy you love.(My mother said that!)And while certainly money guarantees you nothing but time, without time you are guaranteed of zero chance of success.And if that money comes with great investors as partners, you are simply lucky if not a bit blessed honestly.

      2. William Mougayar

        Ok, but the argument of the original article is about companies “not needing VC money”, and deciding to grow on their own. So, it is assumed they are at self-funding their growth, by choice.

        1. awaldstein

          I don’t really understand the concept of self funding growth except in the most unique of corner cases where you can do it through debt.And I simply call bullshit or just plain inexperience for all mythos around the fact that capital to meet payroll is secondary to anything.

    3. Frank W. Miller

      If I had a nickel for every time I heard this, I wouldn’t need any VC. Besides a few well well connected firms, perhaps USV and Foundry being examples, it’s all dumb money thats way way too expensive.

      1. William Mougayar

        Of course I was referring to cases where VCs bring money and value. One could argue that a company could surround itself with non-VC mentors and supporters, but that’s more easily said that done.

  4. LE

    Note this is a mistake per my other comment re: visible success:But people like Sandra Oh Lin, the chief executive of KiwiCo, a seller of children’s activity kits, say that more money isn’t necessary. Ms. Oh Lin raised a little over $10 million in venture funding between 2012 and 2014, but she is now rebuffing offers of more just as her company has hit on a product people want — the very moment when investors would love to pour more gas on the fire. KiwiCo is profitable and had nearly $100 million in sales in 2018, a 65 percent increase over the prior year, Ms. Oh Lin said.A startup that is doing well w/o needing more funding (‘rocket fuel’ per Josh Koppleman) will need to avoid being mentioned in this particular way. The reason is obvious. Old school if you have something good going and you have little defense from competition (don’t want to take on more funding) you should not be out there bragging so that others are stoked to compete with you. Period. The amount of extra revenue or benefit you get from a NYT article is not worth it. And sure you can say ‘well people know or will find out’. That is simply not true. I can’t tell you the number of ways I have made money from simply getting an idea from a mainstream news article. I even keep photos that I take of the articles so I can document later what sparked my interest in the first place.

  5. Vendita Auto

    Softbank heads or tails we win changed the game as would (possibly) the hubris of buying WeWork if Yoda/s marriage counseling had not advised nil pwa ….

  6. Mike

    Really interesting discussion. I would think no two situations are identical so good for all parties to continually evaluate various options. In the end, what is going to create the most value for various stakeholders – founders, investors, employees etc.

    1. Pointsandfigures

      the math works across companies. it’s the interpretation of where the company can go. Let’s take Twitter as an example. If they pitched you at seed-do you invest or not? Do you think it’s a multi-billion dollar company? Probably not-but at seed you might have sensed something of the team and thought they could take you to the promised land. Or maybe you missed it. I never look at another VCs portfolio and say “that dog can’t hunt”. You never know what they see or what the pitch went like. It’s never over until the company folds, or exits.

      1. Mike

        Thanks. I will also say if you do need capital to fund a new high growth venture and pursue it full time the options seem fairly limited. Just not a lot of capital sources willing to take on and manage that kind of risk. But never hurts to try and be creative, and effcient as possible.

  7. Eric Satz

    If founders and investors (not just VCs) have an honest discussion about vision and expectations most of what Erin writes about goes away. When vision and expectations are not aligned, nobody is happy.

    1. Pointsandfigures


      1. Eric Satz

        Come visit when you’re in Nashville

        1. Pointsandfigures

          where are you at? I will be near the airport. driving up from Chattanooga on the 27th and flying out on the 28th so it will be a short trip there.

          1. Eric Satz

            Downtown. Why you here

          2. Pointsandfigures

            My brother in law lives there, so we will see him and then I fly to LA to see my daughter.

    2. JamesHRH

      I always thought that the opportunity drove the plan and then the need for relatively rapid expansion.90% of private companies do not have an opportunity that is:a) globalb) swallowed by competitors in the next 24-36 monthsErgo, 90% of private companies have no use – outside of ego – for VC.

      1. Andrew Cashion

        Fairly interesting on the 90% non-global factor.

        1. JamesHRH

          I’m not an industry expert, but its hard to build a billion+ valuation only in the US. It can happen, but it is unlikely to be a rapid growth play (RE, consumer goods).Feel free to insert national and then shorten the timeline.

      2. Eric Satz

        Opportunity may drive the plan, but that’s where founders are required to understand what it is they want upfront. If founders don’t want fast growth at expense of X, opportunity size doesn’t matter. Neither A nor B above are prerequisites for VC but are no doubt on some VC checklists; depends on the VC.

        1. JamesHRH

          They aren’t traditional VC’s then.They look like a VC but are just a professional private investor. It doesn’t matter much, but it is still correct.Back in the day, VC’s were not about rapid expansion, they were about huge technical understanding underpinning large startup capital costs (building a plant, etc.).I think that pendulum is starting to swing back.

          1. Eric Satz

            Respectfully disagree. Most non-tech VCs are out well before global opportunity becomes a consideration.

          2. JamesHRH

            We are likely having a event horizon / semantics disagreement that is fairly immaterial.Lots of private investors have lots of different criteria and we agree on that point.What they call themselves is not important, what job they want to do and can do is…..

          3. Eric Satz

            Maybe. I don’t think the VCs who invested in Bonobos, Warby Parker, OpenTable, Angie’s List, Dollar Shave Club or Nextdoor did so because of the global opportunity presented in an early pitch deck. It’s because the US opportunity was big.

          4. JamesHRH

            See post below editing global and limiting the opportunity to just the type you listed.

    3. Frank Denbow

      This is definitely the crux of the conversation. I have found that many founder friends feel like they have to put on a front and chase after visions they don’t believe in, as they angle themselves towards investors to look presentable. In reality, an honest appraisal of their own needs, abilities, and potential for the business (without losing its essence) would let them know the right path.

      1. Eric Satz

        100% agree

    4. PhilipSugar

      She left out another leg of the stool: The press. The press hypes vc companies breathlessly reporting on the raise and doesn’t care if you are a non VC funded company. I have been on the record for years saying: Most companies are not right fits for VC’s.So you have entrepreneurs and the first thing they think is how do I raise VC money. Not what is this business Frank is right in saying the entrepreneur feels pressure to put for visions they know are realistic: Usually around size of market, growth rates, and some “secret” vision.The only area I see VC’s complicit is that they will take risks on some of these companies figuring they have a shot, knowing that if they get that one that returns the fund, a couple of other good ones, they hit their number, the rest can twist in the wind.But I have been saying for decades if you don’t have your eyes open you are a fool.

  8. Brook Shepard

    I’ve built a going concern with no outside investment or serious debt. We are not a rocket ship, but we are a profitable, slow-growing business. No VC would invest in my business if I wanted them to – not enough opportunity for scale.Now we are at the point in my business where we are considering an serious growth opportunity via a separate, related business unit. And I am not interested in talking to VC’s at all – although again, the feeling might be mutual.The issue is, most people I know who took VC money, was forced out of their company for not hitting growth rates. It’s a small data sample, but it’s true, and it informs my thinking.

    1. Pointsandfigures

      go to an angel group. have an honest discussion with them. Ohio Tech Angels likes that model, and seems to as well but I can’t speak for either of them

    2. JamesHRH

      Its merely a question of philosophy.Some boot founders b/c they believe the growth is there & not being captured.Some believe that booting the founders pulls the rug out from underneath the company and craters growth.Makes some calls and find the right fit.

      1. PhilipSugar

        See my post above. To get VC many founders put in unrealistic total addressable market, growth rates, product adoption cycles.Now when those don’t materialize….the founder has only themselves to blame. I would say most boot founders, and few don’t believe in that.

  9. Angelo Santinelli

    A couple of thoughts here. First, easy money over the last 20 years has led to the creation of more VC firms as well as firms raising new funds much more quickly they were able to prior to 2000. There was a point after the first Internet Bubble when the number of firms decreased precipitously. However, it didn’t last long as Limited Partners globally who were chasing yield dumped cash into VC firms creating an asset class out of what was once considered a cottage industry. Today we have micro VCs, seed/early-stage VCs, late-stage VC, mega-VCs, etc. etc, etc. I can recall a study that was done in the early ’00 at Harvard Business School, which showed that approximate a dozen or so firms were responsible for the lion’s share of returns. Even today the gap between the top decile of funds and the remaining 90 percent is quite large. That means that a lot of funds are underperforming.Second, too much money has led to higher valuations and VCs owning less as Fred points out. But the other trend that I feel has effected performance is the cashing out of founders prior to exit (M&A or IPO). This simply did not happen prior to about 2005. Founders had to wait for an opportunity for everyone else to get their money out before they were able to cash out. Again, the abundance of capital has inflated valuations and delayed exits which brought about the secondary market where investors and founders alike could sell shares in private companies. This has and will continue to create a disconnect with regard to motivations and how companies are built.It won’t end well. There will be a lot of value destruction when markets tighten, as they always do, and money becomes difficult for both VCs and companies to raise. The asset class and tech industry are long overdue for mean reversion.

  10. awaldstein

    Ain’t that the truth.We all need capital. We all need people to help us be smart about raising and spending it.There are always a lot of jerks, I focus on the good ones and feel fortunate to have them in my circle.

    1. falicon

      …it reads like you just said you focus on the good jerks. 😛

      1. Pointsandfigures

        hahahaha, that’s what I was thinking too!

  11. Twain Twain

    Note that the NYT article has a photo of all-women. Female founders have been so under-served by male VCs (less than 3% of VC deals in $ terms are allocated to women), we don’t even want them as dance partners anymore.

  12. JMS

    I think this debate is missing a key aspect of both investing and business building: People are not excel models. Most of us have strong, volatile emotions that are enormously influenced by our surroundings. Emotions have a far stronger impact on decision making than we would like to admit. Books like ‘The Hour Between Dog and Wolf’ do a good job explaining how this is relevant in a risk-taking / investment context.For founders, sure taking VC money can be great, or it can lead to disaster. Just as not every good business has the profile to be VC investible, not every founder has the constitution required to properly balance the stresses that accompany taking money from professional investors.Julian Robertson used to, and might still, have potential hires complete a lengthy psychological assessment tailored to his needs as an equity portfolio manager. Should VCs be doing something similar with founders?

    1. LE

      I think this debate is missing a key aspect of both investing and business building: People are not excel models.I agree with what you are saying. Business at the core is not an excel spreadsheet. That is finance and accounting maybe but not business. Just like anything creative (and business typically involves creativity) is not numbers it’s ideas and execution. What you typically find is that numbers people and people who are not operators have no appreciation for the pain on the front line of business. That is a really good thing (lack of experience and empathy) to make money. Can’t dispute that.a lengthy psychological assessment tailored to his needs as an equity portfolio manager. Should VCs be doing something similar with founders What I have noticed is that investors are never discussing much of the actual idea or what is good or bad about it. They are discussing (and Fred is doing this today) the numbers. At the core of any business is the idea, execution, creativity, market and potential. And (to your point) who is executing the idea. Of course maybe they are doing this in some way behind the scenes (psychological assessment) but it is not something they are talking about. And yes if you have psychological issues (or weakness) you are going to run into problems in business and in life. Some people more than others. It’s just not popular to talk about that or to appear to discriminate on that basis. Most likely not legal either. Certainly not politically correct. For that matter what about non mental health issues. What about potential marital issues. What about family issues.Competition wise because of the way it’s being done highly unlikely any investor could require as a condition of investment some kind of psychological assessment. Unless they somehow baked into it better terms for the people they are investing in (assuming could be done w/o insult).

      1. Adam Sher

        Maybe the right way is to only look at numbers. Perhaps VC should take a lesson from public equities and deliver returns by operating at low cost and low-touch. Most VCs under deliver, just like most active managers under deliver. If I am an LP or potential portfolio company, then maybe I should look for a VC who is going to be as hands off as possible.

  13. Andrew Cashion

    People should just use the words “new company”Dumb money also seems to defy all normalcy in management and communications throughout organizations.I’d blame too much money to many people want too much money than the expectation.

  14. sigmaalgebra

    Yes, I saw a link to that NYT piece. Against my better judgment from long experience with the NYT, I read the article. Actually I read the article to see if by some strange chance the NYT could write a good article. I suspected that they could not, and I was correct except the article was much worse than I would have guessed. Maybe the NYT is getting even worse.At its beginning, the article was pushing the two favorite, NYC, NYT, Democrat Party obsessions and playing cards — race and gender.Then in its content, the article was both superficial and sloppy. Soon clearly the author didn’t have even a weak little hollow hint of a tiny clue, not even as much as zip, zilch, or zero, and was misinformed about business, startups, and VC.Apparently the article served the purposes of the NYT: (A) Give the reader an emotional experience, VEFEEE, vicarious, escapist, fantasy, emotional experience entertainment, that is, as in nearly all of fiction. So, no credible, objective, well informed, responsible information. No meaningful primary references. In particular violate common high school term paper writing standards for meaningful content. (B) Push the narrative, a Bernays concept for propaganda, repeat it as in Nazi Minister of Propaganda Dr. J. Goebbels and his “If you repeat a lie often enough, then people will believe it. Eventually even you will come to believe it.”, of the NYC media and NYC Democrats of race and gender. Amazing the author didn’t find a way to get in the NYT’s other main scam continuing narrative, sinful humans causing global warming, that is, in the trilogy of sinful transgression, painful retribution, and heavy sacrifice for redemption.So, again, once again, over again, yet again, one more time, the NYT on paper can’t compete with Charmin and on the Web is useless for wrapping dead fish heads.NYT: The highly self-esteemed, formerly revered, leader of the NYC Democrat Party liberal echo chamber media — ABC, CBS, CNN, MSNBC, NBC, and NYT itself.As a result, I work hard to ignore all of ABC, …, NYT and am 99 44/100% successful.I have to believe that there are some really smart, capable people in NYC, but the NYC media echo chamber is a disaster for nearly everyone on the planet.E.g., it has to be that any of Twitter, YouTube, Drudge Report, and various blogs are much more important sources of news than ABC, …, NYT.

  15. Ron Shah

    There will be a breakout innovator in the VC space…. the same way Uber disrupted taxis and Airbnb disrupted hotels. The disruption won’t be about investment model. It will be about values and delivery of services.For decades, 99% of VCs are still the same demographic: older white men. They use the same value-add slogans. They also have the same biases, the same groupthink, the same “warm referral” requirement that keeps the demographic stuck in the same bubble. It’s particularly sad considering how important VCs are for building industry leaders…. a whole crop of companies who think the same and have the same networks of people.This “breakout” VC innovator will deliver services to startups via a transparent consumer-grade interface (accountability to add real value)… and they will embody diversity… not for diversity’s sake… but for the specific objective of finding the best answers. Can’t wait for that to happen!

    1. Adam Sher

      Growth equity funds already do this. It is very hard to add value as an asset manager. Other than running up their own overhead, there isn’t much different about this strategy.

      1. Ron Shah

        Early stage VCs should add try to value. Cheaper sources of funding will keep emerging…. giving founders a way to programmatically unlock value from their VC investors is highly differentiated.

        1. Adam Sher

          What is programmatically unlocking value from VC investors?

          1. Ron Shah

            Lots of ideas there…. If I could login to an app, and interact with the VC’s portfolio…. or perhaps mine the VC’s preferred relationships. Access key advisors and content. Compliance and governance best practices. Go to the VC websites and take the value-add they all talk about and productize it. Just an idea…..

          2. Adam Sher

            This is going on in growth equity. These funds are larger and have more ability to support the cost this type of effort requires. The PE firm that I sold my last company to tried (is trying) to implement this type of thing. It was a minor selling point. I probably would have cared more if it was a minority round.The firm(s) that make what you (and most of us) seek seemless will become the Vanguard of this part of the industry.

    2. sigmaalgebra

      Maybe one constraint, bottleneck, is the frameworks, investment theses and themes, and investment criteria the conservative managers at the big institutional funds agree and insist on.IMHO their views are much like the traditional views of commercial bankers — invest cash ONLY in valuable assets, ONLY for growing a significant asset, and NEVER for just starting one. For VC the LPs are willing to bend a little on the asset and invest in traction if it is significant, growing rapidly, in a large market, with a team with nothing very obviously wrong with it.So, for change, don’t look to the VCs and, instead, look to the LPs, and there will see essentially no possibilities for any change.There are some funds with all their own money and no need to listen to LPs, but apparently such funds find better investments than competing with VCs in startups.Still there are parts of our society able to evaluate ideas and fund them — US DoD, DoE, NASA, NSF, and NIH.My joke about the Manhattan Project is that if Szliard, Wigner, Teller, Fermi, etc. had approached VCs for the $3 billion or so, they would have said “You build the first two, test one, and we will chip in for the gas for the Enola Gay.”. For the SR-71 they would have said, “You build one, fly it at 80,000 feet at Mach 3 for 2000 miles without refueling, bring back some really clear pictures, and we will chip in for the big rolls of film.”. For GPS, would have said “You put up the satellites, and we will chip in for the license for the signal decryption.”. What is in common is that IT VCs just will NOT evaluate technology and, then, invest in it, no more than a commercial banker would.Biomedical VCs seem to be different: If they were like the IT VCs, then they would say to a team ready to cure a major cancer, you get through all the trials, get all the FDA approvals, set up the manufacturing, and we will chip in for the design of labels on the bottles and the marketing effort.

      1. Ron Shah

        That’s an interesting view. At the end of the day, senior partners of investment funds do nearly all their business with a small number of their most trusted relationships (law of least effort). This is why the rich keep getting richer, and the income gap and minority gap persists.In my heart, I wanted VC to be different. I’ve always glamorized VCs as a group of open-minded people who find the diamonds in the rough. But then I started looking at all the VC websites and found no diversity. That means the myopia could indeed be rooted one level beneath — at the LPs!I do think a “new way” for VC investing could emerge. Just look at what the platforms (Angelist, SeedInvest, etc) were able to do…. hybrid that with pro investing, with a consumer-grade wrapper around it!

        1. sigmaalgebra

          > That means the myopia could indeed be rooted one level beneath — at the LPs!Yup, too much the same, and that suggests a common cause and that would be the salaried managers of the big institutional investors covering their back sides by all agreeing on what rules the VCs must follow.For all the VC Web sites touting original thinking, breakthrough this and that, leading edge, guts and glory, disruption, change the world, what we get far too often is no better than a pet rock, some meal delivery service, etc., routine software for tiny little opportunities.Also in current politics, Nancy/Chucky look like BFFs of El Chapo, etc. But it isn’t just N/C but all the Democrat Party and all the NYC liberal Democrat propaganda media ABC, CBS, CNN, MSNBC, NBC, NYT plus WaPo, Boston Globe, SFC, LAT, Politico, and more. Apparently each morning they check their e-mail and get the official talking point for the day: Trump is racist, sexist, xenophobic, Islamophobic, narcissistic, demented, unqualified for the office, won the election by colluding with Russia, told his lawyer to use campaign funds to pay off Steamy, Slutty, Stormy, etc.So, it looks like there is a common cause, as common as the conductor of a band.Then to find the cause, we should do the usual “Always look for the hidden agenda.”, “Follow the money.”, look for means and motivation, etc.Each attack on Trump and his effort to build the wall, e.g., “manufactured crisis”, “vanity wall”, “too expensive”, “won’t stop the immigrants”, “can be cut through”, “can be climbed over”, “is immoral”, is more brain-dead than the last and, thus, as in really bad cases of membership hazing, stronger confirmation of tribal loyalty and devotion. It’s mob behavior, tribal behavior, E. Fromm style security from total membership in a group.But N/C are playing an impossible hand, and once the public is paying enough attention there’s no way N/C can win, e.g., being BFFs for El Chapo.Still the common cause, the string pullers, are insisting on their position and eager enough to have N/C, etc. on a political suicide march.For the string pullers to buy off N/C, the whole Democrat Party, and the NYC liberal media, along with W, Romney, Obama, Ryan, Flake, the late McCain, and more, to the harm of all of them, means some very powerful string pulling. I’m eager to see the cover from these puppet masters removed. I’m not holding my breath waiting for the cover to be removed by the NYC liberal media!Apparently the idea of such public manipulation and political string pulling is quite old, shown with crystal clarity about 3/4th the way through…At least the movie makers believed that the 1941 audiences would accept the possibility of such puppet master manipulations. Enough people have seen enough in manipulations and duplicity in their own lives to believe it could also be real in high places.In some ways that movie is pretty good, has some good depictions of some big issues of human behavior that maybe haven’t changed much since that movie or back to Shakespeare or even the ancient Greeks.I believe that Trump is very much in line to win this one basically just by letting N/C keep being BFFs of El Chapo, a totally indefensible position. Then N/C and their buddies will lose, much like the crash of a stock market bubble or when people agree in public that the emperor has no clothes.It is fun to see the construction of total crap-ola talking points cooked up each few days. That’s a grand case of putting lipstick on a pig, making El Chapo look good, neglecting the 72,000 US citizens killed in 2017 by illegal drugs, nearly all from Mexico, as in the relatively well done CDC PDF at…But without the insanity of the mob, that lipstick wouldn’t work at all.But it is interesting to see half of politics be willing to act just insane and self-destructive in front of the whole country and world, El Chapo BFFs.

  16. Frank W. Miller

    Its real simple. If you’re an entrepreneur, VC is the most expensive money you can take. While it may have gotten a little less expensive over time, it’s still crushing. The message being broadcast in her piece is common sense. Avoid it.

    1. JamesHRH

      The only real reason to take it is that your opportunity requires rapid expansion.

  17. Adam Sher

    Since the NYT is reporting on this, I can conclude that the issue has already reached a peak and is correcting. It’s like when your cab driver tells you about stock X.@fredwilson:disqus I if I take your tweet to the finish line -> when VC ownership declines, the company value at exit needs to increase in order for VCs to achieve a risk adjusted return. Just because there are more funds competing for your deals does not mean the risk in those deals declined – usually it’s just the [expected] returns that decline.

  18. iggyfanlo

    I’ve been on the “entrepreneur” side” of the table for the last 20 years and if I’m honest (with myself), I think that the problem (at least for me) is my/our ego. We choose VC and other capital as much for the external signals it sends rather than seeing it as “fuel” for growth. We don’t see VC capital as a tool for accelerating a company’s growth with PMF.

    1. Adam Sher

      I think it’s a combo of ego and lack of risk assessment. If you take VC money, you’ve committed yourself to financial and business relationship for a time period beyond your (our) ability to meaningfully comprehend and plan. This planning failure is magnified for young founders and somewhat mitigated in experienced founders.You sell the dream, and the dream is R&D and then the hockey stick of growth. You can honestly tell yourself that over the next 12 months there will be bumps, challenges, etc… Beyond that, it’s the great unknown. The control mechanisms in most VC deals mean that effective control lies in VC hands. So when the future arrives you’re doubly surprised by the reality of your business and the behavior of your VC.

  19. woke

    There’s another issue at play here, namely media. There’s a lot of stuff published about venture capital, such as the referenced article. In some cases, it’s accurate, but in others, it’s wrong in some significant way. This is not specific to VC – see… .

  20. Richard

    Fred has to make an investment based on Expected Return E(x) 7 to 10 years out – For E(x) to = actual x, you better not sell part of the probabaity distribution – this is what happens whan USV get 10% vs 30%, when you give away the middle of the distribution curve, your E(x) gets crushed.

  21. Pointsandfigures

    Where? I am in Atlanta this week, Florida the 18th-22, Chattanooga 23-27, Nashville 27-28, fly to LA 28th, SF 29th-30th back in Chicago the 30th. I will be in Virginia in April.

  22. Richard

    With all the whining and complaining FRED does about VC – he quickly forgets the FREE RIDE USV got from the huge government investment in the core technologies that made every USV investment possible and all of that with a 20% tax rate. Woe is me! (Modern) VC may not have been born on 3rd base but they surely born on 2nd.

  23. JamesHRH

    What the hell is driving all the travel?