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One of Silicon Valley's Most Esteemed VCs Says Startups Are 'Mostly Crap' (vanityfair.com)
An anonymous reader cites an article on VanityFair: Former Facebook employee Chamath Palihapitiya won't pull punches when it comes to lame tech companies. Palihapitiya's firm, Social Capital, has backed numerous tech companies with valuations in the billions, such as Slack, Box, and SurveyMonkey. But that doesn't mean that he is bullish on unicorn culture. He says "Most of those businesses are fundamentally not good, they're poorly run, and they never should have been invested in in the first place. But the capital came in because the person who had control of the capital was able to justify it intellectually to themselves versus something else that could have become the next Facebook or Google. [...] The reality is, great companies can go public in any market. When we talk about the I.P.O. slowdowns what we're really saying is that there really just aren't that many good companies being built. We need to divorce ourselves from venture capital as an occupation and focus on using capital as a way to take really big bets on things that just seem totally audacious. Right now we haven't done enough of that, and the result is that most of the things we've funded are mostly crap and largely worthless."
Something's wrong here, but I can't quite put my finger on it.
duh.
It's a bubble, and now it's deflating because, like the mortgage-backed certificates, the underlying assets are crap.
"Transparent" is a shit show that trades on every stereotype going. A man in drag is NOT a transsexual.
Then he announced his plans for a revolutionary type of new instant messaging/social dating app?
Didn't Sturgeon already tell us this 75 years ago? Ninety percent of everything is crap, including VC's.
We hope your rules and wisdom choke you / Now we are one in everlasting peace
Racist.
Most business ideas throughout all of history have been shit, news at 11.
Someone who made a ton of money from investing in something worthless is telling the rest of us we shouldn't invest in things that are worthless? Sure thing.
Damn_registrars has no butt-hole. Damn_registrars has no use for a butt-hole.
Look, the numbers for new businesses are always crap - that's why you get the high returns.
For every 10 businesses you start, seven go out of business in the first year. One more squeaks along till the 2nd year, another becomes a 'viable loss' (i.e. they make money, but less than their owner could earn if they got a job working for a major corporation), and only the last one makes any money. But that last one will make so much money that the owner becomes wealthy
That show VC works - they invest in 10 start ups, one of them gives them a return on their investment that is 20x, or 100x how much they gave it, and they go away happy. The other 9 they invested in are just the cost of doing business.
excitingthingstodo.blogspot.com
Most business ideas are worthless. The trick is to invest in as many as possible, because a small number will work out.
This is not rocket science, and this is why owning the S&P 500 is a great idea. The most successful 500 companies will have many bad ideas, and some business will have such bad ideas that they fail. But on average, you will make 10ish percent per year.
...But the capital came in because the person who had control of the capital was able to justify it intellectually to themselves versus something else that could have become the next Facebook or Google.
The problem is many of these companies only get big because of a fad and not for any concrete business reason. Social media companies have no real source of revenue except advertising and data-mining their users. But revenue from that is going to be highly dependent on how popular they (may) become.
We had that story about the "emoji" company a few days back. Sounds like a pretty stupid company, right? But they likely got funding from someone, and now they are being bought for $100 million. Would a person approving that capital have any justification that the business would ever become the next Facebook? Or was Facebook really just that 1 in a million that managed to somehow take off?
You need fertilizer to make things grow. Sometimes the yield is bad, sometimes it's good, sometimes it's surprising and sometimes it ends up being the most horrible thing ever.
If builders built buildings the way programmers wrote programs, then the first woodpecker would destroy civilization.
The reality is also that you don't know what actually is a great company until it has succeeded. After all, both Facebook and Google looked like pretty crappy bets when they started out. And that's why startups have high returns on investment: they are risky.
Perhaps as a pointy haired boss with a contempt for programmers and who got lucky at Facebook, Mr. Palihapitiya never needed to understand either technology or economics, which is probably why he keeps making a fool of himself.
Perhaps, but when you are planting rocks it doesn't ever help .
Racist.
How do you know her as anything but a white blue-eyed blonde Valley girl, except by her annoyingly long and unpronounceable name?
"Racist", right back at'cha!
Although to be fair, at least the ideas floated in the '90s were at least half-assed plausible (well, most of them).
I always marveled at the ability of VCs to dump metric tons of money into something that usually has no business plan (and no, "get bought by Google!!OMG!!11!!" is not really a practical business plan). I mean, I get that it's gambling in a way, and one out of 1,000 or so might actually turn a profit (or at least get enough hype to cash out the stock and profit from that), but it looks like one hell of a high risk.
Has anyone done any studies as to what percentage of VC-funded startups actually eke out enough money (somehow) to provide a decent ROI to anyone investing in them?
Quo usque tandem abutere, Nimbus, patientia nostra?
Over time some rocks gathers moss.
Some rocks may also look bland on the outside but on the inside they are amazing.
Or you can trip and hit your head on a rock.
If builders built buildings the way programmers wrote programs, then the first woodpecker would destroy civilization.
Racist.
How do you know her as anything but a white blue-eyed blonde Valley girl, except by her annoyingly long and unpronounceable name?
"Racist", right back at'cha!
She's also a dude. From Sri Lanka. You know, a country which speaks fucking Tamil and Sinhala, and doesn't give two shits about what a couple of English-speaking dumbfucks think about how they name their kids.
The moss on those rocks might develop C4 photosynthesis which can then be GMO'd into rice which can then feed the whole planet with less water.
You know, while we're BSing.
There are two types of people in the world: Those who crave closure
Most multi-billion dollar mega-corps are crap too. Facebook, Google, Amazon, etc. They don't actually provide anything of value, they make money off of deceptive and dishonest bullshit. And they are poorly run at that.
It's not racist to recognize the likely ethnicity behind a given name.
Dude, you're mixing two things up: the "stereotypification" and the prejudice.
Inferring one's ethnicity by their name is not racism, it's just pattern recognition. Assuming something is bad because of the specific pattern, that might be racist.
Just to be clear:
stereotype("Palihapitiya") -> "Indian" # Wrong (the guy is not Indian), but OK!
groupthink("Indian") -> "Everything must seem like crap!" # plain stupid, and racist
`echo $[0x853204FA81]|tr 0-9 ionbsdeaml`@gmail.com
Worked with two startups. One was all crap, other was half crap.
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Startup honcho says other startups are crap. M'key. Got it.
You need fertilizer to make things grow. Sometimes the yield is bad, sometimes it's good, sometimes it's surprising and sometimes it ends up being the most horrible thing ever.
Bad analogy. This is like putting fertilizer over fertilizer and expect to see fertilizer grow magically.
The idea behind modern venture capital is not to create a sustainable business. It's all about creating pie in sky valuations for companies that make jack shit. Then they go IPO, whose only goal is to make sure the investors get their money back and then some while the rest of the people who invested in the company are royally fucked. And rightly so because a company that creates no value how can it be valued billions and billions of dollars ? Even a fucking idiot sees this is all a scam.
Since when do you put periods in IPO?
The stories of abject failure, malfeasance, and mismanagement alone would be worth the price of 10 of those startups.
Wheel of Time: Book by Book and Sumview (summary review) Bigdady92 style: http://bigdady92.blogspot.com/
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That's why 8 of 10 new businesses fail.
I have had that problem before... contacts that I only speak to over the phone with non-english names and I'm not sure if they are male or female. or worse yet they have a name that just sounds feminine and they sound feminine on the phone even though it's a dude.
I have a startup that I have been trying to get funding for in order to finish the product. It is highly technical but all the features I have finished work great. I think it will be 10x better than anything else on the market that it will compete against (it does data management). Yet I can't seem to get any attention from investors. If they can't understand it in a 20 second elevator pitch, they have no interest.
Well the only things to come out of India and Sri Lanka are steers and queers. Bad choice in any case.
and some rock, gets sold as pet rock, netting someone millions for pennies in cost
ELOI, ELOI, LAMA SABACHTHANI!?
Any VC who didn't already know this is crap. A Slashdot editor who wasted our time with story is also crap. I'm arguably crappy, too, for pointing this out, since most of our readers also already know this.
A sign we've had enough of delivery drones, robotic dogs, obscure social networking, black mock turtlenecks, and charismatic 20 something CEOs.
Almost everyone knows most startups are crap anyway. Especially in Silicon Valley anyone with any experience is wary of working at one as the risk is so high that you'll be out of work soon and will have made less money than if you had taken a steady job with less stress. Whenever I hear a job recruiter pushing names of VC investors, levels of funding, bios of the founders, then I know the company is more hype than substance.
Right, and buying lottery tickets is still a better way to invest your money.
Well no shit, Sherlock!
Most linux users don't know this, but the man pages were named after Chuck Norris. Chuck Norris fsck'ing hates noobs!
Or they might beat scissors. Sometimes that's all you need to do.
The rich pay the communists (government) to pass laws making it too expensive for the poor to raise capital to compete with the rich. The rich even pass on the cost they pay to raise capital to the poor in the pricing of their products. The poor pay for this and vote for the communists, proving that they aren't poor, they're stupid. Then the fraudsters can raise capital for their stupid startups because there is no competition.
No, not racist. It is probably a microaggression however...
Browsing at +1 - no ACs, I ignore their posts. So refreshing!
Most successful startups are going to look like crap early on. If the ideas behind them were clearly good, there'd be established businesses in the market segment, and it would look dumb to try to break in and make it big.
"When you have eliminated the unacceptable, whatever is left, however improbable, must be the truthiness" - Holmes
TV might be 99% worthless, but that one time it lets you know a tornado is coming your way makes it worth it. Someone could lose $100 million on ten crappy companies to find that one company that will make them billions.
Google books and google scholar are amazing resources for me as a graduate student. Google maps makes a significant contribution to my lifestyle. Youtube has it moments...
Pets.com anyone? How is this news?
Time makes more converts than reason
Improving VC means they would be able to assess project quality, instead of being misled by nice talks. Is it possible?
Fuck you
you take it for what it is if your out side looking in just a bunch of segwayers, the dreams broken pieces make a fun puzzel game (linux things and servers and) and damaged disk arrays from auctions and ebay, peck at it enough and you begin to understand how phone fraudsters work with a copy of asterisk in the comfort of your own home amps portal etc.....
But what does it matter if paper beats rock before scissors gets there.
Incorrect. It is still pattern recognition. I can't speak to all Indians and I do not claim expertise at Indian society generally, but the ones I have encountered in technology have almost all been unqualified resume inflating incompetent wage pirates who make my life a living hell.
That is not a function of race, it is a function of how IT there people are usually trained (and selected). It is very much a subset of a culture, and for that matter a subset of a people which may not be representative of the larger population. I don't know and it's irrelevant anyway. It's not race that's the factor, though in this instance it's an identifier. What's important is background and the training and acceptable attitudes currently associated with that background in the part of the world these folks hail from.
The bottom line is that when I meet an Indian in IT the odds favor that I'm gonna have a bad time because statistically I'm meeting someone trained quickly and cheaply in an environment that condones cheating and lying on resumes who was selected for cost over skills. There are always exceptions and I'm glad to meet those people, but don't call racism what is not racism but rather experience.
>versus something else that could have become the next Facebook or Google.
Facebook and Google have always had the backing of US Government and their surveillance programs. Many startups were actually really good companies with incredibly talented employees - but those companies were not 'tapped' by the establishment and ultimately folded.
And then there's the "jewish connection" (of course). Facebook and Google were created and run by Jews - just like the banks and the media, and just about every other 'influential' organisation.
But that's all just a coincidence... And pointing out the obvious is just anti-semetic dribble, right? Right.
Those silly wind up jumping toy animals are total crap. Yet you find them for sale everywhere. People will purchase them as silly gifts and folks put them on their desks.
But it makes money. Were they the Google of the toy industry? no. Did anybody learn and have an ah-ha moment after seeing one? probably not.
Bobble heads too.
I think its safe to say, most level headed people know that a lot of these tech startups are a fucking joke. Money going down the drain.
Buying Lottery tickets is never a better way to 'invest' your money. The only way statistically to win the Lottery is not to play.. basic maths... Your better off just giving your money to beggars on the street.
VC is great way of making money - if you know what you are doing. The perfect example is Facebook, it might be s**t but its investors have still made themselves billionaires off that piece of s**t. Are you telling me you would not want the money just cos its got a little brown on it?
Below the speed of light Special Relativity is one of the most accurate theories in physics - above the speed of light..
But the investors don't know what they're doing. Facebook won by mostly being lucky, not by being technologically superior or innovative. It also didn't get massive amounts of VC funding instead it started rather small and grew and as it became a better known product with a track record it got more investment. But when people throw money at a start up that has no product, no plan, run by people who've failed before, then that's not a smart investment. At least with the lottery ticket you stand a *better* chance of breaking even or winning another free lottery ticket than some of the returns these startups will have. Sure, spend a hundred thousand or so to help out a friend with a good idea isn't terrible, but spending many millions on a stranger who has nothing but a pretty presentation is idiotic.
Similary someone with a decent job who quits it all, mortgages the house to raise money, and then tries to get yet another dating site started up should not be applauded as an entrepreneur (even if successful) but instead accused of gambling recklessly with the family's future.
businesses never succeed because of their technology.
The technology just needs to not be bad, it doesn't need to be good. And it needs to address a large untapped market.
What's important is management, marketing and actually getting access to that market.
I actually have a business idea 'invention' potentially worth many billions - and a business in start-up to create it. :)
But in real life things are never so simple - getting my design to a working machine has a lead time of at least ten years minimum and is immensely complicated, plus the project is very high risk and has a minimum setup cost of about $1 to 5 million. There are an even bigger set of problems that I wont go into that make recruiting a good team next to impossible - so far too much will have to be done by me alone. - The machine also requires a complete new computer platform (based on FPGA and SMP) - which requires some pretty heavy electronics engineering, as well as stuff like bespoke compilers, test software, a new thin operating system, and bootstrap code.. Fortunately most of that can be farmed out to people who know what they are doing - though it will cost.
Every project is different..
Yes then there is the guy creating a new start-up based on the idea of selling stuff like insurance through a web page, or just like you said setting up a new 'innovative' dating site..
Below the speed of light Special Relativity is one of the most accurate theories in physics - above the speed of light..
In the past many of these really complicated things were solved by having a major corporation doing the investment in house. Sure, you have to be paid a salary rather than ending up a billionaire... Today though most corporations never bother with research anymore.