Slashdot Mirror
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."
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.
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?
When I worked at Accolade, a family-owned video game company, it got bought out by Infogrames, a French video game company, in 1998. Like many companies in the run up to the dot com bust, Infogrames went on a buying spree for other video game companies. When it acquired Hasbro Interactive, which owned the intellectual property for Atari, it moved the company from San Jose to Sunnyvale and renamed itself Atari. As the company slid into bankruptcy after the dot com bust, upper management figured out that they paid two to four times what each company was worth. In short, it was all crap.
Heh, THIS.
Anyone involved in the pitching or management of a VC funded startup will tell you - the purpose of the company is NOT to build a company, the purpose of the company is to create an acquisition target.
The VCs will actively pushback against product release, even against investing too much in building product over building hype to improve the value as an acquisition target.