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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."
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
"well, thank you, unbiased stranger!"
He's making a ton of money, while saying that people are overpaying him for crap he bought earlier for less. Of course, he's still selling it to them.
I consider it the equivalent of the poker pro telling everyone he makes a living at this and (some standing backing that up) when he sits down at the table. Just fair warning that someone is going to lose money, and he has the skills for it not to be him.
Your ad here. Ask me how!
A poker pro doing that is doing image control. He's either trying to scare off a table of fish, or trying to egg on a few aggro hotheads. Or trying to look like an aggro to other real pros. What's this guy's angle?
I still have more fans than freaks. WTF is wrong with you people?
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
aggro
Please stop that.
Don't disappoint your bird dog. Go to the range.
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?
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.
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.
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
Comment removed based on user account deletion
and no, "get bought by Google!!OMG!!11!!" is not really a practical business plan
You say that, but... ...well, OK before I continue, let's both agree it's not actually a sane plan in a world of reason.
But there's a problem here: this ain't a world of reason. Citiation: I currently have a startup. Frankly it's mental. Esseintally what most people seem to want to see is a vague plan to get some customers and revenue and blah blah blah but not use that to have any sort of growth or anything sensible, it's to use that to sell out to google (or whatever) as soon as possible.
Seriously, the equivalent of "get bought by google lolwtfbbq11!!11!11oneONELEVEN11!" is actually the plan they want to see. The purpose of customers is not to bring in revenue, it's to make you a tempting target for purchase AND THAT IS ALL.
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?
Studies? Fuck 'em. Internet of things, man, INTERNET OF THINGS THEN GOOGLE WILL BUY IS DO YOU NOT UNDERSTAND IIINNTTEERRNNEETT OOFF TTHHIINNGGSS!!!!
SJW n. One who posts facts.
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/
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?
Yes, there have been studies. But you don't need a study - it's enough that there seem to always be VC firms about - proof by existence. The game's no different from what the record industry does (except multiply the numbers on the bets the firms are making by about 50-100x) - you bet on a number of artists/companies; some pay out small, some pay out big, and some you lose money on. It's just about finding that next Adele/Facebook that pays off enough to support the other dogs you picked. It's a model that works, as long as you can tolerate the risks and can pick winners well enough. Plus, if you have enough money to start with, you need put only small portions of your actual wealth into these ventures, mitigating a lot of the personal risk by having your main investments in more secure vehicles and loading the VC fund with more risky investments.
That is all.
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.
No, not racist. It is probably a microaggression however...
Browsing at +1 - no ACs, I ignore their posts. So refreshing!
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).
Isn't some of this that they *know* the startup has no business plan? I always thought they were more or less shopping for clever ideas and that part of the VC investment was applying some semblance of business discipline, both to help actually get the clever idea turned into an actual profitable venture and to make sure their money doesn't get spent on bespoke custom Nerf weapons, strippers or otherwise totally flushed down the toilet.
I'm sure a lot of startups are completely worthless ideas, but I would bet that there are some that are actually valuable but die off because the people behind them have absolutely no business sense at all.
Although in theory getting VC investment includes some of the VC's "business sense", however, the business goals of the VC aren't necessarily aligned with the founders (and often not the employees either). Generally the goal of the VC on an early-stage startup is to attempt to execute a 3-5 year plan and then 'exit'. An exit will generally either result in the ability for the VC's to deploy their winnings (if any) on the next big thing, or have the company crash and burn. The basic business sense that a startup gets from a VC team is often that time is of the essence and to optimize the burn rate (e.g. the spending of investment capital vs the performance the exit plan strategy). In fact, sometimes they will install a management team in your company to make sure you follow the plan if they don't trust you.
FWIW, VC's generally don't invest in clever ideas, they invest in teams that can execute exit plans. A typical VC firm will probably get pitched a dozen ideas that are more-or-less similar, but they generally only pull the trigger on investments that they think they can assist in executing an exit plan. I'm sure there are some startups that fail because they have absolutely no business sense, but it isn't clear to me that applying typical VC business sense would generally result in "success" from the founder's point of view either (because the VC's would probably kick those folks out of their own company for not having any business sense).