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Venture Capital is mostly nonsense.

13 points by JacobH ↗ HN
We all feel like we have the best ideas ever, but what do investors really look for I always wondered, because I see from time to time "[insert company with horrible idea] has raised another $50 million". I'll get back to this.

Venture capitalist always act like they're learning and improving, but they aren't. Half of them only invest in people they know, and the other half invest in struggling companies with problems in monetizing.

What I am going to tell you is what i've gained from my research. Investors are mostly bitter people, and they only want to hear about how you are hurting another company's profits. Every question they ask is just them asking again "Who are you hurting, and how fast will they be out of business?".

I went from getting boilerplate "no, but good luck" messages. To emails with more substance.

Now back to these investors investing in companies that don't even make money. Let's take Snapchat. Instead of investors investing $1million dollars at a time in smaller promising ideas, investors are propping this company up like a deleted scene from "Weekend at bernie's". As software people we just instantly know there are tons of ways to save data from applications that try to delete it. Investors don't know this?

7 comments

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brudgers
Commentary is more appropriately submitted as a link to a blog page.
27182818284
Hi JacobH!

I was curious what your startup is? Do you happen to have a link or a landing page?

JacobH
I originally had a landing up on nyckl.com. I took it down because I wanted to give the application people needed more the better name for branding reasons.The application is a spin on time-management to answer your first question.
argonaut
"insert company with horrible idea" = "insert company with what I think is a horrible idea"

You are stating and opinion, not a fact of nature. Clearly there is often a gap between opinion and reality.

JacobH
That sentence is to get the entrepreneur thinking about a company they don't much like, but the company is successful at getting funding. Every entrepreneur should have their own company to fill that blank.

At the end I tell the reader about Snapchat being my disliked company. And although it's based on no real computer science, investors are funding Snapchat because they are competition to where they want to be.

Now lets take a step back. If a company is in a market of it's own, the value of the market is the value of the only company in it. 100% of $0 profited is a $0 valuation. But lets make facebook our competition. 100mil SC users versus ~1 billion facebook users is ~10%. Now take 10% of facebook's value. That's the only way to give value to a 3 year old company that doesn't make money.

argonaut
Why should every entrepreneur have a company to fill that blank? I don't think they should. That promotes an unhealthy, overly cynical view of the landscape. Cynicism does not a good entrepreneur make.

There are a million ways to justify why Snapchat is a dumb company, and a million ways to justify why Snapchat is a great company. One of the great things about markets is that there is an easy way to tell who is right and wrong, given time. Some investors have invested a lot of money into Snapchat. The fact is that many of those investors have a great track record of picking successful companies and actually betting on them (better than you or I). Time will tell who is foolish here.

auganov
You're disillusionment is understandable and I think all of us have these feelings to some degree. But yet if you broaden up your perspective a little bit and try to emphasize with VCs you'll probably change your mind and feel better too. Say investing only in people they know. That's not nonsense in any way. It can be a good strategy, same goes for hiring.

I too thought Snapchat had a crazy valuation but after really using that with a friend and seeing how it's actually being used I don't see it so anymore. Anyways good luck to you and I'm sure you'll figure out how to get VCs interested in your ideas. Keep trying.