VC isn't VC anymore

Wow, TIL a16z hired the NYC subway guy as a partner purely as a political stunt. This on top of the $115M in the midterms, them no longer legally being a VC firm, and recent discussion on dark patterns in their portfolio [1]. I'm inclined to agree with the thesis of the article especially with regards to this firm. Looking forward to the other articles in the series.

[1]: https://news.ycombinator.com/item?id=49416055

I’m a VC and agree with much of this. The mega firms have totally warped VC and the desire for massive cash appreciation has led to a host of bad characters getting involved. I still love working with early stage companies but it is hard to cut your own lane when these mega groups control so many aspects of the stack and have such outsized capital and political influence. There are so many issues destroying early stage VC right now. We need major policy change / guardrails but that won’t happen.

While Anil makes a lot of great comments about VC's shift towards institutional PE, the legal issues he harps on are insignificant.

Until 2012 or so there was no legal concept of "venture capital". Around that time, the SEC adopted some new rules in response to the GFC. In those rules came the "venture capital adviser" exemption. To be a "venture capital adviser", a firm needed to avoid doing a lot of things that looked like private equity investments or hedge fund management. The only consequence of falling awry of the new "venture capital adviser" definition was registration as an "investment adviser" with the SEC.

The important anti-fraud provisions of the Advisers Act still apply to "venture capital advisers" even though they aren't registered, and most big VC shops would have probably been pushed to register for other reasons anyway.

The legal stuff is nearly irrelevant here.

Let's keep praying for fewer and fewer regulations, it's going great!

I didn't know that VCs were ever "not cancer", I've always known them like that. Also my experience with startups is that it is a big scam for employees, but I understand it's not always the case (maybe it depends on where in the world?). I have been an early employee in multiple startups that got the founders rich, and what I got from the stocks didn't compensate for the low salary while working there.

Do I understand correctly that when VCs invest, they dilute the employees and somehow the founders can get away without being diluted? That's the only way I could explain the difference between what the employees get and what the founders get if the startup is successful.

And young people are super excited to work in startups because of old stories like "early employees at Google/Facebook became rich", I guess.

I was thinking about this the other day in regard to Flock. There's simply no way this company will fail, despite the public outcry, because the rich people in charge will not _let_ it fail.

I was living in SF Bay Area when a16z started. They had good marketing and a good reputation. Their analyst posts were insightful and well received here. My perception of a16z has changed drastically. I’m ashamed just how badly that marketing worked on me in the early years.

We need something like an open source model or guild for VC, where successful people can put money into a pool that is generally accessible to anyone, with little friction. The idea would be to join the guild and gain access to funding, with a contract to contribute back some percentage of gross revenue and/or net profit, depending on how many people game the rules.

Honestly, wealth inequality has reached such epic proportions, that if someone came up with an alternative funding model, they could make VC lock-in obsolete. This is simultaneously extremely easy and extremely difficult to pull off. Money talks yes, but sometimes saying "your money's no good here" is more empowering.

all of the institutions that built our current era of prosperity have been corrupted.

> Those firms also stop legally even being venture capital firms

We need an equivalent of the "Fiduciary" word for financial advisors ... but applied to VCs.

"Are you an Artisanal, Free-Range, Fair-Trade™ VC?"

  > Since the Cancer Capital firms have become so powerful, the overall balance of power between founders and VCs has flipped; instead of founders having a company that VCs would try to fund, now VCs publish extremist political manifestos, and “founders” are just the people who are selected to carry out parts of those plans

  > The rest of the world doesn’t know: New founders and workers entering the tech industry are unaware that Cancer Capital has taken over, so many are still trying to play by the old rules, and can’t figure out why their ideas are being pushed into serving the goals of the Cancer Capital firms

  > These days, venture firms are increasingly getting their funds from pension funds and retail retirement accounts, meaning the public (you!) are increasingly holding the bag for the parts of their portfolios that actually have some risk, even if you never intentionally made that choice

  > Part of why this has gotten so corrupt is the way the Cancer Capital firms have transformed themselves into their post-VC forms. Because they’re not legally VC firms anymore, they’re free to buy shares directly from founders, or hold unlimited amounts of publicly-traded stock — exactly what they couldn’t do as regular VCs. They can even sell their investment in a company as an asset to another one of their own funds, and then book the increase in value as a profit, all without the company ever having made a penny. Another racket: a company that’s raised a bunch of cash in a funding round can buy out its early investors if they’re one of these post-VCs, so they can get paid off even if their portfolio company has never made a penny in profits or revenues.

For a couple years, I officed out of a VC firm. It was terribly helpful in taking off the shine.

I’m skeptical of the implicit claim that they’re all the same. It seems rather difficult to prove?

I've been in an interesting spot the last few months. I've pitched probably two dozen or so VCs and, and while almost every case showed interest, it was quickly followed by "rules" and "desires" that were antithetical to the product.

The product I am building is a decentralized trust system. The word "trust" is literally in the name. It requires very specific decisions and a very specific organizational and legal structure to be successful. Why? Because anything else doesn't breed trust.

But that's actually the problem. The VCs don't like those things, because in almost every case it relinquishes their control/power. Or, they ask us to do something either questionably or blatantly unethical in order to sweeten the pot. I was one of those founders "unaware of the Cancer Capital situation." After six months of pitching, it's become extremely obvious to me that the current VC system is incapable of funding anything ethical or long-term.

I don't know what the right answer is from here. Our current attempt is founding a syndicate of like-minded individuals to bootstrap a pre-seed. It seems like the only possibility where you might be able to maintain an ethical vision without fighting a cancerous overlord. We'll see how it goes.

The root of the problem I think was caused by allowing institutional funds to invest money in VC firms. You combine that with the majority of the value being generated before they go public and you have a stock market which no longer works as a way to raise money for the company but as a way for VC´s to exit their positions and offloading companies on the public and funds.

Speaking of accountability, if you look around and see the tech enshitified you have no one else to blame but the biggest investors in the vicinity. Like it or not they are building your future and more often than not it's just a byproduct of whatever the hell they think they're doing, not a deliberate milestone, which makes it even worse.

Not really unique to VC, similar things are happening to private equity with secondary funds.

Maybe VC always has been VC? Maybe the cancer was always inherent to the system and the author only just now noticed it?

yea but part of this is the consolidation of funding too. Standards to raise seed capital are soooo lofty now compared to 3 years ago. If you are in your in, if not good luck.

Likewise, stock market IPOs are a parody now - not means of getting financing, but dumping the paper on the retail after for the insiders and VCs to realize their gains.

VC is basically just plowing capital into people that went to prestigious schools or maybe were at a top company. They collect fees and every once in a while a company hits.

Any analysis on the asset class is moot.

Most of the VC media is aimed at hiding the fact that its a lottery machine for a pre selected group

VC, private equity, angel investor, vulture capitalist.

All the same to me. All of these entities have ruined previous workplaces in one way or another. Effectively stealing years of my life that I put my labor into.

These rich cunts are the reason everything is shittier and the term "enshittification" exists in our modern vernacular

VC was good when a guy with no technical skills raised 10s of millions of dollars. That was when VC was good, right?

This guy has been grifting his entire career but it's those other people who are the problem, guys!

He's not wrong about VC but he's another Chamath - a guy who grifts a thing to death, moves on to the next grift and goes 'look, that grift I'm no longer doing - it's bad, very bad!'

i can't believe the whole blog post was just the tldr. this is going to be a legendary series of blog posts! j/k i WOULD like to read the long version of this but i probably won't remember to go back to this blog.

This reads like someone who can’t make smart bets “before it’s obvious.”

Lots of VCs out there still taking big gambles on the agendaless and unproven ideas.

Anil Dash writes what people want to hear (except for boring medical analogies).

He writes against Big-AI, but supports AI (small?) and copyright theft at the EFF, where he is a board member.

I'm getting tolerated opposition vibes here.

This is all silly and as best as I can read it due to very vocal large VC managers having politics the author doesn't agree with.

Take a look at the bullet points. It's just scattered random conflicting complaints.

VC is small and is now big (okay...)

They're not even VC anymore, they're doing all sorts of other investments (okay and?) Oh and they don't really care about their returns, but they grow fast (what? I'm pretty sure VCs care about returns). You know what else grows fast? Cancer!

Now that they're large, they have power over founders (why? there's other sources of capital). And they use companies to push their politics (seems much more complicated than just paying lobbyists).

And did you know pension funds invest in this stuff?(which is bad?)

There's an argument against large VC, but this ain't it. Talk about misaligned incentives, how they push aggressive tactics without regard to the founders, who may not be indifferent between a 50% chance of building a company to $10m to a 1% chance of building a company to $1b

Or just say "I don't like the politics of [VC related person]" and save everyone time.

> But a cancer grows from a cell that a body needs in small, healthy amounts, and that turns deadly when it grows without limit until it harms, or even kills, its host

I thought a cancer grew from a defective cell that is able to divide and grow to over take the healthy ones.