VCs aren’t your friends

Original Article ↗ Hacker News Discussion ↗

Macroeconomics and VC Appetite

  • Several comments tie VC friendliness and selectivity to interest rates.
  • Low rates → LPs chase yield, more capital flows to VC, looser terms, “money for anyone with a pulse.”
  • Higher rates → safe 4–5%+ returns compete with VC, funds raise less, scrutinize more, and use harsher filters.

Deal Flow, “Hot” Startups, and Hype

  • Skepticism that 10% of decks are “OpenAI‑level hot”; people call this orders of magnitude off.
  • Some interpret “hot” as “seems exciting” rather than “will be $100B+,” but still see it as inflated.
  • Many note actual exits are far more often modest acquisitions than unicorn outcomes.

Power Dynamics and Whether VCs Are “Your Boss”

  • One view: if someone funds you, they effectively become your boss, especially with board control or if you ever want to raise again.
  • Counter‑view: they’re partners with different equity stakes; combative founders get reputationally penalized, but VCs are not literally managers.

Signals, Pitch Deck Dates, and Fundraising Theater

  • Large subthread on a VC rejecting a deck because the cover date was two months old.
  • Pro‑signal side: old date may imply the round’s been shopped and passed on, or that founders aren’t updating materials or showing new traction.
  • Anti‑signal side: called fortune‑cookie nonsense and ego; doesn’t change the underlying business; seen as “investing theater” akin to clergy reading tea leaves.
  • General agreement that cold outreach is low‑probability; warm intros and networks matter far more.

Bootstrapping vs. Raising VC

  • Many argue most software businesses don’t need VC and can be built from salary savings, albeit 3× slower and with big personal costs (health, social life).
  • Others stress that polish expectations and competitive pressure from VC‑funded rivals make bootstrapping harder.
  • Profitability is debated: some say VCs mostly chase growth and valuations; others say profitable + clear growth path is very fundable.

Who Gets Funded: Elites, Networks, and Bias

  • Strong parallels drawn between VC filters and Ivy League admissions: emphasis on pedigree, social proof, and fitting institutional norms.
  • Networks, previous successes, and elite schools heavily influence access; many good deals come via “strong trust networks,” not cold decks.
  • Unpaid or prestige internships and elite CS programs are described as pipelines into VC and startup ecosystems, with embedded class filters.

VC Skill, Luck, and Incentives

  • Multiple comments compare VC to spray‑and‑pray: most investments fail; a tiny fraction drive all returns.
  • Some argue VCs mostly manage optics for LPs, living off 2% management fees while hoping for occasional “lottery win” carry.
  • Others push back: fees cover real operating costs; without alpha, funds couldn’t raise successive vehicles.
  • Paul‑Graham‑style “black swan” view echoed: the best ideas initially look bad; even top VCs miss most huge winners.

Structures and Downside: Liquidation Preferences

  • VC money is likened to an extremely expensive loan: on downside, investors get their money back first via liquidation preferences.
  • On upside, they keep a significant equity share; critics highlight asymmetric risk vs founders and employees.

Practical Advice for Founders

  • Don’t treat VCs as friends; treat them as buyers of equity, akin to demanding customers or bankers.
  • Optimize for alignment of thesis, stage, and personality; there’s wide variance in quality and behavior across funds and regions.
  • If a VC fixates on trivialities (like a date on a slide), some commenters advise simply moving on rather than over‑indexing on such feedback.