VCs aren’t your friends

Original Article ↗ Hacker News Discussion ↗

Venture capital is portrayed as a transactional, highly imperfect filter for startups rather than a source of friendship, mentorship, or uniquely insightful judgment. Commenters emphasize that VCs are constrained by their own incentives, interest-rate-driven capital flows, herd behavior, and crude heuristics (such as over‑interpreting small “signals” like a date on a pitch deck), which often leads to missed outliers and arbitrary rejections. Many argue that most founders don’t need or benefit from VC money, that warm networks and signaling matter more than product quality early on, and that bootstrapping or alternative funding can be a better fit unless a business truly requires large, risky upfront investment.

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.