VC isn't VC anymore
Venture capital is portrayed as having morphed from a niche way to fund risky innovation into a “cancerous” system of mega-funds that concentrate wealth and political power, often at the expense of founders, employees and the public. Commenters describe how late-stage private markets, complex share structures and extended pre-IPO periods let large funds and insiders lock in gains while workers and smaller investors hold diluted or illiquid equity. Many argue that this dynamic distorts which technologies get built—favoring hype-driven AI plays and surveillance capitalism over sustainable, user-serving products—and call for alternative funding models, stronger regulation, or a return to smaller, bootstrapped businesses.
Employee equity, dilution, and “scam” perception
- Multiple early employees describe being underpaid with equity that ended up nearly worthless while founders became rich.
- Some argue this is effectively a scam because internal rhetoric (“we’re all in this together”) hides how little upside employees actually get after dilution.
- Others counter that dilution and low odds of success are well-known; standard advice is to treat equity as a lottery ticket and optimize for salary.
- Disagreement over mechanics: some claim founders/investors have non‑diluting or superior share classes; others say the main difference is simply percentage ownership and liquid secondary sales for founders.
VC model, mega-funds, and “Cancer Capital”
- Many comments agree large “do-everything” funds have warped traditional early-stage VC, behaving more like private equity/hedge funds.
- Critiques: power-law dynamics concentrate influence, capital is funneled to pedigreed insiders, and funds use pension/retirement money to underwrite high-risk bets.
- Some see the current system as inherently extractive or “feudal”; others note not all firms operate this way and some early-stage VCs still try to back genuine innovation.
IPOs, private markets, and public risk
- IPOs are widely described as late-stage “bag dumps” where most gains were captured in private A–M rounds.
- Examples raised of relaxed lockups and index rules that create near-guaranteed post-IPO demand so insiders can exit at a premium.
- Some push back, noting many IPOs still raise primary capital for companies; the real issue is people buying into bad deals without diligence.
Regulation, GFC, and staying private longer
- One camp blames post‑crisis regulations for making small IPOs impractical, pushing firms to stay private and overfunded.
- Others argue cheap private capital and mega‑fund incentives, not regulation alone, explain the “stay private, mark up on paper” trend.
- Legal distinctions around “venture capital adviser” status are seen by some as mostly procedural, not core to the corruption problem.
Ethics, power, and politics
- Strong concern that large funds are now political actors: funding media campaigns, shaping tech policy, and steering founders toward ideological agendas.
- Some VCs in the thread claim to prioritize ethics and world-improving investments but feel crowded out by larger, more aggressive players.
- Several commenters link this to a “second Gilded Age,” arguing that meaningful reform will require unions, antitrust, or other structural checks.
Alternatives to traditional VC
- Suggested paths include: bootstrapping profitable niche products, co‑ops/mutuals/LLPs, founder syndicates, family offices, and crowdfunding (with noted regulatory limits).
- Decentralized or trust-centric products are seen as fundamentally misaligned with typical VC expectations for control and monopoly-scale returns.
AI/LLM gold rush and capital allocation
- Many see the GPU/LLM boom as a speculative bubble starving more grounded AI and non-AI innovation.
- Founders report pressure to overhype AI narratives and count “vibe income” (MOUs, contingent deals) as revenue to attract funding.
- Broader worry: hyper-inequality channels resources into fads and surveillance/business models that enshittify tech while underfunding research, public goods, and modest but real businesses.