If a VC isn’t investing in some frauds they’re being overly conservative IMO given the extreme power laws that govern the returns to VC investing. Of course you need to do some due diligence, but ultimately it’s going to be way too much time and effort to flush out every potential fraudster that wants your money, and you only have so much time to find good investment opportunities.
Obviously that piece on Sequioa’s website about how amazing SBF is looks terrible in hindsight, but I thought a lot of the commentary surrounding it betrayed a fundamental misunderstanding of how early-stage investing actually works vs late-stage investing. Perhaps fair enough to criticize the people who invested in FTX in late 2021 or 2022 (they did their Series C only in Jan 2022!), but even then it’s probably not always easy to distinguish between a hypergrowth company & an unsustainable fraud from the outside. And ofc SBF had told a lot of lies to everyone, his investors included. The better argument might be that any VC that touches crypto is an idiot because the whole space is ultimately going to zero (I don’t actually believe that but it’s not far off, certainly most currrent projects will fail including BTC), but then again, through token sales crypto offers amazing ways for VCs to make money even on failed investments.
Ultimately VC is just very different to most other forms of investing, including investing the reputational capital of your movement on a high-profile billionaire. Then you really should do some DD.
Ultimately VC is just very different to most other forms of investing, including investing the reputational capital of your movement on a high-profile billionaire. Then you really should do some DD.
This. We forgot that our movement runs on reputation, and reputation is easy to lose, and hard to gain (And rightly so.)
If a VC isn’t investing in some frauds they’re being overly conservative IMO given the extreme power laws that govern the returns to VC investing. Of course you need to do some due diligence, but ultimately it’s going to be way too much time and effort to flush out every potential fraudster that wants your money, and you only have so much time to find good investment opportunities.
Obviously that piece on Sequioa’s website about how amazing SBF is looks terrible in hindsight, but I thought a lot of the commentary surrounding it betrayed a fundamental misunderstanding of how early-stage investing actually works vs late-stage investing. Perhaps fair enough to criticize the people who invested in FTX in late 2021 or 2022 (they did their Series C only in Jan 2022!), but even then it’s probably not always easy to distinguish between a hypergrowth company & an unsustainable fraud from the outside. And ofc SBF had told a lot of lies to everyone, his investors included. The better argument might be that any VC that touches crypto is an idiot because the whole space is ultimately going to zero (I don’t actually believe that but it’s not far off, certainly most currrent projects will fail including BTC), but then again, through token sales crypto offers amazing ways for VCs to make money even on failed investments.
Ultimately VC is just very different to most other forms of investing, including investing the reputational capital of your movement on a high-profile billionaire. Then you really should do some DD.
This. We forgot that our movement runs on reputation, and reputation is easy to lose, and hard to gain (And rightly so.)