This is so true. That’s why i decided to build my business from scratch with my own money. I’d only go as fast as I could self-fund. I’d also only get into a business that is something I could fund. I.E if I want to build software, but can’t afford to finance it... is build a service company first, make money there, and use that to fund software company. I rather do that and it take 10 years than fund from a VC and do it in 12 months building a fake business. You miss out on some serious skill development by not learning to build a company without any funding. Before you raise any money. Learn how to build a business from the ground up by actually creating products/services that you can sell profitably.
And the founders are in on it, they feather their beds as much as they can before the music stops, anyone who isn't in the C-suite or part of the original founders is left holding worthless stock. Adam Neumann is a perfect example of this and even proudly admitted to "playing the private markets perfectly."
I like this honesty. Insane what’s going on in VC Land . Just like the QE. Meantime some really promising startups with working product suffering raising seed funds..
the next big financial crash will expose these "massive companies" running on negative cashflow every month for years now. the only reason they are still operating is because fundraising and a lot of those companies are just happy to do that without finding a viable solution to become sustainable.
I won’t say Amazon’s as evil just because Jeff Bezos feels sad that his head looks like a penis. But yeah other than that Bezos is pretty evil (just sad and lonely that his head looks like a cock!).
Well said. It sums up We Work that branded itself as a tech company although it was obviously a real estate company and their backers the Vision Fund that pumped money into them like there was no way they could fail.
6:30 Chamath: You are making a million-dollar year, over 10 years, think of how much you are making! Interviewer: 10 Million Audience*: starts laughing* Chamath: I mean you look stupid, but you are not stupid
This is how it is with the companies that collect and collect more investment, without making their product better. Only invest, if you see continuous product improvement ! And continuous increase of loyal customers.
He doesn't understand tech companies as you cannot apply classic financial analysis effectively to them so generally avoids them. Take for example Tesla... I guess Apple is an exception to that rule as maybe he sees safe haven in it.
Most of VC firms say they will do that, they will do this, never to early to talk with us, apply early, we partner with early founders, etc Reality is they are doing just PR EXERCISE. THAT'S IT.
"Confidence tricks exploit typical human characteristics such as greed, dishonesty, vanity, opportunism, lust, compassion, credulity, irresponsibility, desperation, and naïvety. As such, there is no consistent profile of a confidence trick victim; the common factor is simply that the victim relies on the good faith of the con artist."
12:39 to 1309 is all you need to understand. Lived through 3 of these horrible VC deals . . ."ponzi" makes it sound sophisticated, closer to Amway or the original "airplane" scam from the early 80's.
Look at lectures , read books mentioned by him , study his bets. OR understand where your circle of competence lies and crush markets unbeknownst to guys like Chamath.
The funny thing about these scooter companies is that they will never be profitable until the scooters can last 6 months without new battery (3 months now) and cost half as much to make as they do right now. This will never happen. It is a failing business model unless these companies get an endless supply of venture capital. The only reason Uber works is because Uber doesn't own the cars. Once Uber starts using driverless cars, they will fail as a business.
electric cars batteries already last for hundreds of thousands of miles and are improving every year and self driving would eliminate Ubers largest cost - paying the drivers. Comparing an autonomously driven car to a scooter is just pure ignorance
He only came out to the world about the true nature of VCs after he made his money and got out. You should hear his magnetic talks while he was in the thick of it. He's a master bullshiter. And he only "grew a conscience" after his divorce when his focus shifted to his new girlfriend instead of his company, and all of his partners left his firm. He had to "get out" of the VC business or fail in front of the whole world. He got out, and NOW tells everyone it's a pyramid scheme.
Absolutely. They have a monopoly but they deny it. Do read "Zero to One" by Peter Thiel (Founder PayPal). It's a great book for startup founders and investors. Here is an excerpt from his book. "Monopolists lie to protect themselves. They know that bragging about their great monopoly invites being audited, scrutinized, and attacked. Since they very much want their monopoly profits to continue unmolested, they tend to do whatever they can to conceal their monopoly-usually by exaggerating the power of their (nonexistent) competition."
This guy is VERY smart and insightful. He will be right in his prediction. The question is when? The other thing that is very concerning is all of the "fund of funds" which means you are paying fees on top of fees and the poor retail investor who was talked into by the broker has no clue.....what a shame how this will ultimately end and how the "common person" will lose their shirt...reminiscent of 2001, 2008, etc.....
It sounds to me like someone needs to me like someone needs to create a big short for the venture capital industry because this sounds a whole lot like the 2008 Mortgage backed securities problem.
it isnt hypocrisy, its him explaining the lessons he learned from those situations. he has lived this experience, and he certainly understands it more than we do because of it.
I want the product he's selling though. I don't have the money for his product, but I can see them becoming the cutprice space tourism leader. Meanwhile the industry has a huge development and legal (via ITAR) moat. Will they succeed? I'm not sure, especially if we are entering a depression, but the concept isn't nuts.
He only came out to the world about it after he made his money and got out. You should hear his talks while he was in the thick of it. He's a master bullshiter. And he only "grew a conscience" after his divorce when his focus shifted to his new girlfriend instead of his company, and all of his partners left his firm. He had to "get out" of the VC business or fail in front of the whole world. He got out, and NOW tells everyone it's a pyramid scheme.
I would have agreed with you four months ago, but they couldn't have been more lucky with a near global closing of gyms. Latest results for Peloton show 2.5m members and a 12 month retention rate of over 90%. That might turn into mass cancellations post covid, but it might not.
when all the Beckys and college students stop making payments on the $2500 bikes and canceling the $40/mo memberships and use youtube videos instead its gonna be bad.
So basically he's saying that growth is driven by marketing and sales and the money for that that goes to Google and Facebook ads. Well, 20 years ago, the cash went to pay for TV promos, Broadcast and print campaigns. Its just that today there are algorithms that know you better and can target you really really well with the things you would buy.
Most likely Chamath discovered his new religion after encountering difficulty raising money for a pure hardware company (Virgin Galactic). It's far easier to raise for software companies, because, just like he said, the vast majority of VCs abhor capex.
Early stage investors (Angel and Seed) need to invest in the search and validation of the business models, rather than product development and growth. Only if/when enough data is collected to validate the business model is repeatable, scalable and viable should they consider Series A. At that stage, real growth and financial viability should pretty much be guaranteed. The main risk should now be execution and growth/scaling risk. This is authentic Lean Startup and Customer Development, not (what I call) Faux Lean Startup, i.e. startups that use the terminology of Lean Startup but take a traditional approach of build-it-and-hope-customers-come (or buy them with investor funding).
I came to the same conclusions after listening to Peter Schiff like one year ago. I always wanted to start a IT startup but after I understood the scam I gave up and started hoarding gold and silver instead with my salary from being an android developer for a product that doesn't make a profit.
You had me until gold and silver. Those are purely hedges against inflation and not investments per se... gold nets you no cashflow. Not the best investment.
@@Great_PatBingsoo well hedging for inflation when hyperinflation is coming sounds like a good investment eh? Gold and silver unrealized monetary demand that will be realized within 2 years. After the currency shift I'll find cashflow, until then I'm waiting.
He is right to some degree. Not every VC knowingly pumps money into a business that they know won’t work and simply tries to make money through fees. Investors aren’t stupid. Deals are a lot more complex than what you read in the media. Hindsight is 20/20 but when you are in the weed fight with 30 other firms on WeWork’s B round, you tend to make optimistic assumptions. WeWork had the opportunity to IPO like Uber and Uber is still not profitable. If WeWork did IPO then that would have been a success from VCs perspective, regardless of wework’s profitability.
There are abundance of innovative ways to raise money for your "profitable MVP" today. The fact that you are posting such an elementary question (you'd have googled it smh!) on here says a lot about your problem solving and business shrewdness
He breezed through the “fee” explanation a bit too quickly for me. How is it that the VCs make more money out of their fees than their stakes in the companies they invest in?
Hedge funds, PE, and VC typically they get 2/20, 2% fee management fee no matter what, even if they lose your money, and without even risking their own money. They're mostly not risking their own money. It's money from accredited investors,. The 20 is a 20% performance fee, meaning 20% of the price of the share profits, again without ever even necessarily having to risk any of their own money. The other point is they can get someone else in subsequent series, all the way up to eventually going public, to increase the valuation of the company on the basis of growth, that is created by paying advertising fees to google and facebook. Then they can at some point cash out their stake at a higher price, often before the company has actually earned a penny of net profit as long as subsequent funding is coming in to fund the operations of the company, through subsequent series or even an IPO.
@@mgh62000 wow, thanks for that explanation! One last question: who are the “accredited investors” you’re talking about? Is that other venture funds or is it limited partners like pension funds and stuff like that?
@@Encolpius79 Minimal statutory requirement is $1 million in investable assets or income greater than $200K in consecutive years. However, most VC's require a much higher net worth than that to invest with them.
their way of moving YOUR money into the fund and then get paid a fixed salary which is eventually in THEIR OWN pocket and that is how they fund to pay their expensive mansions and roadsters
@@kenn.alexander taxi Industry destroyed for good. Shared economy got many benefits of it's own. Uber enabled millions of drivers to be able to make a living by working on their terms. Taxi Industry required you to pay higher prices, pay much higher for medallions... And what not. Overall, it was not a good and was hurting consumers. So Uber, Lyft did good.
And his reason for getting out had more to do with his divorce than his conscience. He can suck it along with the rest of them. He's an excellent bullshitter, which got him so far in life and still keeps people hanging on his every word. He played the game and could've changed the rules along the way--like he always promised in his speeches about money being an instrument of change, but he didn't change a damned thing. He scooped up a cool billion dollars before fucking up his company during his divorce, and his business partners left him! He is a BULLSHITER, and he's still spewing it out as if he's on this moral higher ground. He's not.
i think it's spent on services these company offer, which factor into CAC (e.g. ads spending) and COGS (infrastructure / cloud / SaaS) needed to run and grow the business
Not just advertising but also as operational expense for cloud computing and hosting services like AWS, Azure, etc. Since most of the startups are technology based and need these digital resources.
