As I look at things like Uber and YouTube and Twitch, it reminds me of a friend's definition of Web 2.0: "You do all the work, we take all the money." Given the history of business, there's no reason to think VC-funded platforms will do anything other than extract maximum cash. Great for VCs and execs, not so great for the people doing the work.
I've been thinking about what those companies might look like if they were truly centered on workers and creators from the get go. Sounds like the platform coops are thinking along the same lines.
Maybe then. Right now you can work 30 hours, party and then get bought by another VC operated company.
This is what was missing when Apple and Amazon started and for the last decade this dirty VC business has stifled innovation and made people look only for an exit. That is why the biggest companies in the VC era has been companies like Uber and AirBnb instead of Apple and Amazon.
Those startups are going to give the VCs back something. They will make profit. But this is something which will not be making profit. Its a non profit thing and the people pledging money will not get a penny out of it (may be some rewards but that's for major investors.
I admit the over exaggeration on the "living like a king" part but I fail to see any analogy with VC funded social startups and this
There's a great alignment I think between having the consumers themselves invest the money. I read somewhere that VC's who invest in startup's actually lose money on average. The reason they're doing it in the first place is because they represent pension funds and similar who want a finger in 'that startup action' for diversity, with no one monitoring the eventual results closely enough (the consumers probably end up with +1-2% overall)
If point of capitalism is the efficient distribution of resources to the places they need to go then the VC's are actually doing a pretty bad job of it (on average)
At least with crowd sourcing it's a step in the right -direction- toward funding ideas that seem popular, that a bunch of consumers who invest would hopefully be doing so because they also want to use the product.
I'm sure there'll still be serial swindlers and greedy investors who get scammed, but in a utopian world it'd be great if it was sort of like Kickstarter, where you put in $50 with no guarantee of actually getting what you're funding, but now there's a chance you'll not only get that product, plus your money back, plus a nice little bonus sum if the company succeeds. I guess the key is managing the expectations of the investors
I'm biased, but it is really interesting to hear VCs addressing this topic in the first place. Feels like something changed from the nascent Web 2.0 days where it's presumed every startup needs lots of capital to scale.
I once heard that a well-known gig economy company would open up new cities by giving employees essentially-unlimited credit cards and telling them to buy whatever they thought was needed, with no controls or multi-person approvals.
It'll be interesting to see how VC changes in the modern environment - will they still be all-in on founders willing to unsustainably burn money just to incrementally boost the probability of growth, or will they begin looking more for experienced operating teams who reach and maintain profitability (or a rapid path to get there at all times)?
This interview resonantes with something I have been thinking for a while.
Essentially the whole VC fueled hypescaling in a race to become the next unicorn especially in the "sharing economy" seems like a giant pyramid scheme. Like it's all about scaling so the value increases so that in the next round the VC of that previous round can cash in on the next VCs who hope to do the same thing in the next and so on, with the end goal of finding gullible regular investors once it comes to the IPO. All that without a sustainable business model, look at all the bike hire companies a couple of years ago, the scooter companies now etc.. Even Uber might never be profitable.
All that is done on the back of society leaving burned soil in the wake. And yes it's an instrument for the wealthy, because they have the means to be among the early investors.
I don't know - how many tens of billions did VCs put into Uber or WeWork, when these companies are not making a dime...
It seems like that's not a factor. Perhaps they find it boring, or perhaps the technical risk is just too high. It's all or nothing. You can BS your way through a classic tech startup as Adam Neumann did. It's harder with something that is a single flagship product that has to drive (Nikola) or fly hundreds of people in the air.
That's good insight and similar to my own experiences. I spent time on various forums in the late 90s and early 00s. It was a golden experience and I got to know a lot of the members there. You had the usual suspects chatting amongst all the lurkers. The model was far superior to the type chat systems were using today to build similar communities.
I did the VC funded thing and personally don't want to go back to it. I also don't really care about the high growth thing but being sustainable is important. Sustained growth and profitability at least means the thing can be around for a while. I also think it comes down to the values of the creators of any platform. At what point are they going to sell out and why. That really irks me now. Like everything is in the service of wealth creation as opposed to real value. I think the only way to mitigate that is structure the project and team in a way to support it. So if you get on the VC hamster wheel, there's no path but hyper growth. If you go against it and say, run a really normal business or even a social enterprise (aka non profit), maybe it actually benefits the people it's in service of.
How so? I think he's got a point. VC Pumps things with cash, forces them to work well on the surface, and eventually it becomes a thing that isn't so great. Uber pays shit to the drivers and takes a large chunk for themselves. Airbnb is contributing to the housing crisis. What's the problem going to be with AI products 10 or 15 years from now? I think that's a valid question if you look at the history of these types of ventures.
I like Varoufakis a lot. To me one of the more interesting points in the article is the one he makes towards the end, that technological firms have switched from a capitalistic mode of production (extracting profits from markets) towards what he calls techno-feudalism (extracting rents outside the market).
It's always surprising to me that so few people seem to notice that tech platforms, where a lot of human activity is organized on now, to a large extent have completely left behind market mechanisms, instead relying on algorithmic prediction and planning, and replacing profit generation with financialization by either the state or a sort of aristocracy.
I think this is directly visible in the different generations of tech companies. Whereas Apple and Microsoft started out as companies that relied on selling units of products at a surplus for profit and had to pay labour expenses in the form of wages to a large base of salaried employees, the modern VC funded generation of platform firms does no such thing, rather you have VC investors finance the activity of platforms who don't generate profits at times for decades, and derive value directly from the experience of their users outside of any exchange of money, and the value is largely being generated by an unpaid base of workers who are not even in any employment relationship.
Oh yeah and eventually Diaspora will overtake Facebook. Oh wait...
If the VC model did not work it would have simply gone out of business. The reality of business is that doing things at larger scale requires capital. Sure you might be able to pull-off your lifestyle, but its going to be hard to motivate employees when the VC funded competitor gives them michelin star chefs, 50% higher salaries and a shot at windfall in few years. Sure twitter might be laying off few employees now. But before that it made its founders billionaires and several employees millionaires.
I think the binary nature of the VC model is a big part of the problem. I don't know what the alternative's going to look like (crowd-funding?) but right now we have a two-caste system. There are "the funded" and the cold and hungry. The inside and the outside. Losers and winners selected before a single one of either side has had an opportunity to accomplish much of anything. There are a lot of things that could be said about this model, but I think it's pretty clear that it's not good for technology. As we see, most of this bubble is in "social media" VC darlings with mediocre leadership and MBA culture... and still little investment is going into Real Technology startups founded by actual engineers.
A VC cash infusion puts someone from one category into the other immediately. Someone goes from being (in terms of VC-istan social status) a beggar to a baronet in an afternoon. It's really an all-or-nothing game being played. Making it a million times worse is that VCs usually talk to each other about the deals they're making, which means that one VC's opinion influences the multitude. If there were more independence among VC decisions, we'd see an order of magnitude more good startups getting funded.
I think VCs tend to get distracted by their kingmaking powers as well. It's no longer about delivering the best returns for their client. It's about using that magic wand to be "cool" and minting the right baronets, the ones who will use the press access and social status they get from being Funded to make that VC (individually) seem more stylish. Like Tyrion Lannister, they just (::sniff::) want to be loved.
It is, sure. In theory, at least -- existing VC has fairly well demonstrated that they have no particular skill at directing investment to companies that will actually turn a profit (largely encouraged by scale problems).
The real challenge is how (1) to design a VC investor model that doesn't take venture-bait, and then (2) how to convince those with capital that you are actually both different and better.
Of course, there already is something that "disrupts" VC to an extent -- Angel Investors and Angel Funds. These have proven to be better at avoiding VC-bait, but the way they achieve this (the Angels invest their own capital) inherently limits their scale.
I'm suspicious of attempts to blend the two, attempting to create a crowdsource-based angel network, for example, because I think you lose the expertise available in smaller networks of more-highly-engaged investors. Then again, for some types of projects "microfinance" worked 10+ years ago (when that was the cool new thing). It was mostly engaged in for semi-altruistic reasons rather than strictly profit-seeking ones, but maybe something slightly bigger ("centifinance"? "decifinance?") could work.
But we definitely could use more types of Angel networks -- especially those not looking for the next 1000x opportunity, but instead the next 5x or 10x or 20x opportunities, as these are the types of (workable) businesses hardest to get off the ground today.
For all their power, I think most people's biggest interactions on the web are with Facebook, Youtube, Amazon and Google. Do you have any good examples of VC-funded UX experiences that fairly prevalent?
VCs are here both symbolic of a system that seeks outsized returns and the catalysts of that system. VC funding is the accepted model for startup success and it's very difficult to find advice on starting a serious startup that doesn't anticipate VC-style backing. As a result, it's become the norm and an obvious starting point. Capturing the culture of early-stage startups in this way has lead to a monoculture where even communities like Indie Hackers advocates for VC funding[0]. VCs aren't literally the problem but they represent and reinforce the broken status-quo.
I'm interested in the properties of the system we've created and participate in and so this is a generalized observation. There are always counterexamples to generalisations but that's not to say that there isn't something valuable about the generalisation itself. I'm not arguing that without VCs founders would be perfect altruists but there could be other funding models that create fewer conflicts of interest between producers and consumers of technology.
I think you have part of that backwards. I agree VCs don't care about creating sustainable businesses as long as they get fat exits. But I think the reason we don't have more non-VC startups is that VCs are willing to spend a lot of money to create monopoly or oligopoly players. E.g., Super Pumped makes it clear that Uber was very active in trying to strangle all competition in the cradle.
For most Founders who go the VC route,the reality is your boss is the investor. Crowdfunding 2.0 aka Security Tokens will change this dynamic. Then your boss is the market, which is more healthy.
As I look at things like Uber and YouTube and Twitch, it reminds me of a friend's definition of Web 2.0: "You do all the work, we take all the money." Given the history of business, there's no reason to think VC-funded platforms will do anything other than extract maximum cash. Great for VCs and execs, not so great for the people doing the work.
I've been thinking about what those companies might look like if they were truly centered on workers and creators from the get go. Sounds like the platform coops are thinking along the same lines.
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