Member-only story
The Funny World of Venture Capital
How the VC model guarantees failure most of the time
It’s easy to be scornful of venture capitalists. First of all, they’re paying themselves handsomely to gamble with other people’s money. Secondly, although some are quite intelligent as individuals, as a herd they’re reliably foolish. Thirdly, their model is atrocious. Fourthly, most VCs these days came straight out of MBA school to be Associates and then, a decade later, became Partners. Which means they’ve never had any operational experience relevant to the companies upon whose Boards they sit.
Today all these follies are being compounded by a predictable shift in the financial markets that is reminiscent of the dot-com meltdown that began in 2000. The collapse of WeWork has led formerly effervescent public market investors to pause for a moment and consider whether a business model based on ever-larger debt is actually viable. One would imagine this concern could have surfaced several years ago but there’s nothing so foolish as a mob, and markets are nothing more than mobs throwing around billion of dollars of other people’s money.
Let’s dissect the VC model and see what conclusions we can draw.
First of all, the VC model for the last decade and more has not, repeat not, been about investing in companies that can become profitable fairly quickly by…
