Dunking on VCs
Understanding and enjoying the meme
Justin Gage has has an ongoing twitter thread exploring one question he keeps coming back to, month after month and IPO after IPO: Why do people take such particular pleasure in making fun of and/or criticizing venture investors?
Justin is right. VCs do seem to attract a particular kind of disdain. At the very least mocking them (us?) has become a whole category of memes. No, we’re not an endangered species and yes we’re all fine. It’s a small violin that plays for the woes of the venture capitalist.
Here’s what I think is going on.
First off, I think there’s a perception that venture capital is a house-always-wins scenario. Place enough bets and you make money even if most or nearly all founders get screwed, right? So it makes sense that people who make fun of VCs. But not only is that perception not true, it also isn’t singular to venture capital and therefore isn’t enough to explain what’s going on. [1]
Private equity investors, for example, don’t get the same level or ire and shade. Venture capital is really just a tiny sub-category of that asset class. Hollywood agents and executives operate under similar power dynamics as VCs but don’t inspire the same feelings. What gives?
I think the answer is that venture capital has so few measurable outcomes and the timespans over which they occur is so long that assessing quality is nearly impossible. A firm might have a great collection of logos on their website but you don’t know how much they paid, when they got in, how involved they are, or even if those companies will ultimately be successful. Just think of all those investors who made their names as big time Blue Apron backers.
No, in venture capital you can’t really build a brand or reputation on performance. You can’t advertise competence via returns. It just takes too long. VCs measure performance in 8-10 year fund lifecycles, not quarterly returns or annual revenue. Instead, VCs have to cultivate brands for themselves and their firms through omnipresence: they and their takes have to be everywhere always.
That brand is how VCs get access to deals and founders. Moreover, they have to seem like allies, friends, and advisors to founders, not mere financiers.[2] This leads to a kind of new-sincerity particular to this weird little asset class. It’s all precious agreement, and mutual backslapping, and virtue signaling, and affected humility. Everyone is humbled and grateful for their own magnificent, towering achievements.
The incentives are there for VCs to talk and write and podcast and tweet and generally have an opinion on everything all the time. Cutting through the noise means having not just opinions but takes. Preferably steaming hot ones.
Venture capitalists need to look smart because it’s impossible to prove they’re smart. Perception, not returns, is reality.
The result is an insider-y industry dominated by middle aged white guys named Hunter and Travis and Jeff (and all the various spellings thereof) pontificating and self aggrandizing shamelessly, constantly, and at ever-increasing decibels (he said via his blog that no one asked him to write). [3]
Making fun of VCs has become a meme unto itself and has now begun transcending into the kind meta-meme or hyper-take the internet so often produces. Now the cool thing for VCs to do is to make fun of other VCs to show you’re in the joke (the VC associate wrote in his blog post about making fun of VCs).
The best we can hope for is to die young and never tweet.
[1] Almost no one makes money in venture, at least not off of performance (getting fat on management fees doesn’t count). Benchmark returns are really pretty shit. Benchmark’s (note the apostrophe) returns on the other hand…
[2] Note my use of “they.” I’m one of the good ones and all my takes are great.
[3] Sorry to any readers named Hunter or Travis or Geoff. You’re reading this which already means you’re great. Love you.