Comment by cyberax
3 days ago
I'm in a startup, and we are (somewhat lazily) trying to do Series A fundraising. We _are_ a company that has AI as a part of our app, but not an LLM company.
The advice from our early investors was to basically overhype ourselves, telling that we can transform the world overnight. And also to remove any mentions of our _actual_ product that has real paying users because it can muddy the grand vision.
Another hot thing in the startup world is what I'm calling the "vibe income". It's potential income from a signed MOU or contingent on the success of some trial. So we have to compete with companies saying that they're already having $500k in "income" after just a few months. We naïvely thought that our GAAP income is more important.
I have really bad feelings about this whole situation.
Don't take any sort of business advice from VCs. They aren't even competent at running their own business, which is a financial play, not an operational business building and selling products or services. 90% of VC firms don't provide a net positive return to their own investors. That should tell you something. Their advice is self-serving to help inflate your equity value and has nothing to do with your current or future business.
You’re better off bootstrapping/self-funding and just being a humble old business, not a startup.
I have so many thoughts about this, I'm not sure where to start.
Doing a raise has always been weird, there are lots of things that impact it, and different players in PE have totally different theses and motivations.
As a founder, finding the right investment partner has always been one of the most important and difficult things.
As a rule of thumb, I recommend to founders that only about 50% of the value of the investor is their cash investment. In many cases, less than that.
The things that are at least as important are their advisors (who open doors for you), their portfolio companies that can partner with you, and the alignment of their thesis and worldview.
I don't see any of that as having really changed much recently, other than a tightnening of capital for non-AI companies, but I suspect we're going to see a big shift there over the next 18-24 months, as the pressure from the LPs to deploy stays the same, but fingers get burnt from this bubble.
Also, don't forget family offices and industry VCs (Optum Ventures, etc...) that have a lot of these features built in to their structure, not just the fund.
It's not our first fundraise, and not our first startup. But something _is_ distinctly different this time. People are no longer willing to wait for years and are betting on nebulous claims in hopes of a huge payout.
And I feel that this goes far beyond the usual VC risk-taking.
I think society at large is increasingly hitting a gambling mindset fueled by algorithms murdering everyone's attention spans and dopamine receptors. Life is also expensive and it's NOT getting cheaper. Combine thag with endless stories of the rich and powerful getting away with heinous acts and most people have stopped caring. They stop caring about the future, they stop caring about any kind of long term thinking, because why would they?
Interesting, I'm curious about the changes - I know AI has drawn most of the pump & dump sharks, just like crypto before it, but there were always a set of responsible holdouts that resisted fad-tech for real value opportunities.
Are you seeing a difference there?
4 replies →
Most of the industry is running on bullshit. The concept of running a productive service that meets genuine user needs in a clever, delightful, and satisfying way has been replaced by grifting, scamming, hyping, manipulating, and outright lying - a headless chicken voodoo dance to attract moar moneyz and worship the blind, idiot god Number Go Up.