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venture capital

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VC-backed startups commit more fraud, and researchers think they know why
2 months ago
- A report from Imperial College and Emlyon Business School maps how Silicon Valley's VC-backed founders commit fraud and the role investors play.
- Researchers built a database of tech founders and companies prosecuted for securities fraud by the SEC and DOJ from 2000 to 2023, including cases like Charlie Javice, Do Kwon, and others.
- Fraud is more normalized in startups than acknowledged, often driven by investor pressure for extreme growth, especially in overheated markets like the current AI boom.
- The study identifies three stages of dishonesty: surface façading (lying about success), reinforced façading (creating fake evidence), and deep façading (building parallel realities with fake demos).
- Investors co-create fraud by continuing to back founders previously accused of fraud, normalizing misconduct, and founder-controlled boards double the likelihood of fraud.
- VC-backed startups that go public face securities class-action lawsuits more often than private equity-backed ones, and staying private longer reduces scrutiny.
- The report recommends routine SEC audits after a large investment threshold and holding investors accountable for pushing unrealistic growth expectations.
Subject: Airbnb
2 months ago
- Fred Wilson publicly admitted missing Airbnb, a rare move for a VC.
- Paul Graham published email exchanges showing efforts to convince Fred to invest.
- Airbnb began as AirBedAndBreakfast, funded by selling cereal.
- Paul Graham argued Airbnb could become as big as eBay, focusing on accommodation market.
- Fred Wilson was initially skeptical, but his junior team was enthusiastic.
- The emails reveal investors' behind-the-scenes debates and gradual interest.
- Airbnb evolved from sofas to small hotels, proving its scalability.
Steve Blank When Sh!t Hits the Fan – Founders in a Crisis
2 months ago
- Great founders recognize and act decisively in a crisis, while ordinary ones let their companies fail.
- An e-bike company's founders lost a major city contract and failed to learn from the loss or treat the next competition as a life-or-death crisis.
- CEOs must articulate why a specific event is an existential threat and draft a memo outlining what changed, why it matters, and why current operations are insufficient.
- Effective crisis response includes personally leading a dedicated team, setting up a war room, moving to the problem location, and bringing in experienced people.
- A competent founder spots a crisis, a good founder builds new skills, and a great founder already has a plan B.
- Without urgency and action, investors and competitors will make decisions for you, leading to failure.
Steve Blank Making the Wrong Things Go Faster at The Department of War
2 months ago
- The Department of War's acquisition leadership now includes figures from private capital, such as venture capital and private equity.
- The new Warfighting Acquisition System prioritizes speed and timely delivery but risks accelerating the wrong projects.
- Portfolio Acquisition Executives are being used to consolidate overlapping programs, eliminate redundancies, and focus on rapid deployment.
- A key missing element is rigorous problem identification and validation before starting acquisition programs.
- A proposed solution involves a wide funnel of problems with concise summaries, followed by iterative discovery to define minimum deployable products and constraints.
- Reader comments emphasize the need for upfront validation, warfighting impact estimates, and adoption pathways to avoid fast-tracking ineffective ideas.
A Unified Theory of VC Suckage
2 months ago
- The author criticizes venture capitalists (VCs) for being arrogant, sneaky, and overbearing, attributing this behavior to the structure of their compensation, which involves a percentage of large funds.
- VCs take a long time to make decisions and conduct intrusive due diligence because they invest large sums, leading to paranoia.
- VCs often steal startup ideas to share with competitors, driven by the high stakes of large investments.
- VCs tend to interfere in companies by installing their own CEOs and micromanaging, due to large investment risks.
- Large VC investments can harm startups by forcing them to hire unnecessarily or pursue high valuations that limit exit options like acquisitions.
- The author argues that VCs are not inherently bad but are shaped by their work, similar to car salesmen or bureaucrats, and only top-tier VCs like Mike Moritz can avoid these traits due to access to the best deals.
The Venture Capital Squeeze
2 months ago
- Venture capital funds face a squeeze from four directions: too much money chasing too few deals, decreasing startup costs due to open source, Moore's law, the web, and better languages, Sarbanes-Oxley increasing regulatory burdens, and acquirers buying startups early before they need VC funding.
- Startup costs have dropped dramatically—software is free, hardware is cheap, promotion is free via the web, and modern languages like Python or Ruby enable single programmers to build applications.
- Sarbanes-Oxley deters IPOs, making acquisition the primary exit for startups, which shifts the VC role to building companies for acquisition.
- Acquirers like Google are now buying startups at the Series A stage, bypassing VCs and undermining their traditional model.
- Proposed solutions for VCs include lobbying to loosen Sarbanes-Oxley and allowing founders to partially cash out in early funding rounds to align risk incentives.
How to Fund a Startup
2 months ago
- Venture funding operates in gears, with startups taking just enough money to reach the next stage.
- Conflicts with investors can be more problematic for startups than dealing with competitors.
- The five main sources of startup funding are friends/family, consulting, angel investors, seed firms, and venture capital funds.
- Friends and family funding is accessible but mixes business with personal life and may involve non-accredited investors.
- Consulting can fund a startup but carries risks of distraction and lower returns compared to product-focused startups.
- Angel investors provide early funding and valuable advice, but their deals vary widely and may lack protections.
- Seed firms offer standardized early-stage investments with a focus on founders rather than ideas.
- Venture capital firms invest large sums later on, with tougher terms like vesting and board control.
- Startups should approach VCs with personal introductions and when they can convincingly demonstrate potential.
- Deals often fall through due to buyer's remorse and the risky nature of startups; persistence is key.
- Key strategies include spending little, working fast, and maintaining leverage through competition in negotiations.
The Hacker's Guide to Investors
2 months ago
- Investors are the critical ingredient in a startup hub, with angel investors being more important than VCs for early-stage funding.
- Most investors are momentum investors who rely on signals like traffic and other investors' opinions rather than deep technological understanding.
- Investors vary greatly; top-tier VCs are smarter and more confident, while others may be timid and risk-averse.
- Valuations are largely artificial and often driven by deal size; founders should focus on outcomes rather than high valuations.
- The fundraising process is costly in time and momentum; investors often delay decisions and dislike saying no.
- Founders can improve their position by not needing investors and having backup plans; investors prefer startups that are rough with them.
- Investors often collude and care about their portfolio, not individual companies; they may push for risky kill-or-cure strategies.
Why to Move to a Startup Hub
2 months ago
- The speaker's advice to move startups to Silicon Valley is based on urban advantages, not nationalism.
- Startup hubs like Silicon Valley offer better infrastructure, knowledge, and a concentrated market for startups.
- Silicon Valley investors are more aggressive and knowledgeable, leading to greater success compared to other regions.
- Other factors like family commitments, immigration issues, industry specificity, or investor commitments may outweigh the benefits of moving.
- Face-to-face interactions in centralized hubs remain crucial for deals, despite technological advances.
- The success of startups in hubs is due to a deep, specialized understanding of the business.
Why There Aren't More Googles
2 months ago
- Startups that reject acquisition offers often achieve greater success, with larger offers or IPOs later.
- Google and Facebook stayed independent because acquirers underestimated their value, not just idealism.
- Venture capitalists are overly conservative, driven by consensus, and miss truly bold innovative ideas.
- There is a funding gap between early seed rounds (e.g., $20k) and large VC rounds (e.g., $2M), leaving promising startups needing ~$200k underserved.
- The declining cost of startups creates an opportunity for new investors to fill this gap by making smaller, bolder investments.
- VC firms resist adapting to smaller investments, but evolving models could produce more breakthrough companies like Google.
Could VC be a Casualty of the Recession?
2 months ago
- VC funding may dry up in the recession, but startups might not decrease because starting a startup has become much cheaper.
- Costs have dropped due to Moore's law, open source software, free web distribution, and powerful programming languages.
- Many startups can be profitable with as little as $3,000/month, making VC funding a nice-to-have rather than a must-have.
- The connection between VCs and founders has weakened; the recession could cause a complete separation.
- Y Combinator reports record application numbers despite the stock market crash, indicating sustained founder interest.
- Founders increasingly view VCs as not worth the trouble; some startups succeed on minimal funding alone.
- If founders continue to start companies without VC, the venture capital industry could become irrelevant.
How to Be an Angel Investor
2 months ago
- Angel investing is easier and more interesting than it seems; the key is investing in the right startups, not focusing on deal mechanics.
- Mechanics like preferred stock or convertible debt are straightforward; use standard series AA documents and don't obsess over terms.
- The most important factor in angel investing is picking the right founders—those who are relentlessly resourceful—rather than betting on markets.
- To get deal flow, leverage personal referrals; start with small investments to gain experience and build a reputation as a reliable investor.
- Be decisive and ethical: write checks quickly, treat founders well, and avoid strategic indecision; success comes from helping startups grow.
The Future of Startup Funding
2 months ago
- The gap between large VC investments and smaller startup needs is being filled by super-angels.
- Angel rounds are becoming more legitimate, competing with series A in prestige.
- VCs should adapt by taking fewer board seats and doing more, smaller deals.
- Future angel rounds will involve rolling closes, less restrictive terms, and startups in charge.
- Founders are gaining power, leading to faster, simpler, and more founder-friendly funding.
- Investors will need to make quicker decisions and close deals faster to attract hot startups.
- Abuses like option pools and tranched deals will decline as founders gain leverage.
The New Funding Landscape
2 months ago
- Startup funding has entered a period of change with the emergence of 'super-angels,' a new investor type between traditional angels and VCs.
- Super-angels invest larger amounts than angels (around $100k), make decisions quickly, and compete with both angels and VCs by offering a faster, lighter form of funding.
- This shift allows startups to raise medium-sized rounds (like $600k) with less dilution and control loss compared to traditional Series A rounds.
- VCs are responding by making smaller, angel-sized investments, which can drive up valuations and create competition.
- Founders benefit from higher valuations, faster funding rounds, and more options, but must consider 'signalling risk' if VCs decline further investment.
- The long-term outlook suggests convergence between super-angels and VCs, with continued favorable conditions for startups in the next few years.
Black Swan Farming
2 months ago
- Startup investing is counterintuitive; almost all returns come from a few big winners, and the best ideas initially seem like bad ideas.
- Two companies (Dropbox and Airbnb) account for about three-quarters of the total value of funded startups, illustrating extreme concentration of returns.
- In startup investing, there is a 1000x variation in outcomes, which defies typical expectations and makes rational decision-making difficult.
- Financially, only one company per YC batch may significantly affect returns; the rest are just a cost of doing business.
- To succeed, investors must ignore intuitive signals and focus on the rare, often unpromising-looking startups that could become huge winners.
- The best startup ideas are often not obviously good; they seem like bad ideas because otherwise others would have already executed them.
- Fundraising success after Demo Day is a misleading metric; a high fundraising rate may indicate being too conservative.
- YC could theoretically afford to fund startups with only a 30% fundraising success rate, but this would feel wrong despite being financially optimal.
- The psychological difficulty of embracing risk and failure prevents investors from acting on what they know is rational.
Startup Investing Trends
2 months ago
- Y Combinator has funded 564 startups; total valuation of those with valuations is about $11.7 billion, with top 10 accounting for $8.6 billion.
- Batch size was reduced from 84 to 53 to fix an n² algorithm scaling issue, now resolved with new sharding techniques.
- Two major forces driving change: startups are becoming cheaper to start, and starting a startup is becoming a more normal career path.
- Founders will increasingly have the upper hand over investors, leading to less dilution and more control for founders, but potentially more good startups for investors.
- The number of big hits (traditionally 15 per year) could increase significantly as more talented founders start companies, possibly reaching 50 or 100.
- Top venture capital firms will benefit from more high-quality startups, while weaker firms may pay higher prices for leftovers.
- Angel investors have new opportunities: quick decisions (e.g., $100k within 24 hours) can attract the best deals, and founders value speed over prolonged negotiations.
- Idea clashes may become more common as the number of startups grows, increasing competition.
- Series A rounds are problematic: VCs often force companies to take more money than needed to maintain a large ownership percentage, creating tension with founders.
- There is an opportunity for VCs to break ranks by offering series A rounds based on the company's needs and letting the equity percentage vary with market conditions.
- Founders' complaints (e.g., slow investors, excessive dilution) signal unmet demand; investors should do what founders want.
Hardware Founders: (When) Should You Try To Raise VC Money?
2 months ago
- Raising venture capital implies an aim to grow the company to a valuation of over $1 billion within 5-10 years, which for hardware typically requires at least $200 million in annual revenue.
- Hardware sales are 'hits driven' like video games, with one successful product needing to fund years of modest success, unlike recurring software revenue.
- Each stage of revenue growth for hardware companies becomes increasingly complex and costly, with operational costs rising in discrete chunks.
- VCs are incentivized to push for growth at all costs because their business model requires $1 billion exits to return profits to limited partners.
- Founders should be aware of the growth requirements that come with VC funding and consider alternatives like bootstrapping or small investments if they are not experiencing exponential growth.
- Successful hardware startups like Simplisafe, Peloton, and Bellabeat have used VC funding after achieving product-market fit, while others like Lumos and Moment started small.
Anduril in talks to raise funding at $100B valuation, over 3x last year's mark
2 months ago
- Anduril is reportedly raising a new round that could boost its valuation from $61 billion to around $100 billion, with a potential two-stage fundraising process closing within the year.
- The defense tech sector is booming, with venture funding more than doubling to over $12 billion in the first half of the year, driven by demand for drones, autonomous systems, and AI in warfare.
- Anduril has secured major contracts with the U.S. Department of Defense, Air Force, Army, and several international allies, and its 2025 revenue more than doubled to $2.2 billion.
- Other startups like Shield AI, Mach Industries, and Helsing have also raised substantial funds, reflecting a shift toward cheaper, expendable 'attritable' hardware over traditional expensive equipment.
- Both Mach and Anduril are addressing propulsion supply bottlenecks: Mach acquired Exquadrum for $50 million, while the Pentagon supports Anduril's domestic solid rocket motor manufacturing expansion.
- Anduril's investors include Thrive Capital, Andreessen Horowitz, Founders Fund, and current U.S. Vice President JD Vance, though the company denies any finalized financing plans.
Sarah's Wager
2 months ago
- In November 2025, Anthropic's Claude Opus 4.5 enabled AI agents to act autonomously, no longer needing human guidance, marking a shift from childlike to adult-level capability.
- Agents can now take over tasks like coding, health management, and home control, as demonstrated by Nat Friedman's agent ordering him to drink water and redirecting his Tesla to a store.
- The Singularity, the point where machines can improve themselves without humans, is widely believed to have begun in January 2026, with Silicon Valley experiencing a manic energy and rapid investment.
- Venture capital investment surged to $300 billion in early 2026, with 65% going to four major labs (Anthropic, OpenAI, xAI, Waymo), but startups like Harvey, Baseten, and OpenEvidence are thriving by offering specialized AI solutions.
- Sarah Guo, founder of Conviction, is a key venture investor backing AI companies like Harvey and Baseten, focusing on startups that provide alternatives to the dominant labs, and she leads an 'insurgency' against the labs' monopoly.
- Conviction's approach includes a hands-on, intense work ethic, as seen in Guo's relentless deal-making and her firm's success in backing companies that have grown to multi-billion-dollar valuations.
- The text highlights the tension between the labs building everything themselves and the need for specialized, trust-based applications in sectors like law and healthcare, where startups can thrive.
- Guo's background includes growing up in her father's networking company, learning the value of speed and focus, and her transition from Greylock to founding Conviction with a focus on AI.
- The future remains uncertain: while labs continue to grow and attract talent, startups like OpenEvidence are achieving rapid adoption, and the question of whether early-stage investment opportunities remain is hotly debated.
GonzoCapital – The Inside VC Stories
2 months ago
- The author was once homeless, seeking freedom outside capitalism, but later became a venture capitalist.
- He feels conflicted, like a hypocrite, as his current role contrasts with his earlier beliefs.
- The author now works in venture capital, investing in tech startups and navigating the industry's ethical complexities.
- He observes problematic dynamics in the industry, such as funding decisions based on superficial assessments.
- To reconcile his conflict, he launches Gonzo Capital, a newsletter for honest, unfiltered commentary on money, power, and technology.
- The author aims to influence capital allocation conscientiously, rather than being an outsider.

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venture capital

VC-backed startups commit more fraud, and researchers think they know why

Subject: Airbnb

Steve Blank When Sh!t Hits the Fan – Founders in a Crisis

Steve Blank Making the Wrong Things Go Faster at The Department of War

A Unified Theory of VC Suckage

The Venture Capital Squeeze

How to Fund a Startup

The Hacker's Guide to Investors

Why to Move to a Startup Hub

Why There Aren't More Googles

Could VC be a Casualty of the Recession?

How to Be an Angel Investor

The Future of Startup Funding

The New Funding Landscape

Black Swan Farming

Startup Investing Trends

Hardware Founders: (When) Should You Try To Raise VC Money?

Anduril in talks to raise funding at $100B valuation, over 3x last year's mark

Sarah's Wager

GonzoCapital – The Inside VC Stories