HN Theater @HNTheaterMonth

Not really. Just because they exit at a later stage doesn't mean its not a ponzi scheme. Chamath Palihapitiya certainly disagrees with you (https://youtu.be/RwRZtZQoLtQ). Skyhigh valuations with no product market fit and no path to revenue certainly sounds like one to me. Many startups burn money to acquire customers, but churn is high because they don't have PM fit. It becomes an endless cycle of raising to acquire more customers. Once the money stops, someone will eventually be holding the bag.

Chamath Palihapitiya talked about this problem in an interview from 2018. Many tech startups spend 0.40c of every VC dollar with FB/Google/Amazon.

Here is the original interview: https://www.youtube.com/watch?v=RwRZtZQoLtQ

⬐ xamuel

Ironic considering most tech startups' exit plan is essentially to be acquired by FB/Google/Amazon. They are de facto R&D branches for FB/Google/Amazon with all the attendant risk and none of the benefits.

I really liked this video featuring Chamath Palihapitiya[1]. It's essentially a rant about most of VC being a ponzi scheme: https://www.youtube.com/watch?v=RwRZtZQoLtQ

[1] (from Wikipedia) Chamath Palihapitiya an is a venture capitalist and the founder and CEO of Social Capital. Palihapitiya was an early senior executive at Facebook, joining the company in 2007 and leaving in 2011. He is a minority stakeholder and board member of the Golden State Warriors.

It would seem that softbanks backing by the Saudi brutal regime should give Silicon Valley idealistic founders moment of pause before accepting their investment.

WeWork founders banned meat from their office meals can they really accept to be owned by this fund?

Once the SoftBank money stops flowing does the chamath described Ponzi scheme stop causing the whole thing Venture backed growth story to unravel?

https://www.businessinsider.com/softbank-talks-invest-15-bil...

https://m.youtube.com/watch?v=RwRZtZQoLtQ

⬐ dmix

I watched the whole Chamath talk you linked and I'm not sure I'm entirely convinced. Every couple of years there is a guy like him yelling that this is all a big ponzi scheme about to collapse.

But Softbank is a poor example given how the invest almost entirely in late stage companies, mostly with real profitable business models, who would otherwise easily find plenty of funding in traditional less risky capital markets (who don't share the same critique but push the same never-ending growth pressure and often far worse backroom financial trickery).

This is very distinct from the dotcom boom... or you know acutal Ponzi schemes... which were entities which raised countless millions on zero-value organizations. He's probably right in some ways but lost me in his exaggerated/radical positioning which he seems fond of.

⬐ takanori

Acknowledged and true that there is always someone with a contrarian pessimistic view. Chamath seems bent on "burning it down" after his own firm went through what objectively looks like a meltdown.

Also true that later stage companies have working business models (though they are typically not profitable a tradeoff they willingly make for growth). See the comment above on plenty of funding post SoftBank round. I've also observed that their valuation forces founders to do subsequent down rounds.

The Ponzi scheme argument (not perfect) is the gains are all paper valuations that are based on growth continuing or more investment being piled in. Once that stops the whole thing crumbles. After Softbank with a $100B fund, where else does the funding come from? IPO?

⬐ cududa

Chalmath only started talking this way once investors and employees fled his fund.

⬐ joe_the_user

Once the SoftBank money stops flowing does the chamath described Ponzi scheme stop causing the whole thing Venture backed growth story to unravel?

Hmm, so should we call this sort of thing a "Ponzi Scheme" or a "money laundering scheme"? That is given that Softbank is a way to recycle the Saudi Billions while other schemes involve Russia oligarchs or Chinese money itching to leave it's homeland?

⬐ adventured

The Saudis don't require a means to recycle - launder - their money. Nearly the entire world will accept their money, no questions asked.

Saudi Arabia's only serious pressing concern economically, is building a non-oil-based, sustainable economy before the oil growth era stagnates or reverses course. They have rapid population growth (50% in 15 years), the clock is ticking against their ability to sustain a future with 50 or 60 million people.

It's not enough to just replace oil in the equation as it is today for their economy, they have to figure out how to do it for twice as many people. They need to figure out how to build out a $1.5 trillion non-oil economy within 30 or 40 years.

⬐ takanori

Compounded by the fact that almost their entire population lives of off generous government subsidies. Will be tough to instill an entrepreneurial spirit in the next generation.

⬐ EGreg

I do actually often think twice about accepting a state fund such as from the Saudis.

But then what about buying German cars, some of which were started by Hitler (such as VW)?

⬐ miketery

What are you smoking. Germany has accepted their past, and has moved forward to rebuild and establish an advanced and civilized society.

⬐ EGreg

One could say that the Saudis have moved on from spreading wahhabism and funding terrorists as well, regretted their mistakes spreading an intolerant ideology, and are now much nicer.

But I guess the kingdom is still permeated with Sunni Islam and they are willing to bomb the crap out of Yemen so it won’t fall into Shiite Houthis’ hands.

⬐ aaronbrethorst

MbS: First of all, this Wahhabism—please define it for us. We’re not familiar with it. We don’t know about it.

Goldberg: What do you mean you don’t know about it?

MbS: What is Wahhabism?

Goldberg: You’re the crown prince of Saudi Arabia. You know what Wahhabism is.

MbS: No one can define this Wahhabism.

Goldberg: It’s a movement founded by Ibn abd al-Wahhab in the 1700s, very fundamentalist in nature, an austere Salafist-style interpretation—

MbS: No one can define Wahhabism. There is no Wahhabism.

https://www.theatlantic.com/international/archive/2018/04/mo...

⬐ toomuchtodo

> One could say that the Saudis have moved on from spreading wahhabism and funding terrorists as well, regretted their mistakes spreading an intolerant ideology, and are now much nicer.

They executed an American permanent resident journalist, Jamal Khashoggi, in one of their consulates on foreign soil within the last two weeks, and failed at the cover up [1].

[1] https://www.cnn.com/2018/10/15/middleeast/saudi-khashoggi-de...

⬐ eveningcoffee

Please note that I am not excusing the (alleged) murder but trying to put things into a perspective (for my self).

What if Jamal Khashoggi was a Ruhollah Khomeini of Saudi Arabia [0]?

That is, what if it was not about wahhabism but about self preservation?

[0] https://spectator.us/2018/10/jamal-khashoggi

⬐ None

None

⬐ lostmyoldone

That argument you put forth is entirely without substance as far as I can tell, and probably shouldn't have been made at all.

One of your examples is ongoing, the other is not.

One could change the future, the other can't change anything except other car markers margins.

One could be justified, the other can not.

I could make a much longer list, but I hope you get the gist.

⬐ takanori

It’s worth noting that the commercial real estate companies are exposed should WeWork falter.

https://www.cbinsights.com/research/wework-real-estate-earni...

⬐ sajid

Great interview.

On the ground insight into venture incentives and how they are misaligned with the needs of startups and founders.

"Grow real, grow slow, like Amazon."