It reminds me how the Bohemian Club’s slogan, “Weaving Spiders Come Not Here” is a bit farcical given that it is impossible for the club members not to engage in commerce.
The clearest of these is that you have already built it, or an MVP of it that is more than just smoke and mirrors, and there’s users and customers.
If you have excellent proof points and actual revenue growth, you could show up with no pants smelling like weed and somebody might fund you. Then they’d call their press people to do an “eccentric genius founder” piece about the person who showed up stoned with no pants and their pitch was that good. That’s cause if your graph goes up and to the right you’re not crazy, you’re “eccentric.”
If you don’t have any proof they fall back on secondary evidence, like credentials and schools and vibes. The latter, yes, often overlaps with cronies.
And unfortunately that by necessity includes most ideas that cost a lot to prototype, which means credentialism and croneyism tends to gate keep fields with a high cost of entry.
Do you need a working product to get funding? No. But you do need a compelling investment thesis - which takes months and even years of deep thought to come to fruition. Of course you can shortcut this process by smooching but only a select few can pull that off.
While that's completely true, I do think it misses a key underlying point: VCs (and many breeds of investor) are not ultimately selecting for value creating ideas, or for their friends: they're selecting for investments they believe _other people_ will pay more for later.
In the case of startups, those people are most likely other VCs (at later rounds), private equity (at private sale) or retail investors (at IPO).
Very rarely is the actual company profitable at any of those stages, demonstrably and famously.
So the whole process is selecting for hype-potential, which itself is somewhat correlated to the usual things people get annoyed about with startup cliches: founders who went to MIT; founders who are charismatic; founders who are friends with VCs; etc...
So yeah, they invest in their friends, but not because they're their friends. Because they know they can more reliably exit those investments at a higher value.
This is also true for how HFT guys make money. It's not that they are very good in investments. The Fed injects money constantly from the top which gets distributed or trickle down to such firms. Because in a tight economy which is not akin to gambling, it should be near to impossible to make money so easily.
Good ideas are a decent subset, but you could also have a bit of "Greater Fool Theory" compliant ideas.
> Money is not given to good ideas (though, it doesn’t hurt). Money is given to friends.
I have an obvious counter example. I'm sure money is invested for all sorts of reasons to all sorts of people. I'm also sure that money is not exclusively invested based on friendships, and I'm quite sure that money is at times invested based on the merits of an idea. Obviously those merits have to correspond to the ability to form the basis of a successful company, unless it's a philanthropic investment.
Obviously, it is not that cut and dry, but it is kind of impressive how much of the money circulating around is between the same people. I’m not really condemning it. I think it is a natural consequence because humans trust other humans they know. People should be more aware of it and need to make sure they keep it in check. Otherwise, you eventually start getting high on your own supply.
Money is given to ideas that might become billion dollar businesses and teams that look like they can do it. Pedigree, domain expertise, previous exits.
Team matters. What other proxies are there?
Lately, for founders, to which prison they went.
Then, we will develop (read: sell) AI agents that will ingest a proposed code change (created by your front-line agent), and iteratively refactor it until the commit agent accepts it.
