[staunch]

YC is still the best and most open gateway to Silicon Valley investors.

But that's only true because they have no real competition and it's a closed system. An open system wouldn't require gateways. There wouldn't be a need to be walked into a private party by a trusted club member.

It looks like the answer to even this huge roadblock is new technology. Amazingly, it's not even theoretical at this point, it has actually begun.

These new decentralized protocols and "ICOs" are going to all but eliminate Silicon Valley as a center of orbit. All startup funding will move onto the internet, where it belongs.

[olympus]

The benefit of YC is specifically that they are a trusted club member, so investors have some idea about the chances that their investment will pay off. It's a good signal.

ICOs don't have the same level of trust because anybody can offer one. I'd rather have PG vouching for me than Kanye West. Sure, when Kanye tells his Twitter followers to buy your ICO it's going to go gangbusters, which is good for your company. But eventually enough of those ICOs are going to go sour in the public's eye and people will stop investing with them. YC will still be around after that.

[dustingetz]

The signal you speak of erodes as YC scales. From the outside we only see the effects of this a couple years later. So the tone of the conversation now would imply that the signal peaked several years ago.

[aroman]

I think you're making two points: one is about SV as the center of tech, and the other is about YC and similar "clubs".

For the second point, I think current ICO hype is going to have the exact opposite effect you predict in terms of clubs. ICOs are incredibly risky, and there is essentially zero regulation. To investors, a company being part of a "club" like Y Combinator suggests that some basic due diligence, idea/founder validation, and other de-risking signals. (Whether this is true or not, I'm not sure.) That's why they like investing in YC companies, I think we all agree.

For ICOs to actually be validated as successful longterm investments (i.e. scammy bubbles/pump-and-dump schemes, which many are, sadly), I think investors will need some assurances about the quality/risk of a given ICO. Since that's basically impossible (if investing were zero risk, there would be no upside!), trust and reputation are good proxies. This is where companies like YC and "valley" connections come in.

For better or worse, if ICOs are indeed the way of the future, they'll probably end up giving rise to that of infrastructure. Maybe that won't be tied to SV, as you suggest. But I think the "trusted club member" won't really ever go away, even if it isn't tied to SV.

[MediumD]

I disagree. You need to have someway of filtering out companies that don't have potential. These 'gateways' are vetting on behalf of investors who don't have the time/resources to perform a rigorous due diligence of everyone who wants funding. Without any sort of closed system, investors would get swarmed with people asking for money. ICOs are interesting, but how do you get around the scams and pretenders without any sort of filter, if anyone can host an ICO?

[_m8fo]

How do VCs "get around the scams and pretenders?" Presumably regular people would do the same thing.

[avip]

VCs have the resources and capacity to pursue due diligence, even in very technical domains. Indeed this occasionally fails and you get Theranos. Yet for the "public", Theranos will undoubtedly become the norm.

[mbesto]

Due diligence guy here.

VCs don't necessarily do rigorous due diligence, especially at the early stages (where ICO's typically play). That being said, VC's typically do some soft diligence checks that investors of ICO wouldn't normally do, for example: personal check backgrounds within their own network, personnel reference checks, review potentially proprietary/confidential information, etc. So it's not necessarily that they have monetary resources to expend during the transaction process, but rather informal/trusted resources at their expense.

[_m8fo]

It's unlikely that VCs have more resources then the collective internet though. Of course there will be scams, but there are scams with or without VCs.

The question is -- should only VCs have the opportunity?

[komali2]

>more resources than the collective internet

My understanding is that, taking cryptocurrency as an example, crowds of uninformed investors will stampede on something that's popular rather than something that's necessarily an objectively good investment. Regardless of your thoughts on cryptocurrency as a concept, I would say an intelligent investor would balk at the kind of ICOs and prices we're seeing.

A lot of this, I think, can be explained by simple psychological concepts like repetitive attraction (seeing something in the news again and again makes you more comfortable with it), good first-impression traits (GOOGL performing better because it's more pronounceable than TWTQR), and other things that have been fuxing with the stock market for decades.

The market has never been rational, and as I've learned from crowd-funding campaigns, the internet didn't make that situation any more rational.

[EGreg]

But why only one real gateway?

[bsaul]

Not sure i like the "private party" less than the massive advertizing bullsh*t jungle ICOs are going to bring if they become mainstream.

At least if someone gets ripped off, it isn't some poor needy person hoping to win the lottery.

[LearnerHerzog]

There was nothing stopping VCs from funding people online the past 10 years. They meet in person because they need to meet the people behind the idea. I don't see this changing very much pre-VR-boom.

[avip]

All startup fraud will have moved onto the internet, where it belongs.