[ryanSrich]

VC without huge ROI expectations doesn't work. Like the actual economics don't work. I don't really understand the point of any of this. VCs need massive outsized returns because 99% of the companies they invest in will return $0 to the fund. You need that one company that returns the entire fund (ex: $500m) + some percentage.

Also, from the article "And founders can even buy back the stakes (ranging between 10% and 15%) by hitting certain revenue targets"

10-15% interest on a crazy high-risk loan makes absolutely no sense to me whatsoever.

[fragmede]

Another part of VC economics to understand is to look at Uber. Total disaster, right? Softbank and retail investors got totally screwed by the IPO due to questionable economic assertions made by Uber. But the angel and early series investors, circa 2011? Still made out like bandits. An IPO price of $72, when you paid pennies per share, times several hundred thousand shares equals a cool $10mm, easy. Perhaps not as much as they would have liked, but that's still a pretty good payday considering later investors lost money.

WeWork entirely failed to IPO, so early investors not named Adam Neumann got screwed. Thus, on the spectrum of gregarious companies, with WeWork and one end and Uber at the other end, a company just needs to be on the Uber level of gregarious.

[lotsofpulp]

> Total disaster, right? Softbank and retail investors got totally screwed by the IPO due to questionable economic assertions made by Uber.

I wouldn’t call making a bad bet getting screwed. There was no fraudulent numbers I am aware of.

[perl4ever]

I don't think you mean gregarious. Not sure what other word would fit; nefarious doesn't quite. Victorious? Voracious? Sagacious? Rapacious? Vexatious?

[troughway]

How do you figure this won't work?

The article mentions the indie.vc "mortality rate" is 10% whereas for VC-backed ventures it's 44%. Granted, just because a company is alive doesn't mean it's making the investors much money.

I imagine having more companies around for longer would ultimately mean a lot of little payoffs that cover their own investments rather than one big payoff that covers every other investment.

[ryanSrich]

> five years, Indie.vc has backed 34 companies

That's hardly enough time or data to tell what the actual mortality rate is full cycle. A lot of startups will fail in year 6, 7 or 8 after years of pivots and trying to grow.

> On average, they’re growing 100% in the first year, and 300% the second year

Assuming $0 in rev on day 1, of course they grow 100% in Y1. These numbers don't mean anything.

Philosophically I agree with Indie.vc. I think there is untapped potential in smaller companies/markets that mostly is overlooked by traditional VC. But I don't think VC is the answer to that problem. There needs to be some other funding vehicle that can withstand smaller returns over longer periods of time (like a loan, which this seems to be closer to).

[fragmede]

Why don't current traditional VC funding vehicles scale down? Like if you took hypothetical paperwork that says the VC invests $10mm, at a $50mm valuation for Series-A, and just swapped in the numbers $10k and $50k?

I'm assuming the overhead of vetting a deal is a mountain of toil for the VC firm, and there are going to be some fixed costs - eg filing fees for S or C-Corp paperwork, lawyer time. But outside of that, I'm not familiar enough with what a VC does to understand why current vehicles can't scale like , and why a different type of funding vehicle is necessary for $10k investments to become the norm instead of $1mm or $10mm?

Could a tech company automate the shit out of all the toil involved with VC deals and do VC-funding-as-a-service? Stripe Atlas already makes it trivial to spin up a company so further automation doesn't seem unrealistic.

[luckylion]

I Have no experience in the US, but at least for Germany, that won't work because the fees for lawyers, notaries etc will eat that investment completely. You can usually calculate 5-10k€ in external fees only, never mind the time and energy you spend on the talks. Doing a very small round just doesn't work.

> Could a tech company automate the shit out of all the toil involved with VC deals and do VC-funding-as-a-service?

At least for Germany: no. Things like notary fees are pretty fixed, and you can't do that stuff without them (well, you can, but than it'll basically be "here's money, please don't screw me as I have zero ability to enforce anything").

[mrnobody_67]

Also time... Series A investors make 1-2 deals per year. They sit on boards. Hard to do more than 10-12 board seats.

Find deals & founders worth investing in is super hard. Might as well back up the truck and put large amounts to work when you do...

[troughway]

I agree with you here wholeheartedly. The figures shown here are not really all that revealing. It sounds like someone who has some money to invest and is trying to drum up a bit of marketing for themselves by being contrarian.