[mikedouglas]

It's overwrought takes like this that fail to see the real issues at play. Many of those projects were all good faith efforts and I haven't seen a shred of evidence that a16z was mass dumping tokens (most articles confuse a16z's first crypto fund, which did well, with the funds that were deployed in 2020/2021).

With all that said, a16z (and other top VC firms) are at or near the top in the list responsible for inflating the crypto bubble.

1. They weren't aligned with their LPs. The economics fundamentally changed for them as their funds 10x'd in size and they started bringing in $100M+ in management fees. They should have been asking themselves if they could responsibly invest anywhere near this amount in a crypto market with very few real users, but they decided to cash the checks instead.

2. They used social media to promote these tokens to retail and lobbied to reduce barriers for more retail investment. They were more than happy to sign off on plans for their portfolio companies to sell what were basically securities in seed companies to retail investors at orders of magnitude inflated prices. Then, they used their own Twitter accounts and podcast appearances to play up a potemkin digital revolution and raise their next fund, all while retail investors took a bath.

3. Due diligence was universally awful. They might have avoided most of the worst frauds, but plenty of investments were in unsustainable mechanisms where the collapse could have easily have been predicted.

[dinkumthinkum]

They were all good faith efforts? That is an extraordinary claim. How many crypto-scams do we need to see a pattern? I think scam is almost too banal a word; they are complete hucksters taking advantage of naive people (as well as greedy people similar to them). What Axie Infinity brought about in places like the Philippines is just repulsive.

[EGreg]

It doesn't have to be using tokens.

People like Adam Neumann, Travis Kalanick and Elizabeth Holmes were being propped up by VCs long before any ponzi schemes adjacent to Web3 appeared.

Venture Capital firms can prop up money-losing economics for years (called "reducing friction"), and then dump the stock on the public (called "an exit"). By the time the public realizes there isn't an amazing business model there, they're the proud new owners of stock. Then they proceed to replace the management and pressure the new managements to extract rents from the ecosystem, endlessly, to justify the expected endless growth in stock prices.

If anything, true utility tokens (ones pegged to the dollar) can eliminate speculative bubbles, and let the network be owned by the participants.

PS: Celsius and FTX and Binance are not in fact decentralized protocols. They're middlemen, the very thing Web3 smart contracts were supposed to eliminate. UniSwap, Aave and other protocols are chugging along just fine, and the smart contracts are NOT capable of rugpulling people. Even Dogecoin and other altcoins aren't. Everything is designed to be owned by the participants, with no central control. What happened was that Ethereum lowered the barrier to creating these smart contracts, so we got a lot of crap just like PHP. But it's actually worse than that -- opportunists created centralized services where you can merely deposit tokens and withdraw them, and that's as far as they get when it comes to "Web3".

It's too bad that people blame "Web3" and decentralized networks for stuff done by centralized players who build shiny interfaces that LARP as a decentralized protocols. It's like blaming all gold when banks get robbed, instead of realizing the problem is the centralized banks storing your money, not the gold itself.

[JumpCrisscross]

> Venture Capital firms can prop up money-losing economics for years (called "reducing friction"), and then dump the stock on the public (called "an exit")

SPACs come the closest to what you describe. Even there, the burden of evidence and disclosure is markedly higher than anything in crypto.

[EGreg]

No, VCs not SPACs. They say “reduce friction” and “fail fast”. They do multiple rounds injecting capital into companies that lose money for years, and sometimes do not ever generate any profits or even any revenue. David Heineier Hansson and thr Basecamp guys for example have railed against this for two decades.

Example of a huge fund now deemed worthless by investors, who invested in some of the top Web2 projects (NOT Web3): https://www.forbes.com/sites/alexkonrad/2020/04/05/exclusive...

Actually, if that’s all VCs and Wall Street did, then that would be fine for society because they’d basically build useful money-losing businesses that served a ton of people. But some VCs go further. They encourage companies to build a monopoly and extract rents forever. Most of Big Tech ended up this way, and there is a reason many people are not happy. Peter Thiel is open and honest about his opinion that “competition is for losers, build a monopoly”: https://onezero.medium.com/competition-is-for-losers-how-pet...

This has a huge effect on society. Take the Facebook example… Mark Zuckerberg was programming geek who liked Open Source. Microsoft offered him $1 million for a producy he built in High School. He refused, and put it up as open source.

In college, he hacked together projects like Facemash and Facebook using PHP. What people don’t know (and what was left out of the movie) is that Mark Z wanted to create Wirehog, a (gasp!) peer to peer, decentralized file sharing system. I was at the first TechCrunch Disrupt when Sean Parker was interviewed on stage. He proudly recounted how “we put a bullet in that thing”:

https://techcrunch.com/2010/05/26/wirehog/

We being him and the VCs. You see, Sean Parker once upon a time was ALSO a guy who built a successful product that was by and for the people — Napster. And it also went up against a different industry that liked monopolies — er I’m sorry, intellectual property. They formed associations like MPAA and RIAA that sued Napster and destroyed it. But Parker learned the VC gane after that. He started Plaxo. He discovered Mark Z the way talent scouts discover artists for record labels, and brought Mark together with Peter Thiel. Clarion Capital turned $500K into $5 Billion.

So they took an open source-loving software-hacking geek like the ones you should celebrate in Hacker News, and turned him into a corporate golden boy who runs a monopoly, bullies and buys up the competition. And you are conditioned to support that so that you, too, can get funded by the VCs. Closed databases and recurring revenues are good. But the Open Web with Web3 and open protocols without middlemen — they’re bad because some middlemen — the very phenomenon Web3 smart contracts are supposed to replace, did what they usually do: amassed money and power from millions of people promising instant gratification and then started having their own private ideas about how to use that money and power.

The thing is that when a VC-funded company has an IPO, the shareholders push Facebook to extract rents forever. And the VCs groom them to do so. So if the VCs are good at their job and the company becomes a wall street darling, that essentially means the investors will be extracting rents from both sides of the ecosystem, and encourage monopolistic practices and intellectual property enforcement lest people defect to open source marketplaces and, say, Uber drivers keep more of their money.

And as for Peter Thiel? He went on to build precrime software for the government.

Tell me where I’m wrong.

[dekervin]

You left no stone unturned. What's your personnal stance? if you are building a startup, are you ok taking VC money ? YC money ?

[EGreg]

Thank you!

It really depends on the VC, but actually on how much control that VC would have. Even Basecamp in 2006 announced they were taking money from Jeff Bezos's VC fund, but see how they justified it: https://signalvnoise.com/archives2/bezos_expeditions_invests...

I'll be honest, we applied to many VCs when we starting out building https://github.com/Qbix/Platform for instance. But it was just too open-source and too general-purpose to be of interest to most VCs. To his credit, Albert Wenger from Union Square Ventures (the same guys who led the Twitter rounds) met with us in 2014 and said he totally OK with disrupting the VC model. He later became a partner in USV. Albert is a rare VC who writes about a post-capitalism world... here is a book he wrote, in which he is giving it away: http://worldaftercapital.org/

I also like USV because even its principal, Fred Wilson, talked for years about crypto leading to cooperatives where the network is owned by the participants: https://avc.com/2016/01/network-equity/

I will reveal the "realpolitik" (i.e. the industry without the romance). VCs often write really cool things and the top ones end up supporting world-changing companies. And many of them are really nice people, in real life, and want to do good, just as many CEOs of large Wall St firms. But the job changes you. Just like a car salesman has to do certain "assholish" things or someone else will make the sale, similarly being a VC makes you do certain things. VCs definitely write a great lot of great things, and on their own those things are awesome. But they're also signals the VC puts out in order to attract "dealflow", so they can be surrounded by "orbiters" of startups the way artists have an entourage or directors have a portfolio of actors.

Most of these startups never make it (think of actors who move to Hollywood and take many extras roles for years) but they are indeed valuable to show the new tech that is being worked on, when need be. The larger VCs ultimately get all the best deal flow, while the smaller VCs attend lots of events and try network their way into deals with the big VCs. The "best deals" are the ones where a company gets heavily funded, attracts a lot of users, and more VCs pile on, followed by Private Equity firms etc. It's a self-fulfilling thing, not too different from DogeCoin or SafeMoon or EverRise -- the only difference is that in the latter, everyone can play VC.

Since 1933, the Securities and Exchange Acts by the US Federal Government established the SEC, and the idea of an "accredited" investor. Crypto made it so that everyone can invest. But to be legal, the crowd would have to through an accredited crowdfunding portal. This is something enabled by the JOBS act, which many people underappreciate.

So yes, if I had a choice, I'd definitely prefer crowdfunding, and we do: https://wefunder.com/Qbix

There are companies (like Rialto Markets and others) that will let you do a whitelabeled crowdfunding on your own site. It's legal and you can sell tokens. There are also other ways to raise money: https://community.intercoin.org/t/how-intercoin-helps-to-rai...

If you want to know my personal stance, here is a video I recorded recently, it's actually for angel investors: https://www.youtube.com/watch?v=4qFuZcaNuRI

[dinkumthinkum]

I think you have probably a point on propping up some businesses but the difference is that these crypto projects are from the outset and their entire lives (from inception to rug-pull) as pump and dump schemes.

[EGreg]

That's true for many crypto projects, but:

1) Many of the projects that failed weren't Web3 at all, such as Celsius, Voyager and FTX. In fact, the very thing that made them fail is that centralized entities took the money and invested it into assets that made them insolvent as soon as the assets lost value. True Web3 is about smart contracts which are designed exactly to prevent middlemen from exercising discretion. Uniswap is solvent and will always be. It's sad that the public conflates the two.

2) Just because someone creates an empty SPAC or shell company or tokens that don't have any utility, doesn't mean the mechanism for creating this stuff is useless. People also created tons of worthless personal websites with <blink> and <marquee> tags in the early days of the Web, and those were pretty worthless also, economically. But the actual technology behind it (HTTP 1 and 2, HTML 1 - 5, CSS, etc.) was very useful and has powered a ton of wealth for the world as soon as responsible businesses built business models on top of it (e.g. e-commerce, software as a service). Similarly, NFTs and so on are just first-generation technology, similar to games like Pong or Space Invaders.

3) In short, I wouldn't say the Web 1.0 is useless because personal home pages (where the PHP language gets its name) were largely useless gaudy things, or Web 2.0 was useless because Friendster and Myspace ultimately failed. If you want to see many examples of applications of Web3 that are useful, just click here: https://intercoin.org/applications

4) And finally, the very people who bought into "yields" and "trading" were essentially participating in zero-sum games where some people (e.g. early investors, or high-speed trading bots) take other people's money (e.g. later investors, or futures traders). It's like going to a casino hoping to beat a poker table, but being the fish.

5) And the entire advertising model over the long term has been in a race to the bottom because it is a zero-sum game too. That's why Google and Facebook (sorry, Alphabet and Meta) are down while, say, Apple and Verizon are not.

[yunohn]

> I haven't seen a shred of evidence that a16z was mass dumping tokens

Why do you assume their entire investment was just tokens? No other possible way to cash out?