[robocat]

The biggest red flag is that both VCs and founders are required to be highly irrational at their core.

Founders are gamblers, betting they will be the one to win against the odds. Most companies fail, and the expected returns are approximately zero, with all the average returns coming from few winners. Founders that take VC money are multiplying their risk by giving away preferential shares (founder gets approximately zero if business is just mildly successful), founder radically increasing the pressure upon themselves, and if you need VC money you are usually by definition in a highly competitive market where growth-rate wins the market.

VCs are irrational because the vast majority of VC funds fail to beat the market. Fund managers do OK from their 2% fees, but a majority of VCs will not make excessive money (while some minority do make a lot). https://techcrunch.com/2017/06/01/the-meeting-that-showed-me... references slide 14[2] that shows 2% of VC funds (the top 20) rake in 95% of market returns: VC fund returns are nearly as skewed power law as founder returns are!

Power laws of returns truely suck for the majority. Think iPhone games.

[2] https://www.slideshare.net/gilbenartzy/money-talks-things-yo...