[quadrifoliate]

> They've been in business for years. All the founders or investors had to do was drive a few hours to go visit them. Or pick up the phone.

The aim for venture capitalists is necessarily to make risky, long-tail bets that have little chance of paying off; and that incumbents find too risky.

Sure, this bubble has popped, but what success in this case might have looked like is grocery stores selling mass-produced microgreen salads (that can't be reasonably transported without bruising) which were grown upstairs.

It's a reasonable criticism that VCs don't understand agriculture well enough to estimate the risk of "moonshot" style initiatives in that area. But criticizing them for "not picking up the phone and talking to existing operations" is kind of missing the point. Of course the existing operators are going to say it won't work.

[mediaman]

The reason for the long-tail bets being improbable is important, though!

If the reason is because it takes lots of capital, or because there are network effects (e.g., AirBnB, eBay), or because it's a winner takes all market, or some key piece of technology has to be proven out, then sure, shoot your shot, someone will get the bullseye and win the day and it'll be a cakewalk raising the next fund.

But if it's improbable because nobody wants it, that's not the same thing.

That's why a bet being improbable should not be the reason to invest in something.

A VC may look at a bet and say, "sure, the win condition is unlikely, but lots of people will want this, so if it wins, it's worth billions." And maybe they write a check.

But if another VC looks at a deal and says "it's not likely to work, and also, even in the optimistic case this is worse than existing solutions," then there is no market problem being solved. This second VC will likely be leaning more on their management fee than their carry to pay the mooring fees for their yacht.

And a phone call to that farmer would have told them that while microgreens don't ship well over very long distances, they do fine in climate controlled trucks over a couple hundred miles. Part of a VC's job is to de-risk investment decisions by validating key assumptions.

[wpietri]

> But criticizing them for "not picking up the phone and talking to existing operations" is kind of missing the point. Of course the existing operators are going to say it won't work.

This is true but irrelevant. The important part is asking them why it won't work and then seeing if that's correct. VCs are supposed to invest in risky things, not futile things.

Of course, as with WeWork, there's a big gap between what VCs are supposed to do in terms of due diligence and what they actually do.

[bluGill]

VCs had so much money that they couldn't do that work. They have to invest all that money someplace no matter what, even if a moment's thought would show it was a bad investment because they need to show a return on investment, and sitting on a lot of cash isn't showing a return.

This is one way the little guy can beat the market: you are allowed to sit out the market for obviously flawed things. Beware though, that thinking is also why many little guys didn't get rich on Amazon, Microsoft, Apple, Google, and the other big names that at one time looked like bad investments.

[hef19898]

In the last decade or so, VCs have been less interested in finding the next Facebook or Apple or Google, but rather something they could sell as such. So they always seemed to fund the same kind of founder, the same great kind of vision for the future. They did so long enough to keep the lights on until an IPO, or SPAC as of late. Now that this route is basically dead, they seem to reevaluate their portfolios differently. And that might actually include the non-marketing side of the due dilligence nobody seems to have done so far.

[quadrifoliate]

Sure, risk profiles in a a high-interest rate environment function differently from those in a "here's some money at ~0% interest" one. And I wouldn't be surprised by ag-tech being off the table for a few years in portfolios due to the fact that it's not well understood by many VCs.

[nradov]

Existing clinical lab operators said that Theranos wouldn't work. And they were 100% correct.

Physicists and audio engineers said that UBeam wouldn't work. They were also correct.

If existing operators say that something won't work because it's too hard or because customers won't like it then they could be wrong. But if their statements are backed up by hard science and economics calculations then only a moron would disbelieve them.