[srconstantin]

You don't see something...Ponzi-scheme-ish about the industry? I may not be especially familiar with this, but it sounds like:

1. Man makes short-lived company that makes him rich quickly. 2. Man makes money investing in other short-lived companies that make their founders rich quickly. 3. Successful founders grow up to make money investing in still other short-lived companies.

Maybe I'm totally misinterpreting this, but if there's any truth to this version of the story, it seems like it's heading for disaster. I've already met a lot of startup founders who insist that profitability doesn't matter. How on earth is that attitude sustainable?

[dredmorbius]

It's more "greater fool" or possibly multi-level scheme than Ponzi.

In a true Ponzi scheme, payouts come from either investors' own deposits or those of additional investors. There's no investment income in the fund itself.

In Andreeson's case, he's been surfing on the wave of success or perceived success, by inflating subsequent hype bubbles and cashing these out. There's not a strict connection between his ventures, investment funds, and cash-outs, though arguably there would be very little market value if he were perceived as no longer being the golden boy.

I've found myself increasing unimpressed by what he's had to say about the value and credibility of his activities over the past decade or so.

[mattmanser]

Because there's the occasional hit to pay for all the ponzi schemes. So it ends up being not ponzi because it really does generate cash.

I have no idea if Marc actually has done anything at all with his life after mosaic apart from make a lot of terrible companies that sold well. The article seems to imply he's a total fraud. But I'll tell you who has.

Microsoft, Google, AOL, Yahoo, etc.

They all made lots of money and they're the ones paying silly sums of money to buy companies that they then almost consciously let rot, fester and die.

I think mainly so that no-one can accidentally get bigger than them and take them out. Imagine if someone bought facebook 5 years ago. It probably would be dead by now.

[smacktoward]

> I think mainly so that no-one can accidentally get bigger than them and take them out.

You're underestimating the "made man" effect. Once you have a really enormous hit, you become a Made Man; someone will always be willing to throw some money at you for future worthless businesses you found, because the people with the money know you and want to stay on your good side on the off chance lightning strikes a second time later on. So they're willing to throw some money away to keep you happy. (And not just you -- it lets them do a solid for the people who invested in your company, too, by letting them walk away without taking a loss. Why do that? Because the investors are usually also Made Men.)

It's not just Andreessen who illustrates this. Look at Google's recent acquisition of Milk:

http://money.cnn.com/2012/03/20/technology/startups/Google-D...

Milk only ever shipped one product, Oink, which was a total flop. But Google spent a reported $15-30 million dollars to acquire them.

Why?

Because Milk was founded by Kevin Rose, and Rose's hit with Digg made him a Made Man; and it had gotten ~$1.5 million in angel funding from a veritable Who's Who of other Made Men (see http://techcrunch.com/2011/04/26/milk-completes-1-5-million-...).

If you had the same company, with the same team and track record, and subtracted Kevin Rose and the plugged-in investors from it -- the same company, just staffed in some podunk Midwestern town and funded by no-name investors -- I doubt Google would have spent a plugged nickel to buy it. But Milk was very plugged in, so Google bailed them out.

In other words, it's classic logrolling (see http://en.wikipedia.org/wiki/Logrolling). You bail me out when my venture tanks, and I'll bail you out when yours does. It's a pretty sweet deal. But it's a deal that's only available to Made Men.

[ma2rten]

People seem to use the word Ponzi-scheme quite loosely these days, but this is not one. I don't know if this is news to you, but it is not a secret, that VCs do invest in companies under the premise that they get sold or they do an IPO (sell to the public). This is because they need to get a return on their investment.

However, these companies get bought by bigger companies, who drive some real value from buying them. If the big company screws it up or decides to integrate the product in their own, that does not make it a Ponzi-scheme.

[srconstantin]

I probably phrased it too strongly, but I'm legitimately confused. Something seems...unsettlingly short-term here. I shouldn't have called it a "Ponzi scheme." But perhaps "speculation."

[ma2rten]

I guess you're right in a sense, but I think it's quite harmless compared to other things people call "investment" (simply because of it's size). Capitalism is all about the short-term and capitalism is system we live in.