[darth_avocado]

Lack of due diligence often gets characterized as a failed investment. And failed investments are often justified as a cost of running a VC firm, as long as one of them is a 100x success, the 99 failed ones don’t matter. But yes, you’d expect more due diligence from investors, but a lot of times it’s just about how likeable you are and who you know. We wouldn’t have VCs funding Adam Neumann’s new venture with hundreds of millions of dollars as soon as his Wework nonsense got exposed and collapsed.

[burnte]

The worst part of DD is when your report clearly states some massive red flags and that the deal should not happen, and the money guys go forward anyway. Why? Because then 6-12 months later they’re angry that what you said was true and you get tasked with fixing it. I recently had to quit a company because they money guys kept wanting me to do dumber and dumber things because they refused to acknowledge the fundamental failure of their plan and were determined to do it their way. I quit, and then everything I was holding up fell down as they tore out the supports to do it their way. Within months the board finally fired the CEO and COO, asked me back, and I declined. It was a purely ego driven failure.

[SilverElfin]

> investments are often justified as a cost of running a VC firm

> But yes, you’d expect more due diligence from investors, but a lot of times it’s just about how likeable you are and who you know.

I think both of these can be true simultaneously. The limits of due diligence and the practical ability to evaluate an investment opportunity (quickly and at low cost) mean you sometimes do make mistakes, even “stupid” ones. But also, access and networks and old boys clubs are rampant in the VC ecosystem.