[bloppe]

VCs mostly invest other peoples' money, not their own. The "rich people" are often pension funds, endowments, and other pools of capital rather than individual morons.

VCs themselves probably suffer from chronic overestimation of their own intelligence, but there just aren't many good signals at the stage of companies they're looking at. No customers, no revenue; often just an idea and hopefully a prototype. GitHub stars are as good of a signal as letters of intent, which is to say: a bad signal, but at least a signal. Other than that, they have to just evaluate what the founders are telling them (generally unrealistically optimistic at best) and whatever market research they can do (which is hard enough for the founders to do for their own product; image doing this for a dozen different companies every day).

Of course GitHub stars are a terrible signal, but the bar for signal quality is just really low.

[paulorlando]

> the bar for signal quality is just really low During the Covid-era when money was flowing more readily I worked with a series A startup founder on improving their unit economics. They were spending a lot on customer acquisition but after my analysis I realized that they were losing money on each customer. It didn't matter how long you ran the timeline, with churn they never broke even on new customers. When I recommended cutting marketing spend, they told me that they needed to show topline growth -- because that's what investors were looking for. And they knew from experience that the investors didn't dig into the numbers enough to realize they were growing themselves broke.

[bloppe]

Funny anecdote, but that's a bit of a different issue. Actual money moving around is a relatively strong signal. Those investors just aren't looking at the full picture.