Ask HN: Rich ex-entrepreneurs turned VC's: "Bug" in society?

Serial entrepreneurship is not for everyone. Once you've put in nearly every waking hour of 5-10 years of your life into building a company, it is easy to see why doing that all over again may not be all that appealing. Especially once you've got a family and other competing commitments.

However, many entrepreneurs still want to help create and bring new and exciting things into the world. Becoming a VC is one relatively low-stress way of doing this. It is also a way of "giving back to the community".

The few ex-entrepreneur VCs I know have been amazingly helpful, and frankly I don't think any of them are in it for the money - they have quite enough already.

VC's do more than just "invest." You have to pitch them on the idea and new companies need capital with which to work, so, no, I don't agree with your view. It takes a lot of time and energy to launch a new venture. Like the military, that tends to be a game for the young, who have that kind of energy. But having some feedback from someone with experience helps improve the odds of success so new people aren't flying quite so blind. It is not a bug or defect. It's a feature.

I don't really agree with your assessment. First of all, having a knowledgeable person with operational experience deploy capital in viable early stage companies is indeed useful for society. Companies need capital to grow.

Also, it's harder than it sounds to invest in startups. It's not the case that any rich idiot can multiply his money by being an angel investor. It's very, very easy to lose your shirt that way.

Money breeds money. It's just a consequence of the right to private property that this will be the most profitable strategy. It's bad, but changing it would require a huge rethink of capitalism, and the powers that be wouldn't like that because they are a product of the current system. Even the cool ones, like Elon Musk, counts here.

I've often thought about this. Why do we have the right to own land? The people who own the land rights to various parts of Manhattan, Bay area (and other popular places) might pay some taxes and handle some paperwork but other than that they just collect what's basically a tax on everyone who wants to be where the opportunities are. Same with operative systems APIs (like win32) and processor instruction sets. It's not really relevant how the specific individual/company/family got into the position as a gatekeeper. It could have happened hundreds of years ago. Now they're just a taxman you can't vote on. Constrained gatekeeper resources like land or frequency spectrum should be government property for all eternity and rented out to the highest bidder on, say, a fifty year basis. Non-constrained gatekeeper resources should become public domain.

Money isn't nearly as bad, though. You can take investments from the lowest bidder after all, but you can hardly get around Manhattan/Windows/x86. Basically, the issue here is that it's easier to let your money work for you than working yourself. Maybe you could put into law that for each share sold or dividend given (basically, whenever an investor gains cash from his/her investment) a certain percentage also has to be equally distributed among employees. That might work, but I can imagine that investment targets would be vulnerable to investment competition from countries without such a law.

It isn't "just investing". Especially with regards to angel investing, the entrepreneurs are able to use their knowledge and expertise to allow many other startups to exist and flourish.

In my personal experience, I've worked with a pair of founders that have become amazingly successful at creating viral growth in companies. So by investing & advising, they've been able to multiply their impact on the world.

I think many entrepreneurs just don't want to take that high risk of failing anymore, as with startups the odds are against you. And even if they would want to, I can imagine successful entrepreneurs have more money then they would need for a new company, so why wouldn't they want to invest that money into other startups, a world they understand well?

Because, starting a company, and running it for a long time requires very different set of skills and mindset. And it's a very different experience, and people are different.

Also, the most successful entrepreneurs actually continue to create companies, often in very different areas: Elon Musk, Richard Branson, Martin Varsavsky, Oleg Tinkov.

Respectfully...

Investing seems like it is fun and easy to a lot of people who haven't done it. I'm not saying it is or isn't, I'm only saying that there's a perception that it's a fun and easy job. That perception might be right or wrong, and might not be a simple binary yes/no.

Sure, there are big plusses, and yes you can make a lot of money doing it. Starting a company is no cakewalk either, and investing is a nice way to get paid while enjoying the ability to talk to lots of smart folks who educate you about a broad array of subjects.

It's also not easy. A lot of investment funds fail. Not everyone is enjoyable to deal with. There are many hard truths.

FWIW I know a VC who left investing to start another company b/c he hated having to say "no" to so many folks, and to deal with some of the other pressures in the environment. There are negatives that aren't always obvious. http://www.quora.com/Venture-Capital/What-is-the-worst-part-...

As to your bigger point about the moral and social value of investing -- I think nearly everyone would agree that religious and community leaders are more deserving of high praise than a VC. In some cases, people who sweep their sidewalks might be adding more social value than some investors ;)

That being said, I think it's unfair to paint every investor with the same brush.

A good VC adds value and helps companies grow and succeed. The jobs created are good for society. A company like Tesla also serves a bigger good -- moving us from fossil fuels to renewables is a good thing for society, and capitalism is an effective tool for pushing that forward. The people who gave Elon Musk money to make that happen are (indirectly) helping.

Not every company is quite so noble. There are certainly lots of terribly useless investments -- http://www.businessinsider.com/a-year-later-41-million-start...

That being said, if we're going to point the finger at the investors, what should we make of the business people and engineers who work on these 'useless' apps? Are they also profiting from socially useless activities? Is there no room in human life for entertainment? Is there no value in an app that makes it easy for families to share special moments with one another?

I think there's a certain amount of acceptance required that not everything in a society will/can be focused on directly moving that society forward in the most obvious way, and being ok with that.

The bug is called capitalism. It's an imperfect societal system, but a better one has never been tested before.