John ANov 21, 2022
mcc

Here is the thing you have to understand about VCs (and therefore, companies and websites that have accepted VC money), always and forever. Repeat it like a mantra.

--- Venture capitalists do not invest in the company. Venture capitalists invest in the exit. ---

Eventually any site, app whatever has a Sell Out Moment. They get bought by a big established corp, they go IPO, something. There is an "Exit". If you accept VC money, you are *promising* that Exit day is coming and it will be *big*.

Nov 21, 2022 at 8:32pmWeb
Show threadmccNov 21, 2022

Generally the VC model does not look like you invest in a company and you expect your investment to get a bit bigger. It looks more like, you invest in ten companies and you expect nine to fail and one to make back *more than 10x* what you invested in it.

VC startups, when they're trying to build groundwork for an Exit, often do warm & fuzzy market-irrational things like build a personal relationship with happy customers. The exponential payoffs the VCs want don't look like making people happy.

Show threadmccNov 21, 2022
If you see people alarmed at a Twitter replacement "taking VC money", this is the reason that's alarming. A company might have the most well-meaning, nice people running it, but those nice people will have to deliver an Exit. We are no longer in the era you can even really hope that Exit will be an IPO. "Well, now the cruel hand of the market rules us" is too much to ask. We've now established the most profitable Exit for a social media company is to sell to a Musk/Murdoch/Trump style oligarch.
Show threadmccNov 21, 2022

This isn't to say new VC-funded social companies won't make good products—they might even *stay* good products longer than you stick around! But you need to be aware there's a ticking, *legally unavoidable* time limit.

This is why I have more long-term trust in Mastodon (run by a nonprofit, & set up such the nonprofit is effectively extraneous) or Cohost (funded, as I understand, through conventional bank loans, which are non-exponential and can be someday paid off without sacrificing kittens).

Show threadmargotNov 21, 2022
@mcc do you mind if i link this on twitter as well?
Show threadmccNov 21, 2022
@emaytch Sure, that is fine.
Show threadSabrinasNov 21, 2022

@mcc 😔 Sigh. Just earlier was complaining about how Skype has become barely functional trash.

Is the internet just going to continue to be built on such unstable foundations?

Show threadDad KapitalNov 21, 2022
@mcc my understanding is cohost is funded by *someone*. Afaik, who that is is not public and it's a huge red flag to me
Show threadEdward L PlattNov 21, 2022
@mcc the other thing is that VCs have a far reach and can persuade orgs to use inferior products, manufacturing success and eliminating competition, even if it's a better product
Show threadGlitch (over count 1999)Nov 21, 2022
@mcc perhaps controversially: the best thing to do when you see a promising social company is to see what it does really well, then think about how you can best reimplement that feature FOSS or implement it in fediverse tooling.

(Fedi isn't just Mastodon after all...)
Show threadjhambyNov 21, 2022

@mcc Everything you say is 100% true and I've seen it at multiple startups. I worked at a startup that sold Android-based POS systems for restaurants and venues. After I left, I checked back a year later and they had merged with *five* other VC-funded startups.

More recently I worked at Zwift to make what was going to be some very innovative hardware (you can find leaked photos, I'm sure). Then they laid everyone off and now sell a Zwift-branded (rebranded) very boring-looking smart trainer.

Show threadjhambyNov 21, 2022

@mcc Since I'd seen it before, it didn't surprise me, but it was quite amazing to go from 2021 with Zwift acting like a super-fun cool startup with a $1 billion valuation from VC funding to design first party hardware in shiny refurbished expensive offices in Long Beach (despite COVID), and then suddenly the screws tighten and your manager and coworkers all suddenly start leaving for other opportunities. That's before the mass layoffs.

VC funding always comes with some serious strings attached.

Show threadpie🏳️‍⚧️🐗Nov 21, 2022
@mcc and even if Mastodon does take a turn for the worse, we can just fork it ^_^
Show threadMegNov 22, 2022

@mcc I don't really trust cohost either. Social systems have the hockey stick growth built into them, it's one of the things that makes them so attractive. If everyone jumped from Twitter to a privately funded site taking no equity funding not already run by a billionaire, it wouldn't be able to keep the lights on no matter the good intentions (and subscription models only scale so far and eventually grow their own perverse incentives anyways).

In the end it's just another place that's locking in your data for a future payday, whether they know or admit that or not.

Show threadAaronNov 21, 2022
@mcc If you're structured as a cooperative, there's no need for an exit.
Show threadmccNov 21, 2022
@hosford42 If there is a company that the things I am saying do not apply to then obviously the things I am saying do not apply to them
Show threadAaronNov 21, 2022
@mcc Sorry, I'm probably not expressing myself well. I was trying to make the point that if we had more cooperatives instead of standard corporations, it would help to eliminate this issue with corporations.
Show threadmccNov 21, 2022
@hosford42 I suspect that's true, but then the question raises of how you get seed funding for the coops.
Show threadAaronNov 22, 2022
@mcc One possibility would be crowdfunding. I know there's typically less capital available that way, but I think people would be more likely to donate if they were purchasing a share in the company, rather than just dibs on the first shipment or something. I'm kind of thinking on my feet here, so you may see some flaws that I've missed
Show threadjasonNov 21, 2022

@mcc what makes you think VCs aren't seeking IPOs anymore?

Going public is generally preferable because it means they DON'T have to exit.

Once it's public, VCs can continue to profit off of their growing equity. By holding, they can:

1. Utilize the liquidity to more easily and cheaply take loans against their equity
2. Make money on side bets like selling covered calls

As long as there's growth, there's no desire to exit

Show threadjasonNov 21, 2022
@mcc The always needing growth part is, in my opinion, the bigger problem with VC funding. It means the company will always target growth over sustainability. It means new initiatives aren't worthwhile if they don't exceed the scale of the existing business.
Show threadBarry Schwartz 🫖Nov 22, 2022
@mcc This already happened before: LiveJournal died by being sold to Russians.
Show threadFluzNov 22, 2022
I think you are overstating the difference between a public company and a private one. I mean Facebook is a public company. All sorts of companies with different ownership styles can be various measures of “good” or “ bad”. It just depends, and changes over time. The “don’t be evil” today will be pretty evil given enough time.
Show threadlpsNov 28, 2022
@mcc which is why commerce should be a no-go on the #fediverse at least not on public servers.

It seems many people are confused why the evil corp social media services are crap...seems pretty obvious, it's the profit motive.
Show threadMaggie MaybeSep 13, 2023
@mcc if I see people alarmed that a scumbag billionaire is doing what scumbag billionaires do I guess I will just laugh at them. What did they expect exactly? That this one would be special? What has happened to humanity and their ability to learn? Everybody just keeps doing the same thing and expecting different results.
Show threadWilliam VolkNov 21, 2022
@mcc In many cases VC's rely on the "Greater Fool Theory," I.E. if we fund this, who can we sell it to? Often that has little to do with profitability.
Show threadsydney woernturnNov 22, 2022
@mcc throughout this entire thread, but especially on this post, the name “DISCORD” kept flashing in my head
Show threadJackNov 21, 2022
@mcc This is also what I worry about with VC funded remote trans healthcare startups
Show threadalcinnzNov 21, 2022
@mcc I really have an issue with New Zealand's politicians fawning over venture capitalists... Those profits will not be kept in New Zealand! For one thing...
Show threadDave Lane  🇳🇿Nov 21, 2022
@mcc VC (and 'startups' who pursue it) is emblematic of what's wrong with this world.
Show threadKnut MoråNov 21, 2022

@mcc

It will also, without fail, have been predicted by the most reliable news-site:
https://www.youtube.com/watch?v=w8c_m6U1f9o

The Power Of Selling Out: Your Customers As Political Capital - Onion Talks - Ep. 9

YouTube
Show threadWilliam VolkNov 21, 2022
@mcc Exactly. Greater Fool Theory holds true. They invest on the basis of what's attractive to the next 'fool.'
Show threadEdward L PlattNov 21, 2022
@mcc yep, and when it comes to a choice between profit and mission, the VCs will demand and expect profit
Show threadpie🏳️‍⚧️🐗Nov 21, 2022
@mcc this day is very overdue for Discord and I'm not sure why it hasn't happened yet
Show threadmccNov 21, 2022
@janapen I was going to reply with "Actually, Discord might be the kind of company that could still go IPO" but then I was like "wait" and googled "Discord IPO" and apparently business observers expect it to happen any minute https://www.google.com/search?q=discord+ipo
Show threadheartsfailNov 21, 2022
@mcc Douglas Rushkoff elaborates on this theme calling it "the Mindset" in his book Survival of the Richest. It's a great book.
Show threadNatalieNov 21, 2022
@mcc I worked for a startup that burned through millions in VC money. I saw no way that they would ever turn a profit, but it should be one hell of a tax write-off.
Show threadDark Sage Torunka Nov 22, 2022

@mcc There's a (mostly unrelated, but still interesting) corollary for publishing.

For example, if you're pitching a book to a publisher, they're not "investing" in the book. They're buying a franchise.

The current landscape of book publishing is littered with two-book trilogies whose publishers both refuse to pay for the sequel but hold onto the rights as cheaply as they can because more gold for the dragon to sleep on at night.

Show threadShawn HargreavesNov 22, 2022
@mcc this observation is key to why so much VC money went into obvious crypto scams, imho. It's easy to reason that these companies must have merit if an experienced and respected VC chose to invest, but that's exactly backward. The VC isn't looking for a sustainable business that will do right by customers over the long hault, but for an exit that's as big and as early as possible. Crypto is REALLY good at enabling novel new forms of exit.
Show threadsecureisdNov 22, 2022
@mcc @SwiftOnSecurity So think carefully about that cool note-taking, photo-storing, etc app. Will it be there longer than the lifespan of the things you’re storing?
Show threadNicolas PettiauxNov 22, 2022
@mcc and this is, as growth is, incompatible with a sustainable earth, as logic can prove easily (or the 1972 Mit report)
Show threadRoyceGraysonNov 22, 2022
@mcc
Indeed. And the VC sell-off almost always comes with sweeping and painful layoffs.
Show threadnullagentNov 22, 2022

@mcc So much this. Its why it's so critical we seize this moment to gobble up as many users as possible into open source social networks.

https://medium.com/p/3b8c7a3a915f

Mastodon: I’m Spartacus! - Alan Meekins - Medium

Mastodon is the Open Source Federated social network taking on billionaires, has its time finally arrived? Elon Musk’s take over of Twitter has caused it to hemorrhage long time employees and users…

Medium
Show threadMaxNov 22, 2022
@mcc This. So. Much.
Show threadPJ "Vote Green" CoffeyNov 23, 2022

@mcc

I think your post is important and needs to be spread more widely. I have boosted it.

However mastodon works on #.

I recommend:
#twittermigration
#Hive
#SocialMedia
#VultureCapital
#VultureCapitalism

To talk about the dangers of mass migrating to a proto-Twitter.

Show threadArtemisSep 28, 2023

@mcc
VCs are literally malignant parasites that kill off whatever host they latch onto before moving on to the next.

It's a gigantic scam. They make money faster if they tank whatever business they just bought and sell it for scrap.

Show threadsleepfreeparentSep 28, 2023
@mcc excellent point.
This all lays bare the point that for any company to exist, it or its founders most regularly demonstrate commitment to the ideal of extracting wealth from those poorer than them, and giving almost all of it to those richer than them.
Rent, mortgage, small business loan, rounds of investment, and even VC money - they're all coded terms for wealth extraction and upwards wealth transfer. They differ in terms of the amounts transferred and the risk involved, but they all achieve the same underlying purpose: if you're not complicit in this uber-pyramid scheme, you don't get to have a business. Or a home