Is much of venture capital just hype/a self-fulfilling prophecy?
I am 23 and new to the, working at one of the midsize VC firms.
I'm somewhat astonished at how many startups with a mediocre product, barely any revenue, and/or questionable business plans I have seen blow up in terms of valuation.
It seems to me that funding and valuation out here is almost a game. You hype up your product as groundbreaking, get series A funding from one of the big names (Andreessen Horowitz, Sequoia, etc) and a headline comes out that _____ firm invested millions in your Series A. Then, simply because the big names gave you money, in the next round other firms and institutions give you even more money because they don't want to miss out on the next big thing. Valuation continues to skyrocket even though revenue and customer base size has remained the same.
In the media, you have seen some of these CEO's be exposed as frauds and a few indicted. Theranos, Nikola Motors, WeWork etc.
Those CEO's were fired and/or indicted because they kept the train rolling until they were billionaires. But I know several dozen founders who have done the same thing at a smaller scale, were acquired, and cashed out at $10-50m knowing damn well that they made out like a bandit.
I'm not saying all startups operate this way, there are many that have a great product or idea. But you'd be surprised at how many do. And I can't say I blame them; think about it-Nikola and Theranos raised BILLIONS with no one taking the time to verify that they had a working product. Adam Neumann and WeWork used "" in their financial statements. Part of Elizabeth Holmes's defense at trial is literally going to be that everyone in Silicon Valley exaggerates and/or makes misleading statements to investors. It's crazy to me.