Can anyone explain why on earth VC's are making actual investment decisions based on imaginary internet points? This would be like an NFL team drafting a quarterback based on how many instagram followers they have rather than a relevant metric like pass completion, or god forbid, doing some work and actually scouting candidates. Maybe the Cleveland Browns would do that[0], but it's not a way to mount a serious Super Bowl campaign[1].
Are VC's just that lazy about making investment decisions? Is this yet another side-effect of ZIRP[2] and too much money chasing a return? Is nobody looking too hard in the hope of catching the next rocket to the moon?
From the outside, investing based on GitHub stars seems insane. Like, this can't be a serious way of investing money. If you told me you were going to invest my money based on GitHub stars, I'd laugh, and then we'd have an awkward silence while I realize there isn't a punchline coming.
[0] I'm from Cleveland. I get to pick on them.
[1] https://en.wikipedia.org/wiki/List_of_Cleveland_Browns_seaso... I think their record speaks for itself.
> Can anyone explain why on earth VC's are making actual investment decisions based on imaginary internet points?
The answer is right there in front of your face. Say it with me: VCs are morons. VCs are morons. VCs are morons. Just because someone is rich, you think that means they have any clue what they're doing?
Listening to All In is a real eye opening experience. Especially when they have guests on and they're exactly like the regulars.
I have zero respect for All In. It’s a shame people pay those guys any mind.
this is compounded by young, newly rich tech workers (no kids, no mortgage, maybe not even a car) experimenting with being a VC because they've recently reached accredited investor status.
and it's not just ZIRP. every recent IPO or liquidity event creates literally 500 more of these guys.
true, but the way I would frame it is we are all morons in someone else's eyes. No one is as smart as they think they are. The mistake Americans make is thinking that rich people are so smart that everything they do is smart.
VCs are, traditionally, people who made a lot of money in a lottery and think that makes them experts. It's virtually guaranteed they're idiots.
hey shhh the ycomb gods might hear us
The answer isn't that they're morons. It's that they aren't people who "invest" in "good businesses" to make money, but instead on the whole a class of individuals classed with gambling on high risk ventures that will have absolutely massive returns and they don't care if 90% of them fail and 9% flounder because the 1% that succeed bring in absolutely apeshit amounts of $$ when they are acquired by someone else.
Using things like github stars is clearly stupid, but not in the way you're suggesting. They're using the GH stars as a proxy metric for "someone else will come along and give money bags to this person later, so I should get in early so I can take that money."
They're operating on metric of success which is about influence and charisma and connectedness, not revenue or technical excellence.
Again, VCs don't care if you'll make a profitable business some day. They're just interested in if someone else will come along and pay out giant bags of cash for it later in a liquidity event. If they get even one of those successes, all the stupid GH star watching pays off.
Here's another way of framing it: any harms from the false positives around "He has a lot of GH stars" or "He went to Stanford" or "I know his father at the country club" are more than mitigated by the one exit in 1000 that makes a bunch of people filthy rich.
We shouldn't expect VCs to be something they're not. But we are missing something inbetween VCs and "self financing" and "bootstrapping"
> Again, VCs don't care if you'll make a profitable business some day. They're just interested in if someone else will come along and pay out giant bags of cash for it later in a liquidity event. If they get even one of those successes, all the stupid GH star watching pays off.
And if that's true, they should be slapped, hard. They're no longer performing a socially useful function, and and have degraded towards pure financialization. Some middleman between fools and their money.
As much as I don't like Altman, VC should be pumping money into startups like Helios--companies pursuing cutting-edge technology that could totally fail (yes, that's an organic em-dash).
I don't think there's ever been an argument that anybody in a free market capitalist economy has to perform a "socially useful function"?
I do think that ZiRP distorted things extremely badly. There's an entire generation in this software industry that lives around the business-culture expectations set during that time which as far as I could see basically amounted to "I build Uber but for X" (where X is some new business domain).
Perhaps after a bit of a painful interregnum things will be a bit different now that rates are higher and risk along with it.
Also anybody can throw a SaaS together in a few days now. Separating the wheat from the chaff in the next few years will be... interesting.
> I don't think there's ever been an argument that anybody in a free market capitalist economy has to perform a "socially useful function"?
That's a extremely strong statement, and may only be true in libertarian-land, where pure capitalism is a god to be worshiped and "good" has been redefined to be "whatever the unregulated free market does."
But in the real world, capitalism is a tool to perform socially useful functions (see the marketing about how it was better able to do that than Soviet central planning). When it fails, it should be patched by regulation (and often is) to push participants into socially useful actions, or at least discourage socially harmful ones.
How is it strong or controversial? It's the open ideology of the times.
I didn't say I agree with it.
“no longer”… lol
Social proof has always been a factor in investments. Not the only factor, but seeing signs of popularity has always been an input to investment decisions.
The entire game of startup investing is to identify breakout companies early. Social proof (when valid, not faked) of interest is one of the strongest signals of product market fit.
If a product has a lot of attention (users, headlines, stars, downloads, DAU) that’s a signal that it could also have a lot of customers some day. This is also why all of those metrics are targets for manipulation.
> This would be like an NFL team drafting a quarterback based on how many instagram followers they have
Major sports team are about engaging fans. If a promising recruit had a huge social media presence then that could be a contributing factor toward trying to recruit that player.
This is actually easier to understand if you look at the inverse: Some times there are players with amazing stats but who have a cloud of controversy following them. Teams will skip over these problematic players despite their performance because having popular and engaging players is important for teams but having anti-popular players will drive away fans.
Hiring a QB based off instagram followers isn't even that unrealistic. If you can put together a team to win the Superbowl, sure do it! If not, just get together a team that people enjoy following and watching. Much of that would be putting athletes on the field that people engage with.
I agree! Maybe the Browns have never played a Superbowl, but I would imagine they are still making a profit. Different goal.
I don't follow American Football so I don't know how coaching contracts work for you guys, but how does someone go 1W 15L one season, survive as head coach to go 0W 16L the next season, and still start the next season after that as head coach?
Over here the fans would be singing "You're getting sacked in the morning" halfway through that first season.
I guess not having relegation makes things slightly less ruthless for you.
Yeah, exactly. The NFL is a closed system franchise. The same 32 teams play every season whether they win or lose. No team risks relegation to a lower revenue league. Every team gets a roughly equal share of the franchise revenue regardless of performance.
The prevailing narrative here is that the team was actively looking to lose to acquire draft picks. Hugh Jackson was extremely good at losing, so he stayed.
The owner of the Cleveland Browns uses the team to generate more revenue. For NFL teams, performance has little to do with their value or ability to generate additional revenue.
There is no strong financial incentive to win in the NFL, aside from the owner's ego. The Browns' owner's ego is driven by money, and the result shows on the field.
In truth, I don't follow sports much, but I'm really not sure either.
I do find the model European Football (soccer) using promotion and relegation to be much more interesting, both from the standpoint of culling out perennially hopeless teams from top-tier competition, and for having a place for people to play who aren't absolute superstars.
Owners don’t care about winning, but about profitability. And you can make a lot of money with a failing football team (selling/trading draft picks, etc) and your fans get used to losing …
Right, I forgot you guys have "The Draft", so failing is an advantage, doubly so if you can sell your draft picks, because then you can keep losing by having sold away the mechanism for getting you competitive again.
I am so glad the proposed "European super league" was killed off so hard, so that we don't get a franchise model, it produces so many adverse incentives.
The thing I like about EU football is that if your team sucks arse through a garden hose too long, your entire team gets demoted to a lower league.
That would put a fire under some asses!
More to the point, in the US losing teams get rewarded in the form of draft picks, which sometimes creates perverse incentives. This doesn't exist in European football. (Disclaimer: I know almost nothing about American sports.)
Draft picks + salary caps and the various workarounds involved there make it more of a financier's dream than a competitive sport.
just wait until you get to the subject of tanking in the NBA
is there a tech equivalent? like you do a crappy job with your series A on purpose which helps you get a better series B. although there is the notion of a big round of layoffs to secure further investment
Browns fan in. We're owned by a criminal (truck stop-related fraud) who was convinced by a homeless person to draft Johnny Manziel. trust me, we want to put him (and Paul Dolan) into graveyard orbit. but it's not like Vercel where you can just go use AWS or Cloudflare or whatever; and it's not like switching makes you weak, you stand by your team through the hard times!
plus, what is an NFL fan going to do, stop watching football? hahahahahaha
Hey, you can say that the Dolans should/could spend more, but I don't think you really want an owner who has solidified the team in Cleveland, has the fourth-best record in baseball over the past 10 years, and has seven recent playoff appearances in the graveyard.
The Haslams? Yeah, they should really sell the team, but I figure in about 10-15 years, they'll move it out of Cleveland.
As far as I recall it stared in 2014 or so, yes metrics could/were still gamed, but there was still a belief in VC that OSS projects could turn into Red Hats. First I heard of it was when a VC told me they were "looking for the next docker" and mentioned something about Rancher OS and how quickly it's stars/follows were growing. In VC you tend to have conviction builders, and conviction buyers. I suppose what happened was some conviction builders used growth of a project on gh as part of a leading indicator (valid or otherwise), and conviction buyers picked up on that as a method.
Instagram follows is not a good way to hire football players but it's probably a good way to hire instagram influencers. The football analogy is a little unfair because VCs are investing in more than just a company's ability to "play football" they are investing in the brand, the marketing, and the vision. GitHub stars are at least an indication of a startup having a promising brand or some ability to market themselves.
Nevertheless, VCs are in fact pretty dumb sometimes and it'd be stupid to invest soley based on stars.
> This would be like an NFL team drafting a quarterback based on how many instagram followers they have rather than a relevant metric like pass completion, or god forbid, doing some work and actually scouting candidates. Maybe the Cleveland Browns would do that
Not quite the same, but the New York Jets (one of the few NFL teams that can match the dysfunction of the Browns — they have the longest active playoff drought in big 4 North American sports) passed on a few successful players because the owner, Woody Johnson, reportedly didn't like their Madden (video game) ratings [0]:
> A few weeks later, Douglas and his Broncos counterpart, George Paton, were deep in negotiations for a trade that would have sent Jeudy to the Jets and given future Hall of Fame quarterback Aaron Rodgers another potential playmaker. The Broncos felt a deal was near. Then, abruptly, it all fell apart. In Denver’s executive offices, they couldn’t believe the reason why.
> Douglas told the Broncos that Johnson didn’t want to make the trade because the owner felt Jeudy’s player rating in “Madden NFL,” the popular video game, wasn’t high enough, according to multiple league sources. The Broncos ultimately traded the receiver to the Cleveland Browns. Last Sunday, Jeudy crossed the 1,000-yard receiving mark for the first time in his career.
...
> Johnson’s reference to Jeudy’s “Madden” rating was, to some in the Jets’ organization, a sign of Brick and Jack’s influence. Another example came when Johnson pushed back on signing free-agent guard John Simpson due to a lackluster “awareness” rating in Madden. The Jets signed Simpson anyway, and he has had a solid season: Pro Football Focus currently has him graded as the eighth-best guard in the NFL.
[0] https://www.nytimes.com/athletic/6005172/2024/12/19/woody-jo...
Same reason why two companies have the same idea, one goes viral and one doesn't. Public opinion matters even if its illogical at times.
This has happened in multiple industries a number of times - publishers discover that people with large twitter followings sell a decent number of books, so they start selecting new authors who only have large twitter followings, and discover is was correlation and not causation.
And once it gets out that it’s a selection criteria it gets gamed to hell and back.
I appreciate this, but the stakes have to be a lot lower bringing a book to market than making a $1,000,000 to $10,000,000 seed investment. I'd sort of expect that when you're dealing with sums of money that size there would be some grown-ups in the room.
You just stated Goodharts law in effect.*
[*] https://en.wikipedia.org/wiki/Goodhart%27s_law
Also known as Goodharts law.
> This would be like an NFL team drafting a quarterback based on how many instagram followers they have rather than a relevant metric
sounds like how the ufc does it
>Can anyone explain why on earth VC's are making actual investment decisions based on imaginary internet points?
Github stars used to really mean something. Having 1k+ was considered a stable, mature library being used in prod by thousands of people. At 10k+ you were a top level open source project. Now they've been gamed by the dead internet just like everything else, and it's depressing as hell.
> This would be like an NFL team drafting a quarterback based on how many instagram followers
I believe that is how they made the final decision on Watson over Mayfield. Oh, wait, I don't think anything can explain that decision.
Also from Cleveland.
Go Guardians! Go Cavs!
When I took over MLAgents at the end of 2021, before Unity fully shit themselves after the insane Weta acquisition, the main metric they were using to promote the project internally were github stars
Yes actually
Needless to say they didn’t like when I said this was a worthless metric and we needed to be using something like “working policies” or “time saved training”
For those of us that don't understand what was so insane about the Weta acquisition?
It never made sense. Weta tools don’t work with Unity at all
There were no complementary workflows or infrastructure or anything.
It was explicitly a move to try to counter epic’s positioning and internally it was very obviously a JR versus Tim pissing contest (and JR was the only one in the contest because Tim didn’t give a fuck about Unity)
should have bought a few thousand stars on the internet and then taken the promotion to director
I was already a director and didn’t need the promotion
I just wanted to build a good product but unfortunately good products are not relevant
> Can anyone explain why on earth VC's are making actual investment decisions based on imaginary internet points?
I have personally seen several company CEOs (that were billionaires!) do this in different ways. Sometimes hiring people because of it.