One of many articulations of the thought, though I wouldn't use the word "bubble" these days; in core tech (ex-crypto) degree of investment seems extremely rationale to me.
Software takes money to build, and that money has historically been raised by professional money people.
Software makes software people money.
It is very not obvious that professional money people add value other than the money, and to the extent they don't, why have them.
VCs also provide connections, advice, gravitas, sure sure, but CEOs of public companies also have connections, advice, and gravitas, and if you notice some of those CEOs *still code for fun.*
Wouldn't you, an aspiring software entrepreneur, like tying yourself to them for years?
I mean there exist many options for folks who are very good at wining and dining capital allocators at pension funds if you think that you really, really want to spend a lot of time with someone who wines and dines capital allocators at pension funds. Golf's a great game!
I'm not evenly being acidly sarcastic, some people connect much harder with this archetype than they connect with the typical software person and if that is you, great, you have plenty of options.
But people who geek out about servers also have great options, and that's very new
(There are a few VC funds largely staffed by software people and it's become fashionable to say "Oh yeah I have operator experience." Some people who say that have built software companies, and some got an MBA and then did 2 years not building or selling at a big tech company.)
A related observation: one reason founders like raising from other founders is because founders generally don't insist on some provisions that VCs do and are broadly more pro-founder than VCs are, including re: e.g. valuations.
Fundraising Founder: I really want to get $X for 10% of the company.
VC: I mean wishes are fishes, but I have a fiduciary responsibility to my LPs to optimize for their interests, and I think you can get $Y.
Rich Founder: I'm here to fund cool shit with my own money. SOLD.
The way to phrase the reaction to this in polite VC is "I'm concerned about the level of capital discipline in the market these days.", which means "Damn it people we were supposed to allocate the excess return to capital not to the geeks."
See also "The game is changing. We're having to move faster and don't have the ability to build relationships over a month."
It has always been a curious thing that VCs think a large portion of their value prop is gazing into your eyes over many dates, looking for the spark.
If I were a cynical man, and I try not to be a cynical man, I would say that that increases founders' investment in "the relationship" and makes them less likely to push hard for the interests right around the term sheet.
But when founders fund founders, of course its faster.
New founder: "So here's what I'm building and less talk."
Successful founder: "This would be the point where I regale you with tales of how many successful things I've been a part of except presumably you've heard of my company so show me the demo instead."
New founder: "Yeah."
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That’s probably not “Rails create” but very well could be “Here’s how we deploy on Rails and why we made these choices.”
Or in banking not “Here’s what net interest is” but “Let’s talk about funding sources available to banks and the relative costs and limitations of them.”
I remain surprised by how much better my life got by the really simple expedient of making batteries a pervasively available utility, even though I'm not often away from an electrical outlet during coronavirus compared to more typical life pattern.
The dominant use case for me is "Drop daughter off at school, would really like to go to a cafe and enjoy breakfast but cannot justify it if cell phone is off, see I only have 4% and think about going home... pop into konbini, rent battery for ~$3, get to enjoy coffee."
And it's such a good business for all parties that the local konbini moved the station, which both handles payments (with the app on your phone) and fulfilment of the battery, away from the register because frequent transactions were blocking foot traffic to the checkout.
Also there is culturally more willingness to grind a bit on marketing and sales where a lot of us back in the day reaaaaaally wanted to make a software vending machines, put it on Internet, and never have to talk to anybody.
An interesting thing from the crystal ball: a lot of what has historically made this form of software entrepreneurship attractive is that most founders of it live somewhere where they are the best game in town for a software dev.
A very useful thing to know, if you sell things that could be used by a company that would have need for a hundred pretty nice workstation GPUs, is how this calculation gets made in practice:
Technologist: Residual value is $4k contingent on sale.
Manager: Do we have a buyer on the approved vendor list who will do The Usual with less than one phone call required?
Technologist: No.
Manager: Trash them.
Technologist: Why?!?
Manager: We’d only spend hundreds of dollars of staff time, I.e. yours, if this was a simple matter of boxing them up and giving them to vendor. That might or might not be worth it given typical ROI on your time given current workload/priorities. However.
(Not wholly descriptive of things I’ve seen in my career but really important to understand broad strokes of how large software-oriented orgs operate compared to small shops and large non-software orgs.)
(And while there are lots of differences between and within companies it is, unsurprisingly, trivially true that e.g. eng team randomly picked at Google is more similar to one at Amazon than a randomly selected writer of code at Washington University or the IRS.)
So Bitfinex/Tether apparently lost about $23 million to an operational error in setting Ethereum fees, which would be terrifying due to low equity cushion if regulated.
OTOH, most crypto folks believe that Tether effectively has backup up to full equity value of Bitfinex/Tether.
In the more formal financial world there is the so-called “source of strength” mandate where if you own a bank your holding company/etc is required to recapitalize a failing regulated subsidiary even if, considered from its own perspective, it would strongly prefer not to.
The argument in crypto is “I mean sure they’re not required to recapitalize Tether but everyone knows they would; it would torch their rep if they didn’t.”
To which one could make observations about the bail-in that happened.