Post

Today's premium newsletter is about how the JOBS act and endless growth-driven greed is killing venture capital, with terrible returns and inflated valuations leading to a logjam of unsellable companies. The AI bubble has made things much, much worse. www.wheresyoured.at/premium-vent...

In 2012, Congress passed the JOBS Act with rare bipartisan support. The bill, which was intended to make it easier for companies to raise money and to go public, had an unintended side-effect of incentivizing VC to juice valuations. www.wheresyoured.at/premium-vent...

Pre-JOBS act, private companies over a certain size had to do quarterly reports like a public company, forcing them onto the markets at lower valuations that allowed regular people to capture the actual value. Now VCs make them wait as long as possible. www.wheresyoured.at/premium-vent...

To understand this story, you need to understand that VC isn't in the business of backing startups. Most of the money goes to mid-to-late-stage companies. Although the size of seed rounds has grown, their share of the dealmaking pie hasn't. www.wheresyoured.at/premium-vent...

And while growing round sizes has juiced valuations, it's also made exits far more elusive, to the point that 28% of all exit values of the last two years came from Elon Musk's companies acquiring other companies, mostly with stock. www.wheresyoured.at/premium-vent...

Even the biggest IPOs of the 2010s (Uber, Snap, Box, Airbnb) trade below or near their launch price. VC exited, and everyone else held the bag. Once the IPO window slammed shut, VC got stuck with piles of overvalued equity - and AI only makes it worse. www.wheresyoured.at/premium-vent...

Fixing venture capital requires massive reforms of the private markets, starting with making it so that private valuations can *only* be set by an independent auditor. Startups can no longer be valued by the size of a VC check and vibes. www.wheresyoured.at/premium-vent...

Another good step would be to lower the threshold at which companies would be require to file public accounts, giving potential investors an insight into the health of the company, and incentivizing founders to build profitable, sustainable companies. www.wheresyoured.at/premium-vent...