Ponzi scheme?

I had a great chat with the CFO of a unicorn today. I hadn’t spoken to him in about year and we were shooting the shit about all the events of the last 12 months or so. We shared a lot of the same cynical takes on the broader tech and VC industry. We couldn’t help but ponder just how much of this mess that we’re in right now is because of greed in the industry.

I was especially intrigued by what he said about VCs of the last 3 years effectively running a ponzi scheme. Many of these funds and investors were just bidding up the prices of their portfolio companies and hoping to get out before the crash. They had known that this was not sustainable but they participated anyways in hopes of building massive gains and dragged the entire industry along with it.

I had never heard someone equate VC to a ponzi scheme before. I thought it was an incredibly interesting take and angle on the situation and it was hard to argue as many of these investors had this idea in mind.

The unfortunate part to all this is that a lot of these companies will suffer greatly from all this. There’s many companies out there that are trading down over 80% of their peak valuations and not many can or will recover from a large crash whether they are private or public.

I do believe there are many great investors out there looking to build companies. I’m personally ready for the market to turnover so we can get back to building.