Re:Are investors blindly funding any company which has AI or...
by mrbishalsaha on Saturday April 27, 2024 @04:18PM
(#40183106)
VC mindset-
1. Raise a lot of money from LPs (Rich People or Institutions).
2. Get ~3% out of the fund for operations and then for every successful exit.
3. Fund startups/industries that others are investing into to create a cycle.
Now what happens when all the startups are doing bad? Can't deploy capital?
You can't return the cash to LPs saying "OOPs didn't find best startups to fund"
Instead you go, "See everyone is investing in AI, so we are also doing it!", LPs happy to be part of a trend and thinks themselves smart while you raise more for your fund. :)
1. Raise a lot of money from LPs (Rich People or Institutions).
2. Get ~3% out of the fund for operations and then for every successful exit.
3. Fund startups/industries that others are investing into to create a cycle.
Now what happens when all the startups are doing bad? Can't deploy capital? You can't return the cash to LPs saying "OOPs didn't find best startups to fund"
Instead you go, "See everyone is investing in AI, so we are also doing it!", LPs happy to be part of a trend and thinks themselves smart while you raise more for your fund. :)