What's dumb money?

http://venturehacks.com/articles/dumb-money

by iamelgringo • 19 years ago

7 7 19 years ago

gigamon4• 19 years ago

For a bootstrapping entrepreneur, VC money is a drug and a distraction. And by calling it "Smart" money, the popular culture is attempting to turn it into a "legalized" drug. This is a really good article and having been in the trenches for many years, I highly recommend it to the YC community. VC money should be dumb, the dumber the better. Only by understanding this assertion, can one focus on what it really takes to build a company ... and it is not about taking VC money. Enjoy.

pg2• 19 years ago

Their advice about weeding out bad investors is reasonable, but they're incorrect about the meaning of "dumb money." Conventionally, "dumb money" just means investors who have no particular connections or expertise in the startup's domain. E.g. your college roommate's uncle Al, who made his money from a chain of shoe stores.

An evil VC who wants to control your company or fire you as CEO or merge you with one of his portfolio companies could be called "bad money," but that is certainly not what people currently use the phrase "dumb money" to describe.

gigamon4• 19 years ago

This reminds me of the old joke about the wife asking the husband on whether or not her butt is fat. There is no good answer here and the absolute wrong one is when the husband asks for the definition of fat.

There is no definition of smart versus dumb money that would serve the discussion here.

My observation is that many of the Hacker News readers are first time entrepreneurs and my belief is that it is important that they understand that they don't build companies by relying on VC money (even if it comes from YC). The more they accept that VC money is dumb, the more they will focus on what it takes to build their companies.

pg2• 19 years ago

The more they accept that VC money is dumb, the more they will focus on what it takes to build their companies.

Larry & Sergey, Max Levchin, and Mark Zuckerberg all took VC money. If they're dumb, who counts as smart?

What's dumb money?

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