In recent years, I wondered what the startup market and Venture Capital became.
It seems that bubbles, fraud, spin and complete misleading have turn out to be the norm, and even those that avoid such practices will inevitably catch the waves. Either they rely on distorted data, miss the possibilities or lose money and credibility. This is all the above many times.
Although this problem is not latest, you can definitely solve. Recognizing that this is the first step towards finding a solution, which is why I think that the key is that it is to clarify it.
Personal example
I happened to find online that my portfolio comprises two more “exits” than I used to be aware.
As it seems, one startup, which had serious problems and eventually closed-turning the dollar 3 cents to the dollar-the founder showed the founder to affix the well-known company and took several employees for a ride. Somehow it is twisted as a takeover or successful “exit”.
Another fighting startup portfolio burned money, collected debt and eventually “joined” into one other company – not through sales, but simply to maintain the team. The founder, reluctant to the alternative permission of a potential buyer to perform an in -depth assessment of the team, transferred the company for free. Investors did nothing, but the founder proudly counts as a way out.
Great picture
These examples emphasize wider problems in the startup ecosystem, in which narratives evolve at every stage – from the founders creatively interpreting indicators to selective reporting by investors. In turn, the data platform reflects these narratives, ultimately shaping the perception of the market and driving the illusion of success.
In this growing division, only investors of the “storyteller”, extreme risk or too cautious “sharks” develop, while more balanced players often lose or worse-at least on paper, what is all what the market sees.
I know funds that may boast of heavenly IRR, only so that they later arise that these numbers were calculated by selecting a sample of their most successful projects. It masks a full picture of their portfolio performance.
Similarly, there are startups whose creative indicators – think Inside‘S EBITDA Correct on the community – They became a joke in the industry. However, some investors still buy these inflated stories, supporting a dangerous return loop that misleads interested parties and undermines trust throughout the ecosystem.
The consequences are far -reaching. More people consider the industry as undesirable. And ultimately makes capital costlier and difficult to get for those that can have a good idea.
Solving the problem
Startups, investors, media and even regulatory bodies – who often turn a blind eye – all share the guilt. However, there are potential solutions.
The public markets have introduced frames similar to global standards of investment results to make sure transparency and responsibility for financing the results.
Is it time to introduce a similar VC reporting structure?
Maybe. Reporting transparency can assist create a more trustworthy ecosystem. But let’s be honest – this problem is a long time. Remember when Kevin O’Leary He sold a dysfunctional Tlc Down Mattel for over $ 3.5 billionOnly for the takeover that will be called a disaster? It was over 25 years ago.
Despite this, evidently it is price conducting a conversation and we must proceed to shed light on dubious practices, while pressing on the startup ecosystem based on real value.
As investors, we are able to really change something, conducting adequate care and ensuring that we do not finance projects that are smoke and mirrors for fear of lack.