The Venturers New Codes
Are Venture Capitalists creating innovation or merely showing up for it?
NB: I drafted this particular idea in 2021. But if you’ve been following this newsletter from the very beginning, or even from 3 weeks ago, you’ll know that it went quiet for about a year. This was always about the state of the venture capital industry writ-large, not the issues around Silicon Valley Bank (SVB).
I was even nearly finished with it last week when I decided a post about music was in order because I was so hyped up for the Clockenflap Music and Arts Festival in Hong Kong. I felt the need to preface this week’s newsletter with that because the SVB crisis is dominating the VC and Start-up conversation right now across social media and is neither a cause nor a symptom of the very real issues that have been dominating the venture world for over a decade.
With that, here is the only thing I have to say related to the SVB crisis:
I guess they are called “hot takes” because people do not even let the bodies cool in situations like this before rushing to have a position. Back to the newsletter.
Many years ago there was a Venturer so exceedingly fond of his own worldview that he spent all his money on vests. He cared nothing about understanding emerging business models, supporting the arts, or seeing the world beyond his valley except to show off his new vests. He had a vest for every hour of the day, and instead of saying, as one might, about any other investor, "His diligence is second to none. " here they always said. "His capital is a weapon."
In the great valley where he lived, life was always gay. Every day many strangers came to town, and among them one day came a few founders. They let it be known they were alchemists, and they said they could craft the best blood-testing device ever. Not only were their workspaces tech-enabled, but they had a magical incantation that could summon a mechanical carriage right to your location. Their magics were so advanced they were not to be understood by mortals that had merely built a fundamentally sound business, or who were unusually conservative.
"Those would be just the spells for me," thought the Venturer. "If I wielded them I would be able to discover which men in my valley are unfit for their posts. And I could tell the wise men from the fools. Yes, I certainly must get some of the stuff developed for me right away." He paid the founders a large sum of money to start work at once.
They set up two kombucha taps and pretended to code, though there was nothing on the screens. All the finest CSS and the purest code snippets which they demanded went into their IP, while they worked the empty screens far into the night.
"I'd like to know how those founders are getting on with “Changing everything”," the Venturer thought, but he felt slightly uncomfortable when he remembered that those who were unfit for their position would not be able to comprehend the change. It couldn't have been that he doubted himself, yet he thought he'd rather send someone else to see how things were going. The whole town knew about the app's peculiar power, and all were impatient to find out how stupid their neighbors were.
"I'll send the honest old advisor to the founders," the Venturer decided. "He'll be the best one to tell me how the business model looks, for he's a sensible man and no one does his duty better."
So honest old advisor went to the room where the two founders sat working away at their empty screens.
"Heaven help me," he thought as his eyes flew wide open, "I can't see anything at all". But he did not say so.
Both the founders begged him to be so kind as to come near to approve the excellent code, the aggressive burn rate. They pointed to the empty screens, and the poor old minister stared as hard as he dared. He couldn't see anything, because there was nothing to see. "Heaven have mercy," he thought. "Can it be that I'm a fool? I'd have never guessed it, and not a soul must know. Am I unfit to be the minister? It would never do to let on that I can't see the code."
"Don't hesitate to tell us what you think of it," said one of the founders.
"Oh, it's revolutionary -it's game-changing." The old advisor peered through his spectacles. "Such a business model, what incredible accounting techniques!" I'll be sure to tell the Venturer how delighted I am with it."
"We're pleased to hear that," the founders said. They proceeded to name all the accounting techniques and to explain the intricate nature of why they could not be “generally accepted”. The old advisor paid the closest attention so that he could tell it all to the Venturer. And so he did.
The founders at once asked for more money, more user acquisition, and marketing, to get on with the revolution. But it all went into their pockets. Not a snippet went into the screens, though they worked at their coding as hard as ever.
The Venturer presently sent another trustworthy official to see how the work progressed and how soon it would be ready. The same thing happened to him that had happened to the advisor. He looked and he looked, but as there was nothing to see on the screens he couldn't see anything.
"Isn't it a beautiful piece of ‘technology’?" the founders asked him, as they displayed and described their design prototypes.
"I know I'm not stupid," the man thought, "so it must be that I'm unworthy of my good office. That's strange. I mustn't let anyone find it out, though." So he praised the business model that he did not see. He declared he was delighted with the beautiful designs and the exquisite dark pattern. To the Venturer he said, "It was so very sticky!"
All the town was talking of this splendid code, and the Venturer wanted to see it for himself while it was still on the screens. Attended by a band of chosen men, among whom were his two oldest and most trusted officials-the ones who had been to the founders-he set out to see the two founders. He found them codingwith might and main, but without a thread in their screens.
"Magnificent," said the two officials already duped. "Just look, Your Majesty, what colors! What a design!" They pointed to the empty screens, each supposing that the others could see the stuff.
"What's this?" thought the Venturer. "I can't see anything. This is terrible!
Am I a fool? Am I unfit to be the Venturer? What a thing to happen to me of all people! - Oh! It's very pretty," he said. "It has my highest approval." And he nodded approbation at the empty screen. Nothing could make him say that he couldn't see anything.
His whole contingent of partners, general and limited alike, stared and stared. One saw no more than another, but they all joined the Venturer in exclaiming, "Oh! It's very revolutionary," and they advised him to show this most magnificent part of his wonderful portfolio, especially for the great investor meeting he was soon to lead. "Magnificent! Excellent! Unsurpassed!" were bandied from mouth to mouth, and everyone did his best to seem well pleased. The Venturer gave each of the founders a useless wearable for his wrist and the title of "Visionary".
Before the investor meeting, the founders sat up all night and burned more than six kegs of kombucha, to show how busy they were finishing the Venturer's new code. They pretended to type and move buttons to a new dark pattern. They made diagrams for growth on the whiteboard. And at last, they said, "Now the Venturer's new code is ready for the world."
Then the Venturer himself came with his noblest noblemen, and the founders each raised an arm as if they were holding something. They said, "This is the interface, here's the back-end, and this is the business model," naming each module. "All of them are as sticky as a spider web. One would not even know they are agreeing to onerous terms and conditions, but that's what makes them so exciting."
"Exactly," all the noblemen agreed, though they could see nothing, for there was nothing to see.
"If Your Highness will condescend to shed what is left of your principles," said the founders, "we will help you on with your new ones here in front of the world."
The Venturer put on his branded hoodie, and the founders walked him through the UX, step by dark step. They patted his back and assured him they were all about to change the world -as the Venturer turned round and round before taking the stage.
"How well Your Majesty's new code looks. Aren't they becoming!" He heard on all sides, "That dark pattern, so perfect! The logo is such an elegant use of Arial in black and white! It is a magnificent identity."
Then the minister of public processions announced: "Your Majesty's stage is waiting outside."
"Well, I'm supposed to be ready," the Venturer said and turned again for one last look in the mirror. "It is a remarkable bit of tech, isn't it?" He seemed to regard his app with the greatest interest.
The noblemen who were to carry his vision reached for the floor as if they were picking up his mantle. Then they pretended to lift and hold it high. They didn't dare admit they had nothing to hold.
So off went the Venturer onto the stage to share what they had crafted. Everyone in the audience and the windows said, "Oh, how fine is the Venturer's new code! We must adopt this for ourselves and simply click “I agree” without reading the terms and conditions" Nobody would confess that they didn’t like anything, for that would prove him either unfit for his position, or a fool. No code the Venturer had shown before was ever such a complete success.
"But this app sucks," a Gen Z said.
"Oh sweet child, you just don’t yet know what you want in the future?" said its father. And one person whispered to another what the fully-formed adult had said, "There is nothing there. A Gen Z says this app sucks."
"It’s just office sub-leasing!" the whole town cried out at last.
The Venturer shivered, for he suspected they were right. But he thought, "This meeting has got to go on." So he walked more proudly than ever, as his partners carried his water until it was as dry as the desert from where the money came.
There are more than a few not-so-subtle jabs in there at the worst of the worst when it comes to the past 15 years or so of venture capital. But if you put this side-by-side with the original text by Hans Christian Andersen, you’ll notice how little was actually changed.
As I said in the intro, I’ve been pondering the similarities to this classic bedtime story and the many ways in which Silicon Valley has become a caricature of what made it the stuff of legend in the world of technology and innovation. I was further motivated by a one-way conversation that I had on Twitter:
I was responding to this tweet:
Now, I don’t know Ms. Jaffee, but according to LinkedIn she is a partner at a Venture fund and it stood out to me that someone senior at a venture fund does not know the origins of the very industry that she works in. She did reply to other comments saying that her son is a marketing genius…and that is almost a bit too close to the ending of “The Emperor’s New Clothes” to not be a bit funny.
The book I mentioned is a great read (or to listen to) and lays out the storied history of how a few misfits who were tired of government procurement practices putting guard rails on innovation created an entirely new way of funding great ideas.
The industry has become extremely formulaic and hermetic. You don’t need to look any further than most websites of venture firms wherein they all give the same refrain of “We’re not like the other venture funds!”…the irony is almost too much.
With that, I’ll just leave this “Venture Capitalist Starter Pack” image here.
Thanks for giving B10DigitalJazz some of your time. Please consider subscribing and sharing if you like what you’ve read.