VC isn't VC anymore – understanding the rise of Cancer Capital

We really, really request to talk astir task capital. Because it’s not “venture capital” anymore.

There’s a immense disconnect betwixt what astir group deliberation of VC, wherever an investor has a large money and cuts checks to thief a laminitis build a company, and the existent reality, wherever a fistful of billionaire extremists usage the screen of “VC” to beforehand an outrageous schedule wherever they’re accountable to nary one.

I’m gonna explicate this from a standpoint that almost ne'er gets articulated: I’ve personally raised tens of millions of dollars successful task superior backing arsenic CEO of startups, and been straight progressive arsenic a committee personnel aliases advisor successful raising hundreds of millions more. I’ve sat successful committee rooms, crossed the array from the group I’m talking astir here, aliases been astatine the manufacture events that they frequent. So this isn’t sour grapes because these VCs wouldn’t trim maine a check, aliases immoderate spot connected my enarthrosis astir these investors owed to a business deal. This is what I cognize astir these bad actors because I’m portion of the organization of creators and inventors who build the things that they utilized to put successful — backmost erstwhile they still cared astir innovation.

Many of the trends successful nine and authorities that group are astir angry about, from information centers being forced down everyone’s throats, to each of our favourite apps and services being enshittified, to politicians being paid to disregard the will of the people, are each being supercharged by these crab capitalists. They person warped the building of task superior into a shape of oligarchy that answers to nary market, nary regulators, and nary voters. So it’s worthy knowing precisely really they did it.

How Venture Capital became Cancer Capital

I’ll beryllium breaking these points down successful further detail, but conscionable to statesman framing the concept, I’ll laic retired the halfway thought present successful immoderate slug points (so that you’re not tempted to tally this full point done an LLM):

• Venture superior was only expected to beryllium a mini conception of the wide superior market, but it has expanded to go the primary shape of backing that caller companies see — it was ne'er the only way, and it didn’t utilized to beryllium the default one
• VC was meant to beryllium a mini percent of wide finance because it represents the high-risk, high-reward portion of a portfolio; to beryllium healthy, astir of a portfolio — aliases astir of an economy — needs to attraction connected assets that are much unchangeable and predictable. But a crab grows from a compartment that a assemblage needs successful small, patient amounts, and that turns deadly erstwhile it grows without limit until it harms, aliases moreover kills, its host.
• As regulations person gotten looser successful caller years, a fistful of task superior firms person go “do everything” costs that harvester backstage equity pinch their existing VC businesses, and grow to negociate monolithic stockpiles of tens of billions of dollars
• The 1% of VC firms that get this large extremity being exposed to the consequence successful their ain investments astatine each — erstwhile you cod 2% a twelvemonth to negociate $50 billion, that’s a cardinal dollars landing successful your pouch annually whether immoderate institution you funded lives aliases dies. Those firms besides stop legally moreover being task superior firms, making them unaccountable to markets, founders, aliases the rule — and that’s really they go “Cancer Capital”
• Meanwhile, the 99% of “normal” VCs don’t person the powerfulness aliases backing of the Cancer Capital firms, but are forced to play connected the section that those firms define, moreover if they don’t for illustration the measurement they do business
• Since the Cancer Capital firms person go truthful powerful, the wide equilibrium of powerfulness betwixt founders and VCs has flipped; alternatively of founders having a institution that VCs would effort to fund, now VCs people extremist governmental manifestos, and “founders” are conscionable the group who are selected to transportation retired parts of those plans
• The remainder of the world doesn’t know: New founders and workers entering the tech manufacture are unaware that Cancer Capital has taken over, truthful galore are still trying to play by the aged rules, and can’t fig retired why their ideas are being pushed into serving the goals of the Cancer Capital firms
• Politicians and media still look astatine VC arsenic if it useful for illustration it did 10 aliases 20 years ago, and cheer them connected for illustration they’re backing occupation creation aliases enabling caller companies to grow, erstwhile their superior extremity is concentrating powerfulness and wealthiness into the hands of the Cancer Capital tycoons. They support getting fooled by this, complete and over.
• These days, task firms are progressively getting their costs from pension costs and unit status accounts, meaning the nationalist (you!) are progressively holding the container for the parts of their portfolios that really person immoderate risk, moreover if you ne'er intentionally made that choice
• The displacement distant from IPOs successful the tech manufacture has besides encouraged these Cancer Capital firms to find ways to rate retired agelong earlier companies ever spell public, meaning they tin make a monolithic return disconnected of companies that ne'er make a penny of profit, moreover if regular investors get screwed by the banal of a institution erstwhile it really gets listed connected the nationalist banal market.
• Part of why this has gotten truthful corrupt is the measurement the Cancer Capital firms person transformed themselves into their post-VC forms. Because they’re not legally VC firms anymore, they’re free to bargain shares straight from founders, aliases clasp unlimited amounts of publicly-traded banal — precisely what they couldn’t do arsenic regular VCs. They tin moreover waste their finance successful a institution arsenic an plus to another 1 of their ain funds, and past book the summation successful worth arsenic a profit, each without the institution ever having made a penny. Another racket: a institution that’s raised a bunch of rate successful a backing information tin bargain retired its early investors if they’re 1 of these post-VCs, truthful they tin get paid disconnected moreover if their portfolio institution has ne'er made a penny successful profits aliases revenues.

All of this self-dealing, and the measurement that they’re isolated from immoderate accountability, has made these firms go much and much shameless successful their behavior. Former Andreessen Horowitz partner John O’Farrell publicly called retired the firm (a rarity — the institution is notoriously vindictive towards those who it decides are disloyal) for what he called its “political infiltration” of AI policy. Marc Andreessen, Ben Horowitz and their patient person put $115.3 million into this midterm rhythm — astir double their $63 cardinal successful 2024, and more than immoderate different billionaire philanthropist successful the country, moreover including Elon Musk. Molly White, whose Tech Influence Watch tracks this money against FEC filings, shows that a16z unsocial accounts for much than 20% of each governmental contributions from the full cohort of crypto and AI companies it follows. And they’re funneling these costs to candidates successful both parties. This is simply a immense escalation from the tentative babe steps that folks for illustration Zuckerberg were making successful the Obama era, moving connected benign issues for illustration trying to thief immigrants.

And of course, it gets a batch worse than conscionable their lobbying. As I person frequently noted, Andreessen Horowitz hired a man arsenic a partner astatine their firm contempt his having nary inheritance aliases qualifications successful tech, finance, aliases startups whatsoever. His only discernible qualification was that he had choked my unarmed neighbour Jordan Neely to decease connected a subway car.

This is really brazen, really toxic and destructive, we’ve allowed the manufacture formerly known arsenic task superior to become. We must understand that it is nary longer a financial instrumentality that is utilized to money startups, but a governmental and societal instrumentality focused connected dismantling populist and civilian society. And it’s clip to enactment accordingly.

Up next: we’ll dive into the specifics of galore of the points laid retired above, to understand much astir really we sewage here.