Back when Andreessen Horowitz was investing heavily in ICOs I realized that their business was essentially offering their LPs legal access to the ground floor of scams. Every time one of the ICOs turned out to be a fraud they could say "We had no idea, we're one of the victims!"
This, in turn, probably led directly to FTX. They did laughably bad diligence on FTX because they needed to do bad diligence in order to retain plausible deniability.
Interesting take. Surely, VC's have created some very large, profitable, innovative entities.
But I wonder if the nature of the industry is such that it attracts some moneyed folks who lack ethics and talent for business. To make up for that lack, they effectively "scam" investors.
Surely, there are some great VC partners who can identify unique talent and business opportunities. But there are probably more individuals who happened into the position from wealth (e.g. Ivy education, wealthy families) who lack both sufficient real world experience and business context.
To be precise, they don't scam their LP investors, in fact they did generate nice returns to them with those ICO scams. The retail investors who bought the garbage at high valuations were the end target for the scam.
Meanwhile for example AH has made investments also to legit startups.
Were any of the “retail investors” who lost money investing in a product approved by the SEC? If not, how is it any different from investing with a random person who approaches you on the street with “a great opportunity to make money”? Why would your expectation of being cheated be any different?
This, in turn, probably led directly to FTX. They did laughably bad diligence on FTX because they needed to do bad diligence in order to retain plausible deniability.