"Unraveling" is probably the best descriptor for what is happening to VC. Tim O'Reilly is one of the first network celebrities and public intellectual contrarians of Silicon Valley and cocreated institutional seed investing. He has been a long time proponent of "sustainable growth" for startups. I do think that his and Jason Fried's red-pilling has been a contributor to destabilizing some trust sentiment around VCs, but I also would add that the advent of cryptocurrency and ICOs have contributed to this shift as well. Sure, every firm invested in one or a hundred ICOs last year, but the ICO narrative was at first to revolutionize fundraising for a company. Transcend borders, unaccredited investors allowed, you no longer have to go to stuffy VC offices in Menlo Park to raise over 1 million, etc.. In response to this narrative, a good number of companies capped the purchase amount for their raises (maybe for regulatory reasons but) mostly out of ideology. Looking at the crypto space before ICOs, VCs invested heavily in companies working with Bitcoin and then later Ethereum between 2013-2015. Balaji Srinivasan's company raised 70mil for [21.co](http://21.co) in 2015 which eventually failed and then shifted to what is now [earn.com](http://earn.com) . At the time of this raise, it was egregiously disproportionate to what the other startups had modestly raised (the outlier would eventually be Coinbase). Was it a merit based raise? Or was it based on the network of Balaji? After two years from the Mt.Gox incident and two years of a downwards bitcoin price, the bear market blues got to a lot of VCs and near the beginning of 2016 they claimed bitcoin dead and were pressuring startups to pivot or close. And many did. At the end of the 2018 bull market run, a16z announced their crypto fund and within the announcement they stated that despite price, they will continue to invest in crypto. Perhaps taking a lesson from mistakes of the VC past. In short, VC trust has been eroding over time whether it has been from them digging their own graves with poor decisions, an inherent flaw in the VC dynamic, and/or new methods of fundraising coming about. There's definitely a lot more to be sad for all of these.

Fun read about the nature of venture capital and, in particular the challenges crypto investors face in an an environment of uncertain fundamentals and a very short history. One thing I'd like to add along similar lines is that the VC structure (and social dynamics) create an unhealthy incentive to make safe/lazy bets. Here is an example: You're a VC and a bunch of high profile funds are investing in company A but you don't think its a very sound investment (at least not compared to some other options). You have a strong incentive to invest anyway, because even if A fails, your LPs (investors in your fund) can't blame you — everyone else thought it was a great idea, things just didn't work out! However if company A actually succeeds you've missed out on something everyone else saw and this will make you look bad in front of your LPs. I think this is a big reason for a lot of irrational valuations out there.

Great article! One thought related to your comment. With additional liquidity that comes from tokenized assets, I’ve seen some discussion about the possibility of “venture shorting”. What impact do you think that might have on the group-invest phenomenon you described? To the extent that short sellers can get the time horizon right, I think it could help by adding more of a direct incentive to not make a bad investment.