Many investors were left with an egg on their face after FTX's valuation went from $32 billion to zero in a New York minute. They were left wondering what happened. They are still wondering if they did anything wrong. Is it me.
I think it is you.
People are led to believe that investors are people who care about the financial health of the company they invest in. There isn't much room for jealousy or fear. It is absolutely true that not. The people investing billions of dollars have their eyes on the ball.
Not quite.
The former COO of SoftBank, who stepped down in late January after a reported battle over pay, had this to say about the FTX debacle.
I have been reflecting personally on the whole FTX fiasco and it taught me one more time that we should NEVER invest because of FOMO and we should always 100% understand what we are investing in. I totally failed here on both.
— Marcelo Claure (@marceloclaure) November 12, 2022
Another example of poor judgement on the part of investors is the man's former firm investing in WeWork. Steve Jobs once said, "everything around you that you call life was made up by people that were not smart than you." At the time, Jobs talked about building products, but evidently, this applies to the people funding the startup.
Claure was open, honest and reflective, but perhaps we should remember that investors aren't any smarter than everyone else. The problem is their lack of self-awareness combined with the fact that they are venture enthusiasts. White men are the majority of investors and the majority of the founders. These people are given the title of genius in all they do. Warren Buffet is usually predicted to be a black man.
The higher bar they are expected to meet is described by black founders. The bar spans from acting to banking and venture capital. Allen Jones said in an interview that he was a gay black man trying to get funding in Silicon Valley.
They take bets that they deem as a bit safer — entrepreneurs that look like a certain profile — white, cis-gender males that come from Stanford and Harvard that match the profile of confidence. They have kind of built in an anti-bias determination around, so they automatically get the benefit of the doubt to those pedigrees and those profiles.
The founder of She Matters, an app aimed at connecting women of color with healthcare professionals related to postpartum health issues, said in February that she ran into a lot of obstacles when she was trying to get funding. She said it was crazy and challenging. If we are in the room, we have been able to jump over all of the obstacles to get there. It is crazy that we will not give you money because you are unique. It is a large amount.
Private-market investors seem to give money to people who look like them, sound like them, and are, overall, just like them. The investing game is about taking risks, but not so much in the companies that actually pass due diligence. They prefer the ones that pass their vibe checks. There is no equilibrium. There is no level playing field. There's no genius here.
According to PitchBook, companies founded by women raised just 2.4% of the total investment amount last year. It shows how the presence of a man can double the value of a woman. All-women teams raised less than 2% of the total funding.
It's sad that the numbers are so bad. Black founders raised less than $200 million in the third quarter. Adam Neumann got $350 million from a16z for an idea that hasn't even launched.
When it comes to investing and building companies, investors know that women and minorities do better than men, but that has never been the point of the game. They like playing games with each other, circling each other, and laughing when the markets crash as they meet for drinks and discuss how they will bull them up again. They only want to be involved with each other
People will defend the investors who throw millions at Sam Bankman- Fried when he starts his next company. He knows he can build a billion dollar company, he takes risks, and he is just a kid. The devil wrote this speech. Women and minorities are not given the chance to take risks and mess up.
The $200 million investment in FTX has been marked down to zero by the company. It is rare to see a company founded by a black person worth more than $10 billion. Softbank stated a few days ago that it had a $100 million position in FTX. Sam is doing a letter-by-letter count, one at a time, towards what appears to be another confession. He hasn't reached "d" at the time of publication, but he has typed "What h a p p e."
There is a myth that investors areverse to risk. This isn't correct. White men are the only ones who love taking risks. It is part of the excitement. They don't have to fund minorities or women because there isn't a law. This is all about vibes and not cries or calls. A white guy could play video games during an investor call or go to a meeting dressed as SpongeBob and still get a check.
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