Money is not given to good ideas (though, it doesn’t hurt). Money is given to friends. If you look at how VC (or really any network) funding circulates, it’s just people who are allowed to enter that circle and money just flows between them constantly. On one hand, you have trusted people who you are willing to give money, on the other hand, this inherently creates a clique.

It reminds me how the Bohemian Club’s slogan, “Weaving Spiders Come Not Here” is a bit farcical given that it is impossible for the club members not to engage in commerce.

It hasn't been organically popular here[0] among people who would be forced to actually use it, so they have to build hype from investors instead.

[0] https://hn.algolia.com/?q=gitbutler

The founder of GitButler is the co-founder of GitHub. It doesn't matter what he builds, the VC is going to throw money at them.

"Money is given to friends."

While that's completely true, I do think it misses a key underlying point: VCs (and many breeds of investor) are not ultimately selecting for value creating ideas, or for their friends: they're selecting for investments they believe _other people_ will pay more for later.

In the case of startups, those people are most likely other VCs (at later rounds), private equity (at private sale) or retail investors (at IPO).

Very rarely is the actual company profitable at any of those stages, demonstrably and famously.

So the whole process is selecting for hype-potential, which itself is somewhat correlated to the usual things people get annoyed about with startup cliches: founders who went to MIT; founders who are charismatic; founders who are friends with VCs; etc...

So yeah, they invest in their friends, but not because they're their friends. Because they know they can more reliably exit those investments at a higher value.

> money just flows between them constantly

This is also true for how HFT guys make money. It's not that they are very good in investments. The Fed injects money constantly from the top which gets distributed or trickle down to such firms. Because in a tight economy which is not akin to gambling, it should be near to impossible to make money so easily.

I'm sure VCs give money to friends but I didn't know any investors when I raised millions. They invested money because they thought it was a good idea.

The reason “ideas don’t get funding” is usually (but not always) true is that usually a good idea alone doesn’t mean much. So usually you have to have good idea plus something else the investor feels is a proof point or evidence you can execute.

The clearest of these is that you have already built it, or an MVP of it that is more than just smoke and mirrors, and there’s users and customers.

If you have excellent proof points and actual revenue growth, you could show up with no pants smelling like weed and somebody might fund you. Then they’d call their press people to do an “eccentric genius founder” piece about the person who showed up stoned with no pants and their pitch was that good. That’s cause if your graph goes up and to the right you’re not crazy, you’re “eccentric.”

If you don’t have any proof they fall back on secondary evidence, like credentials and schools and vibes. The latter, yes, often overlaps with cronies.

And unfortunately that by necessity includes most ideas that cost a lot to prototype, which means credentialism and croneyism tends to gate keep fields with a high cost of entry.

I don't think describing them as friends is entirely correct. People give money to people they trust. And friends often are in that subset of people. But that's not a strict requirement.

> Money is given to friends.

Money is given to ideas that might become billion dollar businesses and teams that look like they can do it. Pedigree, domain expertise, previous exits.