J. Andrew Rogers wrote:
On Nov 18, 2007, at 4:17 PM, Richard Loosemore wrote:
The majority of VC's do, as you say, want a technology that is sewn
up, from the point of view of technical feasibility. But this is not
always true. There is always a gray area at the fringe of feasibility
where the last set of questions has not been *fully* answered before
money is thrown at it.
This is very much a function of due diligence, which varies from
investor to investor. But as has been noted many times in the VC and
angel communities, there is a strong correlation between the amount of
due diligence and the probability of success. The only thing surprising
is that there are still VCs that slack off on due diligence. For angel
investors it is less of a problem, but VCs can get sued by their
limiteds if they don't do their job.
AGI, unless you have an exceptionally complete technology, will do
better with angels than VCs for this reason. Angels can take
objectively crap odds on a venture, VCs cannot.
Yes, I really should not have placed so much emphasis on "VCs" in
particular, because they are more hard-nosed and systematic about their
investments.
I believe this happened in a number of projects during the dot-com
insanity. And I have personally seen, from the inside, business
projects that were started without the money-source being clear about
feasibility at all! To them, it just sounded so plausible and so
great that they felt that it ought to have been possible, so they
bought into it. The real world is just not so clean that technology
is always "evaluated in considerable detail such that there is little
or no risk that it will turn out to be infeasible".
This kind of easy capital is a double-edged sword, as most people who
got it with minimal due diligence found out. An investor with poor
judgment that can give you all the money you want on a whim generally
has the power to exercise that poor judgment with regard to the
direction of your business after you have the money. Trust me, you
*want* smart and savvy investors that will do the appropriate due
diligence on their investments, as it greatly increases the probability
that they will be an asset to your business rather than an albatross
around your neck.
The current venture capital situation is somewhere close to its ideal
point on the cycle for everyone involved. They have plenty of capital
that they are very interested in putting into play, but the process has
not fed back on itself to the point that there is gobs of money chasing
a handful of stupid deal. Lots of deals are happening, but they are
generally smart deals done by smart people. In terms of raising quality
investment, this is about as easy as it gets. If there is a smart AI
play with solid venture fundamentals, it should be fundable in the
current financing climate. That said, I realize that it is very hard to
create an AI play that has solid venture fundamentals, but that is not
the investors' problem.
Well, I have to defer to what I assume to be your greater knowledge of
many actual deals: I have had experience of a number of such situations
(but not a huge number) and what I have seen is the following. Everyone
pays lip service to "due diligence" because, as you say, their limiteds
will shit on them if they don't. But then, when the rubber meets the
road they often (in the case of cutting edge technology) get into
situations where one of the following applies:
1) The technical review does not come back conclusive and they have
to go with gut instinct anyway.
2) The technical analysis comes back, but the tech person simply did
not know enough about the field (but did not admit as much) and the
analysis itself says something definitive that is just plain wrong. In
other words, the tech folks used their gut instinct in the end anyway.
3) The investors like the personality of the entrepreneur so much
that they are willing to give them the benefit of the doubt if the
technical analysis does not come back with a Gotcha.
I am not really disagreeing strongly with you here, just saying that I
have been astonished at how much of a difference there is between the
textbook situation and the situation that I have observed on the ground.
maybe this is just the skewed sample I have experienced.
As for your other comment about sloppy financiers leading to unwanted
interference later on: agreed.
I have to say though, that one of the sloppiest situations I ever saw
was quite simply rescued by the principals getting cosy with the
government. They don't thrive, exactly, but they still alive and
expanding, about ten years after their sell-by date. They seem to have
an open-ended blank check.
The one question that hangs over this approach is whether the result
of all that systematic effort really would cough up a fully functional
AGI system. That I cannot say .... but I can also produce technical
arguments that strongly indicate that no AGI project will ever be able
to eliminate that uncertainty ahead of time (this was the "sorry, no
prototype is feasible" argument that I suggested earlier, and which
Ben also subscribes to).
This is a pretty weak argument, amounting to little more than
intuition. If you could characterize the problem well enough to make
that assertion, you could push out an AGI system.
Strongly disagree. The argument has a specific structure to it, and
leads to exactly that conclusion. It is definitely an unusual argument,
but it is not hand-waving. Certainly it is not just intuition.
On the other hand, if you have the mad computer science skills required
to produce AGI, maybe your time would be better spent solving on of the
myriad of other important problems in computer science so that you can
have both the quick money and reputation to fund your own AGI program
without having to deal with investors demanding rigorous business
plans. There are other interesting problems that could be solved much
more quickly and flipped for quick cash without too much effort.
"Mad computer science skills"? ;-). No, that is not where I am coming
from.
I *do* have other ideas that might be bankable, but they are a distraction.
If I am right in this last idea, VCs have a stark choice: if they
want AGI, they have to relax their insistence on a project that does
not have that last "research" step. If they insist on something
stronger, they can kiss goodbye to ever getting an AGI.
Right, because this is not an enormous non sequitur based on an equally
dubious assumption.
In any case, investors are in the game to make money first. That is why
they are called "investors" and not "partners"; they are helping you
make money, not solve AGI. Saying things like this is a good way to
scare off investors.
Now I get the feeling you are basing all your comments on an assessment
of the techical analysis I mentioned earlier: if you dismiss that as a
"dubious assumption" without addressing its content, there is nothing
more I can say.
My claim is that my particular approach reduces the uncertainty as
much as possible.
That seems like a difficult assertion to prove.
Who knows, maybe you are right. But it does very much seem like you are
operating under some delusions about how the venture investment process
works. You don't have to look viable to yourself, you have to look
viable to everyone else. Proving your viability is *your* job, and it
is no one else's fault if you are incapable of doing it. I empathize,
but I figured out that you can accomplish far more by playing the game
according to the actual rules than by inventing your own rules and
expecting everyone to accept them.
You make many judgments here about how I play the game, with little
knowledge: I would be happier to hear your thoughts about the issues
(about which you know plenty), not about me (about which you presume
plenty).
If you are smart enough to create AGI, you are smart enough to game the
rules of the real world to your advantage without too much effort; don't
fight it, use it. It is a waste of effort discussing how things "ought"
to be.
My goal in the last few comments has been to explain what I see as the
blockage, with a view to finding the solution. Nowhere did I say how
things ought to be.
Richard Loosemore
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