> VCs or startups trying to lose money? For what purpose?

VCs trying to lose money on either an individual investment, or else on their entire portfolio. Some reasons why this happens:

- New VC funds engaging in 'logo shopping', where they invest in later staging companies everyone knows about so that they can put the logo on their webpage and establish credibility, even if they know the investment probably isn't going to be profitable at the valuation where they invested.

- VCs are often misaligned with their LPs. E.g. the VCs are taking 2% management fees on a massive fund, and know it will be ten years before anyone knows their returns so they don't have much incentive to try to be good at their job.

- Special situations. E.g. let's say Saudi Arabia is happy to invest in things like Bitcoin mining or Uber even if they think those investments will lose 10% of their value, because the only thing they really care about is hedging their risk of having their bank accounts frozen by the U.S. government.

- Cases where an investor puts money into a startup and takes a board seat with the goal of purposely killing it so that one of their larger portfolio companies can purchase the assets in a fire sale.

- Cases where a VC comes up with some scheme to try to shift LP money from their newest fund into a startup from their previous fund to artificially inflate their returns.

None of these are necessarily common individually, but collectively things like this are common enough to distort valuations across the board and make it so that looking at what other people invest in and at what valuations isn't a great way to make decisions.

edit: Consider also that if you look at the statistics about how the vast majority of VC funds lose money, these all come from before the 10x growth in early staging funds that we've seen over the last 10 years.

As a startup founder you only need to start one of the best 1,000 or so startups of the year to do really well. But as an investor you need to invest in one of the 5 or 10 best startups of the year in order to make a ton of money for your fund. And the best startups often (but not always) have a ton of people trying to get into the deal. So if a startup could get 25 term sheets and only 1 in 25 of those investors are crooked, then the other 24 investors have to then decide whether they're going to gamble that this investment pays off anyway even though it's priced at way over what is economically rational. It's maybe a little more nuanced than that, but that's the basic idea.

Many tier-1 VCs... Benchmark, Sequoia, Accel, take 3% management fees.

Fascinating, I hadn't considered a lot of these. I appreciate the reply.