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(https://www.mercurynews.com/business/) Business |   Venture Capital kills ‘more value than it creates,’ Bay Area author says   In a new book, World Eaters, tech activist Catherine Bracy says Silicon Valley needs to focus more on solving real-world problems and less on fast profit.   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Subscribers are entitled to 10 gift sharing articles each month. These can be shared with friends and family who are not subscribers.   (https://checkout.mercurynews.com) Subscribe now! or (https://www.mercurynews.com/login) Sign in to your account. Share Button Disabled (https://checkout.mercurynews.com) Subscribe (https://www.mercurynews.com/login) Log in  Cancel                (Catherine Bracy. (Gabriela Hasbun for Bloomberg Markets)) (Catherine Bracy. (Gabriela Hasbun for Bloomberg Markets))  Catherine Bracy. (Gabriela Hasbun for Bloomberg Markets)   (Author) By (https://www.mercurynews.com/author/bloomberg/) (Posts by Bloomberg) Bloomberg | (mailto:wordpress@medianewsgroup.com) wordpress@medianewsgroup.com | Bloomberg UPDATED: February 19, 2025 at 10:15 AM PST      By Sonali Basak | Bloomberg   Go Big or go home. Move fast and break things. Winner takes all. In a new book, (https://techequity.us/people/catherine-bracy/) Catherine Bracy argues that this ethos underpins much of what’s wrong with venture capital. In search of grand slam investment opportunities, VC investors choose startups according to what’s known as nature’s “power law,” the tendency for outliers to have undue impact—in investing, astronomical returns. (And the vast majority of startups fail miserably.) Despite their oft‑repeated, and much ridiculed, claims to “make the world a better place,” VCs either avoid addressing societal problems or, in their push for breakneck growth, make them worse, according to (https://www.penguinrandomhouse.com/books/723091/world-eaters-by-catherine-bracy/) World Eaters: How Venture Capital Is Cannibalizing the Economy , out in March.  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She’s the founder and chief executive officer of (https://techequity.us/) TechEquity , a nonprofit advocacy group in California focused on the tech industry’s impact on housing and workers. (Funders include the Ford and MacArthur foundations, as well as the Chan Zuckerberg Initiative, the philanthropy of Meta Platforms Inc. founder Mark Zuckerberg and his wife, Priscilla Chan.) Bracy, who opened Barack Obama’s technology field office in San Francisco during the 2012 presidential election cycle, started TechEquity after seeing the unequal social impact of the tech boom in the Bay Area. She spoke with Bloomberg Television’s Sonali Basak in January. Their conversation has been edited for clarity and length. SONALI BASAK : Why do you see venture capital causing unique harms to society? CATHERINE BRACY: Many people understood that venture capital was funding companies like Theranos and WeWork. There’s a whole cottage industry of media covering how those companies went terribly wrong. This book looks at the thing that tied all those companies together, the venture capital that funded them. The problem wasn’t so much what venture capital was funding. It was what it wasn’t funding, which were companies that were addressing real problems, like our housing affordability crisis. Venture capital doesn’t work for those markets. The companies that are building those solutions don’t have very many other options. And so their choices are to either go out of business or to shape-shift themselves to fit what venture capital wants them to be. The takeaway from the book is, in many ways, venture capital is killing more value than it creates. SB : Why?   ()           1/1                                                Skip Ad                            Continue watching  after the ad   (Loading Pods)    Visit Advertiser website  GO TO PAGE          (Advertisement)    (Advertisement)    (Advertisement)  (Advertisement)       (Advertisement)    (Advertisement)  (Advertisement)       (Advertisement)    (Advertisement)  (Advertisement)            CB : What has changed in capitalism over the last several decades is the financialization of everything. Venture capital is really the financialization of startups. It was no longer about pursuing risky breakthroughs that more conservative capital markets wouldn’t address. It became about pursuing a certain return profile in a portfolio. It was agnostic to the type of company that was being funded or the potential for something to be a breakthrough. We’ve seen that in the types of companies that venture capital has created, companies that don’t have any real technological innovation at their core, such as fast-casual restaurants and direct-to-consumer mattress companies. In a previous world, those were not companies that would have needed to raise venture capital. SB : You spoke with Sam Altman of OpenAI. What’s his take?     CB: Sam said, “If you show me the incentive structure, I’ll show you the outcome.” I was very interested in why he and his co-founders had set up OpenAI as a nonprofit, and he was very honest that he thought it was the best way to protect the technology—which he said had the potential to cause great harm in the world—from the pressures of venture capital investor mandates. We should all take a hard look at what that means now that OpenAI is on the path to becoming a for-profit company. [OpenAI says that its plan for a more conventional profit structure will help it raise capital to invest in its technology and that it will retain a nonprofit arm.] SB: Are private markets becoming more like public markets? CB : Yes, I think that’s right. There’s a myth that private companies are able to think longer term or that their investors are less concerned with short-term financial metrics. But really the incentives the companies are responding to are “What is the next round of investors expecting to see?” and “What metrics do I need to show them that will convince them to pay more for this company than the last round of investors paid?” And that cycle for a startup is quite short. It’s 6 to 18 months, maybe. And the general partners, the venture capitalists themselves, are really orienting around the short term as well. SB : How could AI create more disparity between workers and owners? CB : Many people have paid attention to the role that AI is likely to have in the labor market by eliminating jobs or displacing workers or automating whole lines of production. Fewer people are paying attention to the jobs in the AI supply chain that are required to make these systems work. Artificial intelligence is neither artificial nor intelligent. There’s an army of human beings behind the scenes tagging data, cleaning data, creating content wholesale from scratch, and those jobs are quite unstable, low-quality. They’re easy to offshore and outsource. There are no labor standards. I’ve been doing a lot of research on the history of Nafta and offshoring in the ’80s and ’90s. If we thought it was easy for companies to take a production facility overseas, it’s about 10 times easier to move a digital job overseas. It’s basically frictionless. I’m very concerned about what that means for the future of the labor market. SB : Is there more tension than the public realizes between the working class and the owners of these companies? CB : People realize it now. It’s not just an income inequality question or a wealth inequality question. It’s a question of power inequality, a power imbalance, and people feel like they have a boot on their neck. Every time they turn around, there’s a piece of technology that they can’t get away from or that’s making a decision without a human in the loop. And it just feels extremely disempowering to everyday people, and that feels deeply unsettling and is driving a lot of the generalized bad vibes in the economy. It’s less about the money and more about a loss of agency. SB : What role can government play in creating more productive uses for these venture-backed companies? CB : There’s a carrot and stick. The stick approaches are probably on the shelf for at least the next four years. That would be forcing more transparency of private capital funds and privately held companies, or exploring the carried interest loophole. But on the carrot side, there’s a lot that can be done, and maybe in a bipartisan way. Republicans and Democrats have floated the idea of a sovereign wealth fund. There are examples where governments can be the first money experimenting with different methodologies and tools to fund innovation and creating capital that is aligned with actual market need.Basak is a Bloomberg TV anchor and global finance correspondent in New York. More stories like this are available on (https://www.bloomberg.com) bloomberg.com  ©2025 Bloomberg L.P.  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