Social Apps Are Gambling

A venture capitalist with successful investments in companies like Robinhood shares a perspective that investing in social apps is essentially gambling, while B2B investments are more predictable. This view is supported by examples of even the best VCs having mixed success with social app investments.

Key Points:

• Social Apps are Highly Unpredictable:

  • Even competent founders have little control over success
  • It's comparable to gambling - you're "rolling dice" with very little confidence
  • B2B investments are more predictable and easier to evaluate

• Why People Still Pursue Social Apps:

  • Massive potential upside when successful
  • When social apps hit, they become deeply integrated into users' daily lives
  • Success means reaching billions of users across all relationship types (family, friends, romantic)

• Evidence from Top Investors:

  • Sequoia Capital's track record shows the unpredictability:
    • Major success with WhatsApp (invested in every round)
    • Failed investments in social apps like Yik Yak and Whisper
  • Even the best investors can't consistently predict social app success

• Risk vs Reward Dynamic:

  • Entrepreneurs are "madmen" to enter this space
  • Odds are heavily stacked against success (described as 80% chance of loss)
  • The potential for becoming "king of the universe" drives people to try despite odds

• Contrast with Traditional Businesses:

  • B2B ventures offer more predictable paths to mild success
  • Can better evaluate likelihood of success based on concrete factors
  • Lower ceiling but higher probability of positive outcomes