Excellent post and dead on — in fact, I’ve been now arguing for around a year that startups should not take VC funds unless (a) they have figured out a clear path to profitability and (b) that is really the only way they can continue their product/market development.
It’s also worth noting, lost in the unicorn frenzy, that most startups don’t fit the VC model, and would be much better served by not even trying to raise venture rounds at all.
However, there is one glaring point missing from you post: shouldn’t those (supposedly, wise and knowledgeable) VC folks who plowed $132MM into Medium have done a bit of due diligence? nothing too fancy, you know, just kinda asking, “umm, er, well, Ev, say, any idea how you’re going to make money?”
And, if the answer had been (as I must assume it was) “why, sure, we’re going to sell ad space, and tons of it!” — well, shouldn’t they have had some hesitation too?
I don’t know, the more I look into the VC and startup space, the more it looks like a gigantic Ponzi scheme to me — with us, the products’ users, being treated like an afterthought…