The Black Hole of The Valley
STOP ME if you’ve heard this one: Guy goes into a venture capital firm, borrows money. Uses money to turn neat idea into product. Gives away product (or sells well below cost) to build a following and thus a demand.
Customers love product, imbue it with their life energy and creativity. Community grows, but not cashflow, because money was something to be figured out later. More investors throw more money at the product, on the theory that what it needs is fancier offices or fifty designers united behind no vision in particular.
Surprisingly (at least to the participants), several rounds of throwing cash and bodies at what was once a neat idea fail to generate ludicrous return on investment. Capitalists demand that product idea be changed.
Change of idea fails to generate ludicrous return on investment. Customers, no longer sure what product is about (or even that it has a future) become less passionate.
Usage falters, then rapidly hits event horizon.
Guy starts shopping no longer loved or interesting product at fire sale price.
Eventually big internet company sucks product and product team into itself, where both disappear forever.