The Circus of Institutional Stupidity

Every few months, a headline reminds us of a brutal truth: large institutional investors — supposedly the “smartest money in the room” — keep pouring billions into policy-dependent, structurally flawed, perpetually loss-making businesses.

And then, when the inevitable collapse comes, they act shocked.

The latest example? A real-money gaming sector wipeout with thousands of crores written off and thousands of jobs gone, all because entire business models were built on regulatory quicksand that everyone conveniently chose to ignore.

This isn’t a one-off blunder. This is a pattern. A culture. Almost a doctrine.

Where this “smart money” actually flows

Institutional investors have a baffling habit of betting aggressively on:

• Policy-dependent industries that can be killed overnight by a single government notification,
• Businesses that have never made profits and have no path to sustainability,
• Companies with structurally broken economics that require an endless infusion of capital just to exist.

All this while turning away from founders building high-potential, pre-revenue startups, dismissing them over the smallest bullet point in a deck:

“Your CAC assumption in slide 23 doesn’t align with how we see the market.”
“We don’t invest before early traction.”
“We’re not sure about the regulatory environment.”

The same regulatory environment they happily ignore when writing nine-figure checks into the next soon-to-be-crushed “hot sector.”

A paradox that borders on comedy

Somehow, these institutions keep raising larger and larger funds. Somehow, LPs keep trusting them. Somehow, despite catastrophic misjudgments, they still brand themselves as gatekeepers of startup legitimacy.

But here’s the uncomfortable question: do they actually make money?

Or is the whole game simply about deploying capital fast, justifying management fees, and praying that one moonshot covers a long trail of disasters?

Because if you look at the outcomes, it’s hard to tell the difference between strategic investing and lighting piles of cash on fire and calling it innovation.

The hypocrisy founders see every day

When a founder building a truly innovative product — with long-term vision, real value, and sane economics — approaches them, scrutiny becomes microscopic.

Every slide. Every comma. Every sentence. Every assumption.

But when a hot category shows up? Suddenly due diligence becomes optional. Risk becomes romantic. Regulations become “nuanced.” Losses become “strategic.”

And then, a few years later, we get another headline about layoffs, shutdowns, and regulatory carpet-bombing.

A system detached from ground reality

There is a growing frustration among founders who are building real businesses — asset-light, sustainable, revenue-aligned — and keep getting dismissed simply because they are pre-revenue or don’t fit an investor’s outdated checklist.

Meanwhile, the same investors write massive checks into companies that:

• Bleed money every single month,
• Depend on government mercy to survive,
• Have no moat beyond cash burn,
• Collapse at the slightest regulatory wind.

But they keep calling themselves “smart capital.”

The industry deserves accountability

At what point do institutional investors stop hiding behind buzzwords like:

• “Macro headwinds,”
• “Unexpected policy shifts,”
• “Market recalibration,”
• “Sector-wide correction,”

When the truth is simpler and uglier: they made terrible decisions with other people’s money. Repeatedly. Predictably. Avoidably.

Meanwhile, real innovation struggles for oxygen

Founders are out there building real products with lean operations, thoughtful economics, long-term defensibility, and measurable value.

Yet they are denied early capital not because their ideas are weak, but because investors have trained themselves to believe that the only ideas worth funding are the ones already validated by someone else’s money.

That isn’t investing. That’s following the herd.

And this herd, repeatedly, walks off cliffs.

The question no one at the top wants to answer

If institutional capital continues to make such obviously bad decisions, what exactly are LPs paying for?

Because from the outside, it looks like:

• Risk is ignored in hype cycles,
• Due diligence is weaponized against early founders,
• Accountability evaporates after every write-off.

Yet somehow, founders are the ones grilled for every pixel in their deck.

Maybe it’s time we drop the myth

The myth of institutional investors as the ultimate arbiters of startup success is cracking.

Policy-driven wipeouts, regulatory shocks, and repeated funding of broken models have made one thing obvious: big money does not guarantee big wisdom.

The people building resilient, revenue-aligned, regulation-aware businesses — often dismissed for being “too early” — are the ones with actual clarity.

The circus of institutional stupidity will go on as long as LPs tolerate it. But on the ground, founders are quietly learning a different lesson: the absence of institutional money is not the death of a good startup. Sometimes, it’s the only reason it survives.