Equity investors still generally won't let the founders say "Okay, it turns out we were wrong, let's go back to square-one and find a new product idea." They certainly aren't going to say "no", but they probably won't put up more money either - and if you're burning money in accordance with the cash you have from investments, that effectively means death.
"Screwed" is with respect to this present venture. I have no doubt that the Xobni founders will be successful with something, I just would bet against it being with Xobni.
And investors are smart - individually. Groups of investors, however, are generally dumber than the individuals that make up the group, hence my use of the plural. There are also a few conflating factors that may affect their assessment of Xobni's prospects, namely that VCs are pretty close to an ideal market for Xobni's product (inflating their estimate of its usefulness to other markets) and that their risk tolerance is higher. 5% odds of success isn't too bad for a VC, but it's terrible for an entrepreneur.
"Screwed" is with respect to this present venture. I have no doubt that the Xobni founders will be successful with something, I just would bet against it being with Xobni.
And investors are smart - individually. Groups of investors, however, are generally dumber than the individuals that make up the group, hence my use of the plural. There are also a few conflating factors that may affect their assessment of Xobni's prospects, namely that VCs are pretty close to an ideal market for Xobni's product (inflating their estimate of its usefulness to other markets) and that their risk tolerance is higher. 5% odds of success isn't too bad for a VC, but it's terrible for an entrepreneur.