It's pretty sad to say this, but the vast majority of Angel investors are hobby investors, not investing at any degree of "scale". And most often, let's be honest, these "investments" should be considered grants to the founders, or perhaps lottery tickets with the expectation of full loss of value, and not really any expected return. It is pretty much crazymaking, as you put it.
But to the point above about losing the "investment" in acquihire situations. The loss is primarily caused by the fact that the investment vehicle is an unsecured non-debt obligation. Which means that there's really nothing to protect the investor in the situation where there's no conversion. If the Acquihire company had instead raised a priced round (the old Seed Series priced round) instead of a SAFE, the investor would be protected. SAFEs should really be "bridge" investments when there is an expected conversion opportunity in the short-term. Not for indeterminate conversions that may or may not ever happen. In fact, if I'm not mistaken, the SAFE note (and convertible debts) originate with the idea of bridge loans, since that makes complete sense in that situation.
Indeed, it's the combination of the hobbyist investor and the Uncapped SAFE notes that are not the best combination. Only sophisticated, at-scale investors should invest in Uncapped SAFE notes, and they can then be prepared for the expected downsides.
Without saying anything about our company's seed investors (I wasn't here when we did the seed round), the YC companies I've been friends with raised their seed rounds from a mix of "firms" (I didn't do much digging but they all seemed to make lots of investments; ie, at scale) and friends or industry acquaintances. It may just be the case that we hear mostly the hobbyist perspective here, because the people who do seed investing seriously don't bother to wade into HN comment threads.
If you kick in on a friend's company, you shouldn't care what happens if their company has a soft landing; having that level of concern over an investment seems like a really good way to kill a friendship. The friendship is more valuable.
Mixing investment and friendship is NEVER a good idea, and is definitely not the situation in my case, nor that of the other angel investors similarly burned in these situations. I live by Benjamin Franklin's words on never a borrower or lender be to friends.
But to the point above about losing the "investment" in acquihire situations. The loss is primarily caused by the fact that the investment vehicle is an unsecured non-debt obligation. Which means that there's really nothing to protect the investor in the situation where there's no conversion. If the Acquihire company had instead raised a priced round (the old Seed Series priced round) instead of a SAFE, the investor would be protected. SAFEs should really be "bridge" investments when there is an expected conversion opportunity in the short-term. Not for indeterminate conversions that may or may not ever happen. In fact, if I'm not mistaken, the SAFE note (and convertible debts) originate with the idea of bridge loans, since that makes complete sense in that situation.
Indeed, it's the combination of the hobbyist investor and the Uncapped SAFE notes that are not the best combination. Only sophisticated, at-scale investors should invest in Uncapped SAFE notes, and they can then be prepared for the expected downsides.