, 45 tweets, 24 min read Read on Twitter
We’ve been following the chatter about the @nytimes article featuring our Zebra founders: @marazepeda @operaqueenie @jenniferbrandel @ajscholz. We'd like to respond (except for tweets about our looks, we’re going to skip responding to those, thanks.) ...and we’ve got receipts.
We see that some people are skeptical about whether this is real or a bunch of whining.
Friends, it’s an actual trend. From just our vantage, Zebras Unite has 3,000+ people who have contacted us from around the world, mostly entrepreneurs, who have said that there needs to be another option for companies who can / have scale but don’t want VC.
ICYMI, read the NYT article and then come back to this thread! If you’re already up to speed, brace yourself…. let’s go!
nytimes.com/2019/01/11/tec…
✅ The current model of VC is not a fit for most companies in the tech space. Yet, we venerate the culture around VC, so most people DON'T KNOW that it isn’t for them or believe it’s the only path. Education is key.

@bgurley put it this way:
So, why are people so hungry to get their hands on VC money when it's not right for them? Because the few readily-available alternatives are currently: bank loans, personal savings, or crowdfunding.
Let’s start with loans. Most startups don’t have the collateral, or are too high growth to get a loan. But even if they could: small business lending has plummeted since the financial crisis. It remains down 40% from pre-crisis levels. investopedia.com/small-business…
As for savings: did you know that 40% of Americans are so broke that we can't cover a $400 emergency expense, let alone capitalize a company? money.cnn.com/2018/05/22/pf/…
VC money never requires you to risk your personal money or credit. It’s technically free, unsecured debt, giving founders the freedom to grow fast and fail with less risk to their futures.
There is an implied expectation that investors will be paid back one way or the other, but that doesn’t necessarily happen.
✅ Even in cases where a business IS the RIGHT fit for VC funding: women, people of color, and other minorities are disastrously underfunded by VC and banks. It is nowhere close to being a meritocratic or equitable system. But are you really surprised?
Women and people of color are hardest hit when it comes to this capital crunch. Let’s pick a state to illustrate: for example, in Oregon business loans for <$100,000 are down 45% (from $1.25B to $689M. bizjournals.com/portland/news/…
In 2008, Oregon banks made 71 loans to black-owned small businesses. Last year, only three black-owned businesses in Oregon got SBA loans. THREE. Women received 18% of loans. bizjournals.com/portland/news/…
Turns out - investing in all women and POC is good for business, and we are all missing out on brilliant ideas and the economic vitality their businesses can stoke. According to Morgan Stanley: cnn.com/2018/10/18/per… And:
morganstanley.com/pub/content/da…
✅ Beyond the hurdles of getting VC money, problems arise because after a raise because the VC model encourages exits, acquisitions and massive returns over profitability, sustainability and ethical behavior. See our Zebras manifesto for more on this: medium.com/@sexandstartup…
While some VC-backed companies are successes, many more are driven by a “billion dollars or bust” strategy, pushing them to make decisions that can be bad for the business, industry, and/or team. These companies also tend to extract value from communities in harmful ways.
We’ve seen headlines surrounding big tech in the past year. While the industry paints a small subsection of “social impact” startups as though EVERY business doesn’t have a social impact. Uber and Airbnb aren't social impact companies, but they are having a MASSIVE social impact.
Some investors respond to a change in the model like @jason. They assume that *LPs don’t care about anything that’s going to make below market returns.*
But here’s someone who manages a fund that’s an LP in VC funds saying something different. We are seeing this more and more: “I think we should, as investors, take seriously our role in driving some of these destabilizing forces in society” - @RukaiyahAdams
Some investors have never stopped to question: is bigger, faster, and more always best? They don’t look beyond their perspective to see and reckon with who is helped and who is harmed by this grow-hard-or-die ethos.
✅ The secret many VCs don’t want to make public is that most FUNDS aren’t successful. Much like the companies they invest in, the system produces few winners and a ton of losers. Or they invest and reinvest in the same guys who fail time and time again. techcrunch.com/2017/06/01/the…
.@KauffmanFDN has done comprehensive research on this. In a report they issued back in 2012, they found that “...LPs invest too much capital in underperforming venture capital funds on frequently mis-aligned terms." We’d love to see this refreshed. papers.ssrn.com/sol3/papers.cf…
Also, they remind us that 81% of *all* entrepreneurs don’t have access to VC or bank loans. Don’t believe us? Ask @rossbaird from @villagecapital: kauffman.org/currents/2018/…
✅ Many folks don’t know that money from everyday people--public employees, taxpayers, students--funds this system. Follow the $$! Investigate where your state’s pension funds, city and state investments, and university endowments invest. This amounts to TRILLIONS of dollars.
✅ It’s possible for founders to sell a startup for a billion dollars and make LESS than founders who sell theirs for $100 million. techcrunch.com/2016/09/16/ven…
✅ Many founders take VC money on the promise of what they’ll build, before reality sets in. They often don’t know what they’re signing up for. Their great idea may have otherwise worked, but sometimes their companies implode when forced into hyper-growth.
This why we loved @eringriffith sharing the stories of @buffer and @wistia. Read a valuable story from Buffer CEO @joelgascoigne here: open.buffer.com/buying-out-inv…
✅ Many of the workers at these high-risk VC-funded companies are sold the dream of huge returns. But if you’re not on the cap table, it’s unlikely. And even if you are, you might not realize how little you’ll get for working insane hours.
The human capital investment by employees looks even worse when they try to leave and exercise their vested options. @operaqueenie tweeted about this before:
PLUS, more and more workers at huge companies are getting hired as 1099 independent contractors, and left out of any big payday for the work they put in, not to mention the crucial benefits like health care that full-time employees enjoy. buzzfeednews.com/article/mathon…
This is fueled by the engine of VC and startups within the picture of our capitalism-obsessed civilization. “The entire capital system and incentives are a holy rat’s nest, and need rethinking if entrepreneurship is to deliver on the promise of the American dream.” @marazepeda
“We think there is going to be a tsunami of entrepreneurs who have experienced the one-size-fits-all venture model and want to cherry-pick the pieces of it that work for them” - @bryce from @indievc
VC and capitalism are based on a model of infinite growth, and economic theories that have been proven to have catastrophic impacts on the earth. Check out @KateRaworth for a great explanation and alternatives, and the 7 steps for getting to 21st century economics.
There is an overhaul required to get institutional values to match those of most people. And startup funding is a great place to start. We agree with what @akothari said in the article, “We’re not anti-V.C. We’re just thinking for ourselves, rather than for them or other peers.”
There is a fundamental lack of education around capital systems: how they work, who wins, and who loses. Between bank loans and VC, there are a lot of worthy experiments happening to fill the gap in the market. Be we can be doing SO much more!
“What if all of the ppl w/ brilliant ideas, talent & drive to invent the companies of the future can’t get access to aligned capital? What if they don’t have $, aren't in a position to bootstrap, can't raise a friends & family round? We're living the answers.” - @JenniferBrandel
So what needs to be done? So much!

How are we going to do it? We’re not going to wait for the current power brokers to solve it. They have no incentives to.
To quote the OG disruptor Albert Einstein, “We can’t solve problems by using the same kind of thinking we used when we created them.”
Anyone can play to build better capital systems! “To investors, lawyers and others who are supporting the creation of alternative businesses–my call to action for you is to get involved in some of the very necessary work that we are doing.” - @ajscholz socialcapitalmarkets.net/2018/10/zebras…
Thanks for reading our epic tweetstorm. Wanna talk more about it? Join us this Tuesday (Jan 15th) at 5pm Eastern/2pm Pacific, and connect LIVE with the founders of Zebras Unite to discuss these ideas and see what’s next! Join in: crowdcast.io/e/zebracast-li…
Love what we are doing and want to participate? Check out zebrasunite.com for ways to join and/or support the community.
To close this out: we are well aware that behind every “trend” are years of work by hundreds of people building the groundswell.
We’re not trying to take credit. Thanks to these fine folks for doing so much incredible work for so long to move this conversation forward: @Anerbenami @ArlanWasHere @bryce @carolsanford @Caterina @ChloeS @csavage @deldelp @DerrickBraziel @FrankDenbow @indievc and…
Who are we missing? Who else do you know who has been arguing and working toward a different way where more people win? Tag them here!
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