Another explanation for high valuations is we’re suffering a scarcity of (great) founders.
A thread on why we’re suffering from a founder scarcity and some ideas on how to solve it.👇
Typically high prices signifies a scarcity of something.
When oil prices are high that means there’s a scarcity for oil.
Usually, when you raise prices, you get more demand.
Pay engineers more, and you’ll get more engineers.
But with founders that’s not the case. Higher valuations doesn’t mean more founders.
Why?
The average founder does well, but the median founder flounders.
Which is partially (among other reasons) why so many people take exec jobs or want to be VCs:
Exec jobs will be there. Your startup might not.
VCs have a portfolio, and founders don't.
Others, to be sure, are unwilling or incapable of building a great biz.
How? Diversification
VC firms can give upside in portfolio, or VC founders can become scouts, or they should engage in founder pooling activities. (Employees too, ideally)
Visas, health insurance, cheap housing, child care are others.
How many people are out there who, if they started a company (or a few companies), could create the next $1b company? 100s? 1000s?
VCs far smarter than I disagree here on several grounds
They think that "security" is inversely correlated w/ success. There is some truth to this (which is why we don't give big founder salaries)
There is probably a Laffer-esque Curve for security & likelihood of success, but we're not close to it IMO
This thread best demonstrates the sentiment
I'm sympathetic to it, but don't think we're close to the point on this Laffer Curve—we can allow some diversification w/o sacrifice
I'd equate it to Military: Many great soldiers "stumbled" into war & made it their mission once they got there, but they needed the push
Maybe not. They’ll only invest in a handful of cos a year, and those cos will hire 1000s of ppl — they want great talent to join them. Their advice is often “join a break out series A or Series B company”
Fair enough! I'd suggest it hasn't really been tried. Maybe it won't, but there are other ways to diversify.
E.g. Angel/Scout investing hasn't seemed to hurt founders chances of success (cc @villageglobal)
- We're suffering from founder scarcity, partially evidenced by rising valuations
- We should systematically remove bottlenecks to starting cos
- We can incentivize more founders by making median founder outcome closer to avg & by removing economic friction
- celebrate starting cos as a thing for ambitious ppl to do globally
- see startup failures on resumes as badges of honor instead of blemishes
- create communities to find co-founders & founder support(@beondeck)
h/t @BurakYngn and @david__booth for conversations on the topic.