Note from Editors:
This article debunk the myths of startups being in San Francisco, having remote workers, and growing fast. Rather, these are requirements of VCs that startups must avoid, so as not to be entrapped.
Inefficiency comes from the fact that founders are pressured to structure their business in a way that requires debt.
Venture capital firms are very efficient from the standpoint of partners and LPs but less efficient in terms of assisting founders, and providing net macroeconomic impact.
Founders have been seduced into believing investors are primarily symbiotic rather than fundamentally parasitic.
Founders willfully become horses to be bet on, because it is flattering. Oftentimes, you are only in a “capital-intensive business” if you frame your business model in a capital intensive way.
Where does this land grab narrative come from? Perhaps these founders have an investor breathing down their neck asking for hockey stick growth.
Good entrepreneurs have a moat by virtue of their own talent scarcity
Do these businesses really need to sprint like they are being chased by the Samwer brothers?
Perhaps not. As Tucker Max wrote recently, there is a dearth of good founders. If your business gets going, why not maintain profitability and grow slow? Good entrepreneurs have a moat by virtue of their own talent scarcity.
The pressure of fundraising is largely social.
The accelerator game: fun to play because it feels like applying for college, or being a pick-up artist. The highly adrenal tension of hoping to be picked or rejected–this is more pleasurable and linear than building a product and engaging with the marketplace.
The pressure of “capital requirements” is often illusory.
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Curated from Is The Venture Capital Industry In Silicon Valley Efficient?
Note: Featured Image credit to denniskneale.com