Rents are astronomical. Startup math has worsened. FANG math has improved. In fact only the G in FANG even resembled the FANG of today. FANG has done a great job figuring out the innovator’s dilemma, making disruption in all their verticals much more challenging. The low-hanging fruit problems are gone so there aren’t really any two engineers in a garage problems that someone well capitalized can’t quickly copy. You now need generalist engineers, designers, AL/ML/DS engineers, hardware people, etc. on a founding team, meaning that you need to take on sizeable VC money before building IP equity and getting product market fit.
Startup risk is way way worse these days.
Hmmmm, isn't being a VC kind of exacerbating this problem? The business model of being a VC is entirely based around moonshots, which means that you are pigeonholed into only making bets on certain types of founders that either (a) already have extremely high risk tolerance or (b) can be pushed by VCs to take risks beyond their personal risk tolerance.
Which makes your "right people" statement come off slightly disingenuous, since the VC strategy seems to disproportionately attract more Mark Zuckerbergs than Matt Mullenwegs (for category (a)) and often exploits founder naivety for the benefit of the VC (for category (b)). I'd argue that many if not most of the "right people" who can solve problems are in general not a good fit for seeking VC investment.
Do you have suggestions for other investments strategies that may be more compatible for potential founders that don't fall within these two categories? Have you thought about branching into those investment circles?
We try to put what you say to practice, but it's an inexact art, far from a science.
I still look for two things: a/ great engineers/designers/product folks with deep empathy for problems people have, and b/ a real problem to solve.
From my experience as a YC partner it seemed clear to me most of VC-dom uses the wrong criteria: buzzwords (like Realtime or AI), and resumes (ex-Google ex-Facebook Stanford Stanford Stanford etc). Better to use first principles and try to find that which is signified, than just use of credentials that are just dumb signifiers.
But in order to do that, you kind of have to be an engineer/designer/product/marketer yourself, and that's why I think our approach can work. Ask me in another 10 years.
You're absolutely right that VC makes this problem worse. I'm sorry for the industry, but we are trying to do better.
That... sounds like just regular investing. Rather than trying to save the VC brand (which is already pretty tainted in entrepreneur circles), why not come up with another name and scale that?
But note that this game is not as much costly for you as the founder. Founder takes bigger risks in terms of their time and opportunity costs than you as a VC. You will probably find your successful pick in the other founder you fund and designate that other guy “the most capable”.
The only reason I became a VC is that I want to be here to help people who really should be start companies actually figure out that they can! People helped me a lot, more than I deserved.
The world is full of capital, and it's not going to the right people who can solve problems. I would like that to get better, and trying to do that with my own hands.