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@eriktorenberg | |||||
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We also should decrease cultural friction to starting companies:
- 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)
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Erik Torenberg
@eriktorenberg
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15. sij |
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Indeed: There are lots of VCs who could make great founders, who would actually prefer to build a business than do a financial services job, but they just prefer the economic calculus of venture capital.
Others, to be sure, are unwilling or incapable of building a great biz.
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Erik Torenberg
@eriktorenberg
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15. sij |
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The average founder may have a good outcome, but we need to make the median under have a better outcome.
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)
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Erik Torenberg
@eriktorenberg
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15. sij |
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To be sure, there are many bottlenecks besides risk—perceived career risk, fear of failure, mental health, to name a few—and even within economic risk, founder pooling is just one solution.
Visas, health insurance, cheap housing, child care are others.
twitter.com/eriktorenberg/…
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Erik Torenberg
@eriktorenberg
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15. sij |
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I think we should be doing everything possible we can to unlock more great founders.
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
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Erik Torenberg
@eriktorenberg
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15. sij |
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#1 They'd prefer some barriers
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
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Erik Torenberg
@eriktorenberg
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15. sij |
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They think founder diversification will mean less "all-in" from the founders
This thread best demonstrates the sentiment twitter.com/eriktorenberg/…
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
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Erik Torenberg
@eriktorenberg
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15. sij |
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#2 They don't buy that they're are great founders out there held back. If they need the support/encouragement to start, how will they scale?
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
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Erik Torenberg
@eriktorenberg
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15. sij |
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In terms of there incentives, wouldn't you think VCs want more founders?
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”
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Erik Torenberg
@eriktorenberg
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15. sij |
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#3 Founder Pooling has never worked. Why would it work now?
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)
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Erik Torenberg
@eriktorenberg
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15. sij |
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In conclusion, IMO:
- 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
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Erik Torenberg
@eriktorenberg
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15. sij |
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Would love to hear thoughts & feedback.
h/t @BurakYngn and @david__booth for conversations on the topic.
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Julie Fredrickson
@AlmostMedia
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15. sij |
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IMO biggest major expense I struggled with early in my founder career was health insurance and it being tied to employment. I went without for years (to my detriment) in order to be a serial founder
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Sachit Gupta
@sachitgupta
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15. sij |
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@julianweisser @david__booth Agree! Worse was being 24 and told I shouldn't even apply because of a pre-existing condition (shoulder dislocation). Then dislocating shoulder 2x in 1 year. It ended up being cheaper for me to fly to India to get surgery than get treated in the US
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Usman Shabbir
@usshabb
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15. sij |
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I think another barrier is just switching cost from being an employee to being a founder. Many projects stay in passion projects phase and then die off because potential founders don’t see a practical path in terms of income + benefits (specifically ones with no safety net)
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Usman Shabbir
@usshabb
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15. sij |
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One approach would be for VC firms to start EIR sort of programs that pays opportunity/switching cost, which can later be recouped. Currently such programs are few and only focused on second, third time founders
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Dougal Adamson
@DougalAdamson
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15. sij |
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A lot of this aligns with what @join_ef is trying to do. Particularly the point on ambitious ppl. See @matthewclifford podcast this week on Invest like the Best
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JG 🦁
@lionslogistics
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15. sij |
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These are great thoughts!
I think the tl;dr would be:
“We should systematically start removing bottlenecks to starting companies.”
I believe any shortage of talent to be directly correlated to either:
A) process friction
B) process ignorance
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Adam Paigge
@AdamPaigge
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16. sij |
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Strong. Lots of things here I wish had been available to me starting my first business. Would start again if I had a reasonable wage and some safety net to bail out if both parties agreed it was time.
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Patt-tom McDonnell
@pthm_
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15. sij |
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startup failure will always be a badge of honour in my book, actually failure of any kind that’s noteworthy enough to get put on the resume is
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Ingrid Green
@Ingridium
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16. sij |
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Intriguing notion. Most immigrants and overlooked founders disagree.
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