The Big Lie of Venture Capital

I think anyone familiar with how class dynamics works would have seen the writing on the wall for the startup ecosystem a long time ago. There's just no way that venture-capital funds are going to willingly march into a regime where their money goes into systematically making anyone else rich but their own.

Hey! As a non-white non-Ivy League person I take umbrage at your characterisation of me as "willy-nilly".

I got through this whole thing and I still can't figure out what "the big lie" is. That it's hard to get funded as a first-time founder? No shit. In the post-YC era it seems pretty close to impossible to close a round with a professional VC firm without first having done some kind of syndicated, social-proof-collecting round of angel investors --- so if that's seriously what you were playing with doing, I automatically have a hard time taking your experiences as guidance. And since hundreds of credible startups get introduced to angel investors through accelerator programs, it's hard to skip the accelerators and avoid signaling risk.

Is the big lie that you should be careful about trying to execute a funding-first startup plan? Hasn't every bootstrapper been saying that for over a decade?

"Nobody is going to invest in you unless your wealthy family plowed a bunch of money in already" is horseshit.

It seems to me that the only observation being made here is that in the absence of any financial or meaningful social proof for your business, you're not going to get funded as a first-timer. There are marginal bits of financial and social proof that privileged people start with, sure, but who does that surprise? That's true of every competition in society.

The answer isn't to call out "the lie" (I mean, the market for funding is pretty dishonest, but calling it out isn't especially productive). It's to recognize how the modern startup financing market works and plan accordingly.

1. Apply to reputable accelerators as a hail-mary.

2. Execute a plan that works without external funding and accumulates the proof you need for financing.

3. Repeat until accumulated proof suffices for talking to investors directly (by which point you may be on the Mailchimp trajectory anyways and won't care anymore).

The role of VCs as gatekeepers is, I think, pretty overrated, and gets more overrated every year.

What's that logical fallacy where you take what someone said, twist it into something completely different and more extreme and then defeat that extreme argument? Strawman?

What he said was "Another thing investors like" is when the investor himself puts his own money into the startup.

Well that's a no-brainer. If I were an investor, I would definitely say putting your money where your mouth is, is a positive signal. I'd specifically avoid wealthy founders who don't pony up - seems like a strong negative signal if they themselves don't want to take a risk on it!

He later says "So, unless you come from money, attended a prestigious university in the States or sold your previous startups for a lot of money, you should assume that you’re never going to raise early-stage capital." Given the statistics that he quoted, that's sound advice. The odds are strongly against you, so unless you check all the boxes that VCs look for, you're effort is likely better spent elsewhere. If you can get that hockey-stick growth going, it doesn't matter what boxes you tick or not, now you're speaking their language and have things on your terms. It's smarter to do the stackoverflow thing and take the company as far as you can before seeking investment. At the least, you'll raise much more, with less time investment, and less equity expended.