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Well Marc, one problem is the world of VC-driven innovation. Building truly revolutionary work takes time and commitment, while the VC ecosystem and entrepreneu
by solidasparagus 7y ago
Well Marc, one problem is the world of VC-driven innovation. Building truly revolutionary work takes time and commitment, while the VC ecosystem and entrepreneurial culture actively works against this.
- Telling founders to be underpaid and commit their entire finances to the success of their startups forces startups to spend more time finding product-market fit than building what the world needs long-term.
- Hiring employees at below market salary and offsetting with equity incentives people to think short-term. You need to move towards going public and increasing valuation if you want to keep your talent.
- The funding round model forces short-term thinking by constantly forcing companies to prove their vision has a market in a short amount of time. How do you prove that a two-decade project has legs in the first 5 years? The path I've seen is people reducing their ambitions to find traction.
- The VC industry does not value positive social externalities in any appreciable way. Fast growth and revenue is all that matters and we celebrate the companies that achieve that by causing negative externalities.
There's a reason that the most impactful real-world innovation I can think of comes from people like Bezos and Musk who can afford to think in terms of decades.
Maybe VCs are not the vehicles for long-term innovation. Or maybe the leaders of the VC industry could look inwards and find changes to how they approach innovation that could help solve these long-term problems.
When you have extreme wealth and influence, there is an inherent responsibility to ask whether 'you' are doing enough.
- jimnotgym 7y agoI think you have identified a real problem. There needs to be a vehicle for long term investing in companies. In the UK at least the major vehicle for long-term, even multi-generational, investing is property because of the special protections it has. The richest family in Britain recently transferred £9bn to the next son, tax-free, in this way. It is low risk, and the costs of holding non- devoloped land is low. This leads to all kinds of undesirable effects like land-banking. I feel the cost of holding land needs to go up (land value tax?) to incentivise development. Inheritance tax shields (trusts) need removing. This should get all of this stale capital working and looking for a new home. This could be a longer term VC type fund, perhaps?
- solidasparagus 7y agoMaybe! I wonder how that would work with the internal dynamics of VCs. OpenAI is an interesting case study here. But they ran into the problem that working on transformative long-term projects is expensive and it is very hard to continue to fund it solely on what are essentially group charitable contributions. Maybe the right domain to address this problem is via the government - help shift incentives towards long-term investments in innovation in some way. The only model I've seen work effectively so far is having on extremely rich person decide on a long-term goal and financially drive that work over a long-period of time - Musk with electric vehicles, Musk/Bezos with spaceflight, Gates with global health.
- pmarca 7y agoFortunately, VCs have no regulatory protection whatsoever. Build a better way to finance innovation!
- solidasparagus 7y agoBrb in a couple decades. But I was kind of hoping that the domain experts would have thoughts on the topic. I would very much like to build long-term solutions to our biggest problems, but I haven't found a whole lot of mechanisms to do so.
- eli_gottlieb 7y agoYou may be interested in Vannevar Bush's ideas on this matter from 1945. https://www.nsf.gov/od/lpa/nsf50/vbush1945.htm https://www.nsf.gov/od/lpa/nsf50/vbush1945.htm