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If you look at the most valuable tech companies today, most made it a significant way along the path without outside investment due to the financial position th

If you look at the most valuable tech companies today, most made it a significant way along the path without outside investment due to the financial position the founders were born into. While there are a few notable exceptions, nearly every one of them relied on early loans from parents to build their fortunes rather than early stage VC.

robocat 5y ago
Privileged access to powerful people probably matters more than the $. I recall Bill Gates got trusted access to IBM decision makers. A recent example is Elizabeth Holmes, where the $ amounts were probably low hundreds of thousands: https://arstechnica.com/tech-policy/2021/11/holmes-parents-seeded-theranos-connected-her-with-powerful-investors/ https://arstechnica.com/tech-policy/2021/11/holmes-parents-s... “The family’s wealth, power and political connections date to the 1890s, when Christian Rasmus Holmes, a Danish immigrant and physician, married Bettie Fleischmann, heiress to the namesake yeast fortune and a Cincinnati socialite with a fondness for Chinese bronzes.” - from NYT article: https://archive.vn/aMCpe https://archive.vn/aMCpe The interesting thing is that the future fortune depended on a “yeast fortune”, i.e. while you might not be born into wealth and power, perhaps your grandchildren or descendants can be.
- wayoutthere 5y ago
  I think people underestimate the cascading effect that avoiding a seed / angel round can have on cap tables in later rounds. It allows the founders to retain control for much longer, which in my opinion is a critical factor for success of a rapid-growth product company. A founder has a clarity of vision that, when it aligns with the market, delivers outsized results and delights customers. You can avoid decision-making by committee for a lot longer, which gives you a much better shot at success. Their companies are more successful as a result (when the vision aligns with the market — things can go to shit just as quickly if the vision is off). And we see this story of parental financial resources reflected in nearly every case. The fact that these were technically “loans” is largely an artifact of tax law.

robocat 5y ago

Privileged access to powerful people probably matters more than the $. I recall Bill Gates got trusted access to IBM decision makers. A recent example is Elizabeth Holmes, where the $ amounts were probably low hundreds of thousands: https://arstechnica.com/tech-policy/2021/11/holmes-parents-seeded-theranos-connected-her-with-powerful-investors/ https://arstechnica.com/tech-policy/2021/11/holmes-parents-s... “The family’s wealth, power and political connections date to the 1890s, when Christian Rasmus Holmes, a Danish immigrant and physician, married Bettie Fleischmann, heiress to the namesake yeast fortune and a Cincinnati socialite with a fondness for Chinese bronzes.” - from NYT article: https://archive.vn/aMCpe https://archive.vn/aMCpe The interesting thing is that the future fortune depended on a “yeast fortune”, i.e. while you might not be born into wealth and power, perhaps your grandchildren or descendants can be.

wayoutthere 5y ago
I think people underestimate the cascading effect that avoiding a seed / angel round can have on cap tables in later rounds. It allows the founders to retain control for much longer, which in my opinion is a critical factor for success of a rapid-growth product company. A founder has a clarity of vision that, when it aligns with the market, delivers outsized results and delights customers. You can avoid decision-making by committee for a lot longer, which gives you a much better shot at success. Their companies are more successful as a result (when the vision aligns with the market — things can go to shit just as quickly if the vision is off). And we see this story of parental financial resources reflected in nearly every case. The fact that these were technically “loans” is largely an artifact of tax law.