4 ms·

I find these sorts of things fascinating ito the economics. If there is a large section of the population that creates companies but is underserved in funding b

I find these sorts of things fascinating ito the economics. If there is a large section of the population that creates companies but is underserved in funding by VCs (which I think is the case), then you've essentially got a market inefficiency. This means that the VCs that do fund these startups will actually end up becoming more profitable, because they're "stealing" edge from VCs that won't.

DelaneyM 4y ago
Not strictly true in this case - an essential factor in the success of a venture-backed startup is the ability to secure a next round of funding. This exacerbates biases significantly, because you're not only trying to select for success, but also for next-round fundability. So it makes perfect sense to say "I think you're a great founder with a great idea and fantastic prototype. _I'm_ not prejudiced, but I think other VCs are too biased for you to be successful, so I won't invest." I've heard this multiple times personally, to the point that I've been advised to bring in a more traditional CTO and take a VPEng/CSO role. Systemic inefficiencies like this one usually require regulatory or systemic assistance to reach a new, more profitable, equilibrium.
- Tehnix 4y ago
  > an essential factor in the success of a venture-backed startup is the ability to secure a next round of funding. I've been quite surprised at who true this is. A majority of the large rounds of layoffs we've been seeing lately (an almost weekly occurrence at some point) was in most part driven by no more investments coming in for the foreseeable future, and companies needing to make drastic cuts for this reality. I didn't really appreciate how dependent companies were on funding rounds to keep up.