Betting on Founders
On the trivial notion that certain folks will “figure things out”
Starting April 6, for the next 30 days, I’m writing a brief essay every day and posting it to my Medium account in an effort to get off social media and focus on doing something good for me, both personally and professionally. To read my last essay, click here.
When I was pitching my startup throughout 2019 and bringing in some capital, I kept hearing phrases like “We believe in you!” and “People called you a rockstar!”
In the past, I’ve written about how my feelings during this time period affected my mental state, but the main thing I wanted to touch on was this idea that became universally-accepted among startup and VC folk throughout the 2010s: betting on founders.
From a confidence-inducing perspective, the feeling of people backing you — both with their minds and their wallets — is incredible. It gives you newfound confidence in your vision, and a modicum of proof that all that time grinding when no one was watching was time well spent.
However, there’s something to be said about how it potentially invalidates the content of your actual ideas. In my experience, it felt like people only started caring about what I had to say because a group gave their blessing with a open checkbook, not because they liked or cared about what I was doing before the fact.
On top of that, I believe the progression of the betting on founders mantra in startup circles is a big influence on the lack of investment in companies with diverse founders because VCs feel more confident in someone who looks and communicates like them. In a story for Belt Magazine, one Black tech entrepreneur named Davidson Moss — who went back to working at his family’s restaurant after failing to secure any funding in Chicago — had this to say:
“It’s just white folks giving money to white folks for ideas that white folks like. And they say, ‘Hey, it’s business, it’s not personal.’ But VCs are definitely more comfortable losing money on white folks’ dumb ideas than sitting still to listen to something that’s outside their world.”
I was reminded of this quote upon watching Hulu’s recent documentary WeWork: Or the Making and Breaking of a $47 Billion Unicorn. Along with being a great movie in of itself, I think it painted a really accurate picture of the intoxicating movement WeWork was able to manufacture while simultaneously showing how people were hurt by CEO and figurehead Adam Neumann’s greed and mismanagement.
I first heard Neumann’s story through his own words on How We Built This several moons ago, and like any supposedly great entrepreneur, he was able to weave quite the narrative. To me, though, that’s inherently the problem— when founders craft their own narrative, sometimes they make sure to leave out the icky, quasi-legal parts in spinning their “failures” and lauding their successes.
This leads many onlookers to regard certain founders as prophetic figures —literally. In the doc, none other than Scott Galloway has the perfect quote: “If you tell a 30-something he’s Jesus Christ, he’s inclined to believe you.”
I guess my concluding thoughts revolve around the logic that investors should trust their money with someone who will “find a way” when the going gets tough and eventually “solve the problem.” I believe that there’s merit to this line of thinking, as ideas should never and will never be perfect in their early goings. Founders will always have to communicate with their users and iterate on their product in a creative fashion.
Additionally, in the three years since the Belt Magazine story I referenced was published, the Chicago startup scene has seen increased diversification through intentional initiatives. When more and more of the people with an open checkbook start to accurately reflect a population, my optimistic viewpoint is that access to funds will become more widespread.
Nevertheless, I still wholeheartedly believe that the overarching mentality is what’s lead to fallout from morally questionable leaders like Adam Neumann in the past. You can bet on founders who sound great and look the part all you want, but ideas matter, too.