Seeking Solutions, Not Capital.

A reflection on where entrepreneurship and finance went wrong, and a call for a better way of doing things.

Tears of sweat rolled down his brow, it was an hour past midnight. His back ached from the long hours staring at his screen in a tiny apartment, but he had to get this done. After all, he’d been lucky to land this role as the chief of staff of this company right after they raised a huge round from the best investors in town. The board meeting was tomorrow and his CEO was relying on him to get the deck ready. There was only one problem, the numbers weren’t good. In fact, they were downright bad. He thought about sounding the alarm bells to the CEO, but what could she do, she was responsible for getting them into this whole situation in the first place. And, largely they’d been following all the advice, raising lots of money, hiring the smartest people, why wasn’t this working? Frustrated, he convinced himself he was overthinking things. Surely working harder will solve this problem, and that's exactly what he did late into the night.  

Why do companies seek capital? To fund an idea? To gain status? To prolong their inevitable death? I believe capital should mostly be an afterthought to seeking real solutions to hard problems. This is not a new idea. In fact, when we read about the venture darlings of yesteryear, the Apple’s, the Google’s, the Paypals, these companies were founded by visionary entrepreneurs fundamentally seeking solutions, not capital. 

Today our world is hyper capitalized. Everyone is an “investor” (including myself in my past job). And so it seems entrepreneurship has changed to reflect that as well. Now, it often feels like entrepreneurs are seeking capital first, and solutions second. Why? What changed between the early 2000’s and now? 

Entrepreneurship got…sexy and then got productized (thanks Ycombinator, A16z etc), and most importantly the capital came flooding in. Anyone starting a company in a major metropole was instantly swarmed by 100’s of investors, few of whom had worked at funds that existed more than 5, let alone 10 years. With so much capital, sex appeal, and resources flooding the ecosystem, entrepreneurship became the zeitgeist. Like finance in the 80’s and 90’s, and big tech in the early 2000’s, entrepreneurship and startup culture commandeered the cohort of young 20 somethings graduating from top private schools in the US. 

But this posed one fundamental issue. Goldman, McKinsey and Google offer specific products to young ambitious people: status, reliable income, and most importantly: safety. Ask any VC who's been around more than 5-7 years and you’ll find a resounding truth, startups as a whole offer the exact opposite experience. Roughly ~50% start off with a bang and then slowly wither. Another 45% don’t compound growth fast enough to become venture businesses. And the last “lucky” 5% experience truly exponential growth that turns out to be both wildly exciting but extremely painful in other ways. Now, try selling that pitch to a group of wide eye’d CS students at Harvard? 

Well you wouldn’t because it wouldn’t work. So instead, we rigged the game, softened the edges of this industry, and brought more and more young people into entrepreneurship. How? Capital. Lots and lots of capital. 

One phrase I’ll never forget when I worked in VC was this: Most companies die of indigestion, not starvation. It turns out, the best venture capitalists knew this all along, but with the hypercapitilization of the ecosystem, all investors were by default forced to over invest in their companies, and like clockwork, who started showing up? The people seeking capital. 

If you’ve read this far, you believe what I’m saying, so let's cut to the chase. The people who are only seeking capital have no place in the startup world. Go work in another industry, you’re smart and you probably will make more money there anyways. Instead, we need people with the courage to seek solutions. 

While we’re here, let's also be frank about capital itself, it's not all created equally and for a good reason. Not all companies will generate venture outcomes, probably not even your company if you’re a founder right now. But what if we celebrated that? Maybe a future with a lot of smaller/mid sized companies (that actually generate cash flow!) is a good thing. As we see a new era of stakeholder capitalism emerging with companies trying to do good for the world, perhaps collaboration amongst private enterprises is going to be sorely needed to solve really tough issues like climate change, inequality, nutrition, farming and health. 

This fundamentally still comes back to the people we want in this industry, and I hope this post can be a rally cry for a forgotten type of entrepreneur. The entrepreneurs with a burning focus on solving hard problems. The entrepreneurs who dream of building enduring and sustainable businesses, with or without venture capital, and those who fundamentally want to build on their own terms.

It turns out that the world of business is actually full of enduring companies that are seeking solutions to important problems, on their own terms. Unfortunately, many don’t get the proper attention they deserve in traditional media. After spending most of my career in traditional venture capital, I’m eager to share the stories of these companies and the solution seekers behind them. Join me on this journey. Let's build a community together. Let's be honest about the challenges. Lets learn from each other as we attempt to solve some of the hardest problems out there.

No more seeking capital, it's time to start seeking solutions.