Use Pixar's story formula to win over investors
startuppitch.substack.com
startuppitch.substack.com
Fascinating all of it, But for me the big thing to contrast is how Ed Catmull described the IPO (how did Steve plan this, how did he know? I am axed at his business acumen) versus Levy (we were all terrified, movie studios refused to give us their business models, the IPO could have failed at any moment).
In short there is always several sides to a story, and if anyone is confident of a future plan but has not done it twenty times before, they are faking it !
link to book - https://www.amazon.com/To-Pixar-and-Beyond-Lawrence-Levy-aud...
https://en.m.wikipedia.org/wiki/Centripetal_Catmull%E2%80%93...
https://www.goodreads.com/book/show/18077903-creativity-inc
It's on my list to read. Saw a talk Catmull gave on youtube (don't have a link at hand) and was pretty impressed.
I was 1 of a team of 2 or 3 on every pitch in 2 or 3 separate processes to raise over 1bn dollars and make the company I worked for (OakNorth) the most valuable fintech in Europe at the time. We did about 30 investor meetings covering everyone in the PE world, some of the big tech investors, some key VCs, some family offices etc. We ended up massively oversubscribed so and picked the investors we thought were the best fit. In every single pitch the most important things were:
1. your company should actually do something important/valuable. Solve an important problem etc.
2. you should have a plan for a future where the unit economics work, and you should know the plan inside and out
3. you should have thought through something about how what your company does intersects with *this particular investor's* interests, and be able to articulate that clearly
4. You should have clear asks - not just money for valuation but what else you're looking to get from them (strategic advice, intros, synergies with other companies in their portfolio etc).
A bad pitchdeck is one that focuses on form over function, wastes the readers time with unnecessary detail and extrapolates into an unknowable future with too much conviction that things will really play out that way (they won't).
There are for sure examples of companies who are not 'solving an important problem' (at the time of the company being formed). It would be interesting for someone to compare funded companies that met this criteria that were successful (that would have to be defined as well) vs. not and 'pie in the sky maybe maybe if it works will hit it big'.
But right off the top Airbnb as envisioned and as it started was not solving any important problem or really doing anything valuable. At the start I mean (when pitched to investors note Fred Wilson famously passed on this after Paul Graham even pushed him to invest) not what airbnb became (which is what many investors go on).
The Automobile when it started to be popularized didn't solve an important problem that problem was already solved by horses and the early automobiles had to develop over many many years into a state where they became valuable. At the start they were not and investing on that basis would not have been wise (other than 'maybe they will end up allowing people to do this and that vs. using a horse').
Uber ditto (but less so) than Airbnb that problem was solved by cabs in most places. (Will agree this is a weaker point than Airbnb).
That said with respect to the above points 1 to 4 probably a fifth is needed. That would be being able to explain to an investor why your solutions works for a problem they don't even agree is a problem or understand. Once again using airbnb many investors (including Fred Wilson and for that matter myself) couldn't understand why in the world someone would let a stranger use their house makes no sense you have person items and what not just didn't seem to fly. However people of a different age group think differently so how do you explain to the investor (who is not the same peer) why the idea makes sense?
The 'narrative' is something that you tell to partners, customers, on the speakers panel at the tech show, in articles.
In a nutshell, the 'story/narrative' is the foundation of the pitch, which can be expanded from 10 seconds, to 2 minutes, to 5 minutes to 1 hour, with varying levels of detail.
The CEO, or 'someone' at the company will be telling this story over, over and over, and this is how the company is communicated.
The 'VC Pitch' is just one small part of telling the story.
I would also leave the stories for Pixar and other story tellers.
If you actually want to understand why Finding Nemo “consistently tugs at heartstrings worldwide”, Craig Mazin used it as his primary example in “How to write a movie”, episode 403 of Scriptnotes[1]. (TL;DR: the purpose of everything that happens in a movie is to expose the hero to as much agony as possible, so that the change they’re forced to go through feels real. I don’t know what that means for your startup pitch, though.)
1: https://johnaugust.com/2019/scriptnotes-ep-403-how-to-write-...
The hero is your customer. If they aren’t in agony sufficient to prompt change, i.e. to your product, maybe your pitch is off. Or maybe your target market or product need tweaking.
A young couple is expecting twins and moves into a respectable neighbourhood.
In a home invasion the wife is killed, one of the twins are lost, and the surviving child is born physically impaired.
Flash forward, the child is now ~10. He's a happy, normal child (minus the physical impediment). The father is wracked with anxiety at all times and emotionally suffocates the child.
The child wants to be independent (like any 10 year old) so in an act of rebellion with his friends he goes someplace a little bit shady.
He's kidnapped! All of the father's worst fears are realized.
Nobody can help him except a mentally handicapped outsider
(If done well enough, laugh all the way to the bank)
If it tells a good enough story it is a story they can then sell to consumers.
Profit isn’t to be made by meeting basic survival needs, but once people have their basic survival needs met, then it can become profitable to start selling the story that this product lets you be a participant in.
reference : https://blog.reedsy.com/guide/story-structure/dan-harmon-sto...
So story theories are stories themselves. How meta.
1. I wanted to do X.
2. But I couldn't Or it was an extremely frustrating experience.
3. So I took a step back and thought, f***k it I'll build it myself.
4. So here we are; our vision is to democratise X and uplift millions out of their misery.
1. The concept for Uber was born one winter night during the conference when the pair was unable to get a cab. [1]
2. ....they were having trouble paying their rent and were looking for a way to earn some extra cash. They noticed that all hotel rooms in the city were booked, as the local Industrial Design conference attracted a lot of visitors.[2]
3. The idea for ZopNow came when founder Mukesh Singh was standing in a queue at a grocery supermarket. The idea flashed in his mind that something could certainly be done to save people from the hassle of waiting in long lines at grocery supermarkets [3]
4. He was motivated to start OYO Rooms so that he could be in control of the TV remote, which wasn’t possible when he stayed with relatives when he was a child.[4]
[2] https://getpaidforyourpad.com/blog/the-airbnb-founder-story/
[3] http://www.newspatrolling.com/zopnow-company-profile/
[4] https://economictimes.indiatimes.com/news/company/corporate-...
In startups the initial moneybag investor needs a brilliant story to repeat to everybody in their network. Later, everybody who works in that risky venture wants to repeat that story to explain the risk they're taking to have this adventure. Finally, consumers who are initially convinced to buy the thing also need to tell themselves stories of how this product is somehow special, unique, made by brilliant people.
It's like the origin story is an accumulation of all the narcissistic energy accumulated in order to swallow the uncertainty felt by everyone involved.
I would question the importance of focusing on the story - it should naturally follow and result from all the work being done, not be invented ahead of time to fit in with expectations.
This is just a consequence of people taking that old adage to heart
That's the myth. The reality is "a problem you see some people have" (where problem is defined as "anything real or imagined or incepted need that someone can be persuaded to pay for").
As to the content of the article itself, I am curious how many of the hundreds of the founders Ashwin has worked with have used this approach to acquire funding?
(Notice how almost every "success" story involving entrepreneurs, prestigious job offers, etc. seem to be some variation of the Hero's journey)
How can we fix that?
To the extent that this is true, startup funding will go to the best storytellers, like Stephen King or John Lasseter (or, perhaps, Elizabeth Holmes), instead of the people working on the most important breakthrough technology they could most easily bring to market. How could you run a VC firm that funds the best hackers instead of the best storytellers? Or a company that works on the best ideas instead of the ones advocated by the best internal storytellers? Or a trade publication that touts the best ideas instead of the ideas with the best storytellers?
One way to think of this is that storytelling is an attempt to hack investors' evaluation function; as pg says in http://www.paulgraham.com/lesson.html:
> But wasting your time is not the worst thing the educational system does to you. The worst thing it does is to train you that the way to win is by hacking bad tests. This is a much subtler problem that I didn't recognize until I saw it happening to other people.
> When I started advising startup founders at Y Combinator, especially young ones, I was puzzled by the way they always seemed to make things overcomplicated. How, they would ask, do you raise money? What's the trick for making venture capitalists want to invest in you? The best way to make VCs want to invest in you, I would explain, is to actually be a good investment. Even if you could trick VCs into investing in a bad startup, you'd be tricking yourselves too. You're investing time in the same company you're asking them to invest money in. If it's not a good investment, why are you even doing it?
Investors want to invest in the companies that will make the most money. As Ashwin points out, the founders' storytelling ability is a component in making money, because it affects company morale and public relations, as well as future funding rounds. But there are a lot of other components to making money, as Theranos found out. If Ashwin is correct that 90% of a startup founder's job is storytelling, then investors are vastly overvaluing storytelling ability when they make their investment decisions, and there should be a lot of startups out there with mediocre storytelling and genuinely great technology that investors could get exposure to for a much lower price.
The information asymmetry here is a real problem, though, because how do the investors find out about the great technology? The people who are working on it have to tell them about it, and if they're bad at communicating, it's going to be hard to understand what they're saying. Maybe "due diligence" should start earlier on, with proactive due-diligence teams going out and scouting out ideas that could turn out to be big. Linux Weekly News, of all things, is the closest approach to this I've seen in the real world.
Sounds pretty hard. But better than investing in Theranos and passing on Dropbox.
If true, there's nothing to 'fix' with VCs. If you can't sell a story to them, how are you selling a story to the customers?
Look at all of the companies that we admire. The tranparency we get from some? Literally stories. Products that last or 'just work'? More stories. Hell, even my hobbies are mostly full of stories.
But objective reality does actually matter, and that's what eventually sunk Theranos. Similarly, if your girlfriend is objectively planning to empty your bank account and run off with her other boyfriend, that objective reality will eventually impose itself on your understanding, perhaps some time after she executes her plans. (Unless her own understanding of the situation changes in a way that makes her reconsider her plans.) Your "products that last"? You'll change the story you're telling yourself if they fall apart in your hand enough times.
And that's why we're using TCP/IP and not IBM SNA or DECNet or Tymnet or Minitel or even OSI to have this conversation; TCP/IP objectively worked better, even though IBM and CCITT had better stories.
But I'm not saying that stories don't matter. That's not what I'm saying, man. I'm saying that reality also matters.
1) I think more business relationships are two adversarial. And big companies get big to own their supply chain, including labor. If we were nicer to each other, paid better overall and were dependable partners, many things could get farmed out to other orgs.
We need an economic model that isn't in a war with itself.
2) Sales folks, the story tellers get too much money, make it big, become VCs, only see themselves in the world. Funding for folks creating the future should be predicated on the whims of this weird positive feedback loop.
Nobody ever said stories are GOOD. Stories are BAD. (thanks to Terry Pratchett, well known for telling cautionary tales)
Our tech bubble is overfitting. Selecting for characteristics that don't affect the outcome we claim we want.
Or maybe story telling is more useful than you think? Plot holes represent real business problems. Suspense of disbelief can allow you or investors to see the value just behind a hurdle. Giving employees a role to play keeps their focus, even if a plot twist is around the corner.
And remember that founders don't do most of the work. A good startup has lots of people who do real work. But a founder does need to tie it together into something coherent and show the endgame. And that does appear to work a lot of the time, so there seems to be lots of evidenxe that founders telling stories is valuable, and little evidence that it's not.
Just to correct this misreading, I'm not saying that founders telling stories isn't valuable. I'm saying that the value of founders telling stories is already taken into account in the existing funding process, and if Ashwin is correct, it's overweighted. Theranos, Juicero, and Animats's example of Better Place are evidence that Ashwin is correct.
Storytelling is common to successful startups and to the mass graveyard of failures. The question isn't whether storytelling is necessary given the way things are done currently (it is necessary, therefore it is necessarily effective), but whether the gap between storytelling and the ground truth is necessary.
It doesn't need fixing. If you can't tell a compelling story to potential investors, how are you going to tell a story to your customers?
Some businesses will need a story (I would consider my own an example). For others, the products do speak for themselves. The initial generalization, that 90% of a founder's work is storytelling, tells me more about the limited, silicon- valley-centric perspective of the author than it teaches me about business.
At that time the dot com boom of the commercial Internet had just started. They also had very good credentials - I mean, two PhDs at Stanford still is a pretty good background for investors to take you seriously. It also was about an interesting problem, which in addition looked solvable with enough brains and brawns.
The storytelling itself had a big mountain as a base to jump higher form there. You can't claim the height reached was due to the storytelling as a major factor. Everything else contributed much more, the right idea, people and external conditions at the right time.
There were many companies at the time that had received investor money with horrible stories from today's point of view. Some of which I could see more closely because I accidentally applied for a job (I switched jobs in 1997), to see people with a huge ego, no idea what they were doing getting a few millions for ideas that made you scratch your head. We saw how it ended at the end of the dot com boom.
The danger is of course shown with Google: when the reality shifts or evolves, the story tends to stay put, and then you're building a trouble machine.
I rebutted what I guessed to be your unstated premise by pointing at the example of Google, which, as I remember it, spent 7 years without telling its users almost anything at all about its products, much less engaging in the kind of masterful storytelling exemplified by the Chrome launch comic book. (They did have revenue before Adsense; Adwords was already in place in 02001.) They had no advertising campaigns of their own; they made almost no public statements at all. Yet they overwhelmingly dominated online search by 02004, having unseated well-known established incumbents.
So I think it's possible to get wide adoption without engaging in storytelling to users about your product.
I also think it's possible to be profitable without getting wide adoption. There are a lot of companies, mostly with fairly unique products or services, that sell to a small number of long-term customers, so their sales next year depend much more on the quality of their products this year than on the quality of their storytelling to their customers. That's actually where Google got revenue pre-Adwords: Yahoo outsourced search to them. I'm sure there was some storytelling involved in that sales process (I wasn't part of it) but I suspect that the more significant factor was that the people at Yahoo knew by experience that Google's search was really good, in fact, better than the crap Yahoo's portal was using at the time (maybe HotBot?).
I definitely don't mean to deprecate Google's founders or imply that they were mediocre at storytelling to investors or didn't spend a lot of time on it. On the contrary, I was simply rebutting what I took to be the unstated premise behind your response: that if a company is mediocre at storytelling, it won't be able to sell products, because storytelling is an essential part of the sales process. In fact, storytelling is not an essential part of the sales process (although it certainly helps), and so companies that are mediocre at storytelling frequently do sell products. How much investment Google's founders had raised is completely irrelevant to that question.
If that wasn't your unstated premise, then how was your comment, "But what do you do with a company, even with good tech, when they’re not able to sell a product?" relevant to my original comment? Because I'm evidently not smart enough to figure it out on my own.
The article is meant as a how-to of how to win over investors. So your rebuttal of my comment is ‘just be Google, then you won’t need Storytelling (maybe, because maybe they were pretty good at it after all)’? It’s like telling budding school bands ‘just be Beatles/Nirvana/Beyoncé’. How that is helping the average guy trying to build their pitch deck?
Moreover, you seem to be attempting to rebut the proposition "that Google’s storytelling was bad", as if that were something I had said, when in fact I specifically disclaimed that interpretation in the comment you're ostensibly replying to: "I definitely don't mean to deprecate Google's founders or imply that they were mediocre at storytelling to investors or didn't spend a lot of time on it." Then, you summarized my comment entirely incorrectly as "just be Google, then you won’t need Storytelling (maybe, because maybe they were pretty good at it after all)".
I cannot tell if you are astoundingly incompetent at reading or intentionally lying about what I'm saying, which would make you astoundingly dishonest.
- the article suggests storytelling as a way to increase your funding chances. - you say that’s stupid and needs to be solved - I say it seems like a good idea if you want founders to be able to sell - you say that’s not valid, giving, of all possibilities, Google as an example of how storytelling is unnecessary, regardless that (1) you don’t know how good they are in it and (2) they obviously were very successful in fundraising, the very topic of the article (did you even read it?) You also claim they did not tell their customers about what their product is, yet you also claim that their product was enough to keep them growing, apparently unbeknownst to their customers.
I don’t know man, if you can make sense of your arguments, good for you.
What is the machine? The story explains it and the numbers then give it credibility.
I try and get a little stories into my work comms (given enough time)
brief overview of how the project is going - story
technical document - story
It can be fun to write as well. It doesn't have to a childrens type of story either, read some short stories and get some good ideas
although being too creative is sometime seen as not professional.
And as you conclude, it fulfills what can be expected at that point.
FWIW my venture fund is an investor in ~150 companies, and I've run correlations for company success vs. a bunch of company attributes. "Founder's ability to pitch and sell" is one of a very small number of positive correlations that I've found over the last decade.
In grad school (molecular biology/genetics), various lab members would return from scientific conferences and the most common comment was "You should have heard <so-and-so's research talk>. She had a great story."
It made an impression on me. You can do the best research, make the best product, write the cleanest code, etc. But you will suffer if you can't tell the story.
In the end doing anything non trivial requires collaboration, and the way to create that is to tell your story.
So I agree but I’m concern that focusing solely on “pitch and sell” is what gave us Nikola, Theranos, …
I beg to disagree -- storytelling is the main part of hiring and selling.
Hiring is convincing the employee you want why this company is the next chapter in their personal story, and how they fit into the story of the company and the product. Storytelling is the creation of meaning, and people take jobs because of what they mean for your life. For some people, that meaning is about making the world a better place, while for other's it's about how this job will generate more cold hard cash than you could anywhere else.
Similarly, selling is telling and justifying the story of how this product will change the customer's life for the better.
Integrity? Vision? Technical specifications? All part of the story you're telling.
Not all jobs involve story. If you're building an algorithm, story doesn't really factor into it. But convincing people is always done through a story -- "here's why X is better than Y". So to whatever extent your job in convincing people, it's about communicating story.
CEO's do other things too. Deciding which strategy they want to pursue isn't story, it's strategy. But then convincing everyone else to go along with the strategy -- that's story.
Selling includes includes finding market, indetifing right people to sell to, product market fit, should we sell X or Y, etc. But the goal is to make money. If CEO does only storytelling then it is a scam.
Hiring is also much more complex then just convincing some person to join your company. Which person? How to find them? Location? Are they too expensive? Can they recuirt more?
Anyway my grandfather always told me that is you want to understand how companies work just like how the oldest profession in the world works. So what is responsibility of the pimp? Sell and hire.
If your goal is to hire a person or sell a product, yes. I think what the OP was saying is that they are a small part because of other ethical concerns. Like, the OP was saying that selling many units of snakeoil is a failure because it's a scam. Or hiring contractors and motivating them to work hard and then using fine print to screw them out of their profit sharing (e.g. Hollywood accounting) is a failure.
I’ve always known storytelling to be fundamental to sales. So much so, that when I first went through sales training a decade ago it was predicated on “customer centrism” (as in customer centric selling) and punctuated by days worth of storytelling foundations.
I would add identifying a market, conceiving a product and achieving product-market fit to that list.
Pixar's story approach is all "I am the chosen one". It's not about someone who worked to make it happen. This came from George Lucas, whose stories are all about "the chosen one". His success changed film storytelling. Too much. Before Lucas, there were more "clawed their way up from the bottom" stories.
I've seen "I am the chosen one" pitches. The CEO of Better Place (electric cars using battery swapping stations) comes to mind. He was a really good speaker, he was really good looking, he knew several national leaders, and his business plan was total bullshit. Better Place went bankrupt.
The trick seems to be to create a dream, let the perceived company value increase based on that dream, and then pull out at the right moment, leaving the losses to investors who came too late.
I think a better business might be battery pack refurbishment. Buy dead/worn out packs from mechanics, replace any bad cells or fuses, reseal them, and sell them with a 90 day warranty.
(1) battery
(2) electrons
It's early and people still fetishize the batteries a bit, but they're really just containers for the thing we actually want - the charge.
[1]Taxis drive a lot, so the savings from battery swapping are much more compelling compared to the car costs. And many taxis drive only within city range, so no range anxiety.
For how Better Place blew it, see the Wikipedia article.
https://www.cnet.com/google-amp/news/china-ev-swappable-batt...
Good overview here:
edit: Here it was, from 2013: "Tesla Shows Off A 90-Second Battery Swap System"
https://news.ycombinator.com/item?id=5916980
https://news.ycombinator.com/item?id=5916451
https://www.tesla.com/videos/battery-swap-event (it's still on tesla.com!)
I think they are making good strides on fast charging and decided not to lean into the swap.
Solving problems is incredibly important. You can often succeed with that alone. The most successful ventures do both.
Ergo your job as a founder is to convince the investors and the journalists that you are the chosen one. Either that, or bootstrap.
"Make money". This isn't the most important thing, but it is the means by which all of these other things are done... then he listed the "things that are important"
Your solution is nothing if you can't build it, and nothing if nobody uses it.
I know really smart engineers that would do well to internalize this.
The best leaders I've worked with have (implicitly) spun narratives about the problems we're solving, the ways we're approaching them, the kind of people we are, etc. which lead everyone to find within themselves the (mutually agreeable) answers about what to do next.
In a sense, this too is a real problem. People will burn a lot of money, time and resources as long as their fundamental motivation is to chase a pipe dream.
If you are founding a new coffee shop, or a trading company, probably you should spend more time working on the actual problem. But if you are founding a future tech (eg SpaceX at its beginning) or anything that requires huge capital or fast scaling in team size, you should spend more time on getting everyone buying the story and provides you with talent and capital to actually solve it.
Effective leaders tell the stories that attract and retain key people, enable them with resources and put their works into the world. This is a key difference between ventures and small businesses. If the CEO thinks that is beneath them, they’re micromanaging a glorified one-person shop.
The technically-superior badly-coördinated solution losing to a well-communicated one is a Silicon Valley, business, political and military trope for good reason.
A great solution without good communication is just as worthless as an aspirational pitch deck with no solution. Both result in a problem not getting solved.
The next 90% is telling the story so people can understand how you can help them.
- Be a friend or acquaintance of the fund manager.
- Be the child of an important client of the investment bank.
- Study at a prestigious university together with other children of the bank's clients
- You have sold your previous business or already own a very successful one.
It is a fallacy to think that your pitch will be of any use in 2021. It is 90% personal relationships, 5% narrative and 5% luck. Not even the business plan is relevant anymore (WeWork and many others)
In university (which I paid for myself through internships + loans), my cofounder and I just started coding on an idea, which got us into YC, which helped us get in front of a bunch of VCs, which allowed us to raise $3m in seed funding. No connections, just lots of googling and talking/pitching to anyone that would pay attention to us.
It could've been the 5% luck you're talking about, but certainly don't think that coming from a well-connected family is the only way to fundraise in 2021.
Leveraging YC's rep for selection is one way to break in. You were part of the lucky 1% who make it through the program from application to funding,congrats!
An aside.. How did the company do?
People aren't selected at random. There isn't any luck involved. It's hard work.
I feel it's diminishing peoples achievements to say that their lotto numbers came up and YC let them in.
The other 99% is where the random rejection component amounts to more like "bad luck".
IOW good luck on its own isn't even enough, but bad luck can set you back years.
And since there's realistically at least another 2% out of the 99 who would have been equally performant if there was actually room for them to be accepted, the greatest pool of most promising candidates are among those whom have been the most unlucky.
Hmm.
So you got a loan that your family backed and you were able to work as an intern in various places. You also went to a prestigious university. You were a privileged 1% and after entering YC you are part of the 0.1%. This would not have happened if you had been born in Namibia.
My complaint is that by using the leverage of the 0.1% you try to convince the 99,9% that: if you work, think and play hard you can achive your dreams. This is no longer the case. Maybe it was like that 10 or 15 or 35 years ago. Today the wealth difference and inequality is abysmal because of the network effects. So basically you don't need to be good or bad business, you just leverage your network and keep going.
PS: I'm also a 1%
That's your "connections" right there
When the worlds of venture capital and government contracting collides, it gets even more murky. There are many deals in that government folks are closing with silicon valley firms where someone within the government then ends up working for that same silicon valley firm. It's such an I scratch your back, you scratch mine world.
I don't doubt that VCs tend to prefer those they know to those they don't for the very same reasons.
I'm just curious how this works. Here are the two possible scenarios I came up with.
Scenario 1: Fund managers are altruistic and not particularly interested in making money. So they give money to people they know personally.
Scenario 2: Fund managers are greedy, but success is essentially random. So they are indifferent to their investments, so they invest in friends and people they know personally
Is there some scenario in which fund managers are both greedy but also invest in relatively crappy ideas just due to happenstance of having a personal relationship with a founder?
But they have investors. Their investors care about portfolio returns, not the elite networks of the VC administrators.
> the same networking and nepotism factors are at play for many of the other business deals besides venture capital that a new business will need,
So basically running a business is easy and pretty much anyone can do it, you just need connections rather than competence.
None of this makes any sense.
I mean, those investors are often part of those networks.
So the fund is basically a charity where it invests according to merit and uses those gains to subsidize the investments in their buddies funds. But at least some decisions are made on merit
> have investments where they sell all the shares at a greater price even if the business doesnt do anything revenue-positive
Who are they selling to at a higher price? Do the other investors have to have a relationship with the investor as well since they're investing in sub-par companies?
private equity funds "subsidize" all their losing equity investments with the winning ones, as well as additional investor capital - subsidize only being a useful term if they participate in an additional financing round for one of their poorly performing companies. The rest just fade away into nonexistence. It is not uncommon, unheard of, or odd that the founders of some of those companies has a personal relationship with a fund manager. And more likely the founders at all the companies have a personal connection to one of the private equity firms that invested in the funding round, who then convinced other firms to invest. One triggers the other, but the first one was a relationship.
Most ideas work with infinite money invested, and infinite budget to convince people to purchase or otherwise buy into that idea. Typically ideas work long enough for the same organization to pivot to another idea, or have enough money to buy the better executed version of the idea they originally wanted to do. It doesn't matter. The only thing that is a waste of time is being extremely good at a discipline and hoping that translates into financial investment. It is not an important part of the puzzle.
Every startup I know or have worked at went through a pitch contest that was pretty boring and not at all based on relationships. You often speak to multiple funds, they kick the tires, interview the team, size out the market opportunity, look at revenue or users, or growth or whatever you have, and they choose to invest. My wife's company also had a PE firm invest in her company and they did the same process and are focused on growth. No one is doing favors for anyone else.
What are you basing your answer on? No offense, but it sounds like you're just going off a caricature of how a very young inexperienced person thinks business happens.
> The only thing that is a waste of time is being extremely good at a discipline and hoping that translates into financial investment. It is not an important part of the puzzle.
I guarantee you if you build a product w/ a high growth rate or engagement, VC will be kicking down your door to give you money.
Why I need a VC then? Did you understand why the Venture Capital industry was created in the first place on the United States in the 60's? If I have a working product with high rate and cashflow, I just use the private debt markets and keep going and expanding. We are not talking about that.
Investors want to make money and they very frequently invest in people who do not meet that criteria. So it’s helpful to too how people were successful without the nepotistic criteria you outlined.
In general your post just complains about privilege without being helpful or insightful.
And of all of the investments of all of our customers I think I might be able to point to one or two cases where one or more of these were true but I highly doubt they were the deciding factor because the bulk of those did not go through, mostly because having such a relationship - and having it declared - would cause a lot more scrutiny on the fund managers than would happen otherwise because they'd be open to claims.
Now of course it is possible that a bunch of them passed under the radar without being declared.
WeWork - and SoftBank in general - are weird outliers, there is very little logic (to me, maybe they do understand) to their investments.
Yes, it’s true. It is tautologically true. You haven’t come up with some clever indictment of the system, you’ve only described it.
That doesn’t mean nobody who comes from a modest background succeeds and it is not at all helpful to anyone in that situation to just harp on how other people have it easier.
Govt shares go into a citizens wealth fund and are setup to require a standard dividend formula that triggers based some formula of certain revenue or funding trigger/ramp up threshold.
When you look at numbers of new business starts - even with venture capital and the yc model becoming popular, the numbers are at a multi decade low. The people who our current system selects to take a risk with look far too uniform from far to homogeneous an outlook. This would be a way to setup a monkey throwing darts at random, but the non randomly pick up the next stage winners to position them for private investment. But with society reaping benefits of wins.
Yes, that’s what makes it basic income. What’s to prevent people from copy-pasting the same “local restaurant” business plan every year and just going “whoops, it failed”?
I’m always surprised at how much people value an idea verses making that idea happen.
Also, remember that banks have a license from the state to create money at their will from thin air, so it's really free money that we're talking about.
"You have sold your previous business or already own a very successful one."
This is of course very true, and probably the #1 factor which will help you raise money, but that's an authentic reason to invest in someone.
No serious fund will give you money because you 'know them' or are the 'son of an important client of some investment bank'.
Graduating from a Top School will be beneficial but it's neither sufficient nor necessary.
[0] https://medium.com/@BoundeHQ/what-is-the-trough-of-sorrow-an...
Today I went to RIGHT ARROW the supermarket GROCERY BAG to get some groceries VEGETABLE and I saw EYE my friend WAVING HAND.
but ok.