There is a controversial interview with Paul Graham floating around and I'm left to wonder why we're still paying attention to guys like him. He is accused by people of being, at best, oblivious and at worst, sexist. I've never sat down with the guy, so I can't speak to that, but I'm tired of hearing about the same voices over and over again when I'm not even sure they're relevant.
Why give more airtime to someone whose peak of influence, and perhaps success, is clearly behind him--especially to talk about topics where he clearly isn't adding value to the conversation. Every time he opens his mouth about founder diversity, he seems completely out of his league to address the topic. I want to hear Paul Graham's thoughts on gender equality and inclusive participation in the Valley as much as I want to hearCharlton Heston's thoughts on gun control.
"God knows what you would do to get 13 year old girls interested in computers. I would have to stop and think about that," he offers.
Well, maybe he should do that... Stop--AND think. As a guy, I know how hard it is for us to do either of those things, let alone do both at the same time. However, in this moment, I think one's career in venture capital depends on changing your perspective.
The biggest question I think VC's face right now is whether or not, in the future, the best founders will look and act like the best founders of the past. Will they come from the same places as today's industry leaders, or from the far corners of the earth and from underrepresented groups? The world is getting flatter than ever before and the white American male is exerting less and less influence over it each day.
If you are a venture capital investor and you're not preparing yourself to succeed in a more diverse ecosystem of entrepreneurs, you're just going to get left behind.
Considering the myopia at the top, it's not surprising that turning point may have already happened for YCombinator. YC's best investing days may be behind it.
YCombinator had a great run from 2007 through early 2009 investing at a time when there weren't nearly as many seed funds and accelerators as there are now. They picked up Airbnb, Heroku and Dropbox.
Since Airbnb, however, it feels like not only is YC missing another billion dollar plus home run, but the percent of companies worth $40 million (a standard YC has used in the press), either by financing or exit, seems low. I'm thinking maybe I found about three dozen companies worth that much in the nearly 400 companies that have been through YC since Airbnb. That's less than 10%. The classes got too big and quality was diluted because, by PG's own admission, YC "grew too fast."
You could argue that the recent companies are too early, so I'll take that challenge and compare it with my own portfolio. Given that they do $17-20k per founder across 350+ companies, we're in the ballpark of the amount of money we're invested--just south of $10mm.
My own track record as a VC across First Round Capital and Brooklyn Bridge Ventures actually starts in January of 2010, *after* the Airbnb class of Winter 2009. I've closed on about 20 early stage investments and, by comparison, 5 of my investments are now worth $40 million or more either via financing or exit (with three more over $25 million). That's 25%... a far higher rate than YC has appeared to have done since then. My total valuation multiple across that span is nearly 4x and the return rate is up over 110% IRR. The initial base of capital has already been returned in those investments, so it's not a made up return based on just paper gains either.
Most relevant to this conversation, though, is that I didn't do it by only funding only hacker dudes in the Valley:
- Nine of my twenty investments have female founders or co-founders--nearly 50%.
- All of the companies but one were funded in NYC, with the other in Boston.
- Of the 20 teams, only half count an engineer as a founder or co-founder.
A couple of years ago, I went to a networking event sponsored by a top tier VC firm. It was held at a trendy Lower East Side bar where the price of the drinks made it the kind of place that a typical NYC entrepreneur would never actually go. The invitees were a who's who of the NYC tech scene--all the most visible folks.
It was exactly how you'd imagine a venture firm to throw a party. You could see that conversation happening:
"Hey, let's reach out to the community. What's the coolest place to go to? Let's invite all the important venture and startup people people we know of--and don't forget to throw in a few women, too."
You wind up a far cry from Shake Shack when that happens, I'll tell you that.
That's when I realized what separates how the next generation of successful VCs will look at the world.
That party was a bet that the best future opportunities would come from an insider network of people already connected to the establishment--that getting the next Google or Facebook meant connecting to the people "in here".
I'm certain, however, that the more interesting stuff is going on "out there". I believe that the most successful companies that I will get to work with over the course of my career will come from people not currently connected to the insider ecosystem, and from people who don't look like yesterday's notable founders. I'm making a huge bet on the people "out there" because they have new ways of looking at things, new approaches to running businesses and are tackling problems being felt most deeply by the people outside the inner circles.
If I'm going to be successful in that world, I better damn well have a view on how to make the ecosystem more inclusive. I need to watch my style to make sure I appear approachable versus authoritative. I need to learn from my mistakes where I may not have done all I could to make people feel welcome and respected--and surely I've made 'em.
My brand needs to be one of a dutiful civil servant in a welcoming city rather than what I see from certain investors--acting like royalty in a place that investors believe is the only one that matters in the world.
The media needs to do it's part, too. Let's stop paying so much attention to what old voices are saying about the establishment, and instead strive to seek new voices and new perspectives. Otherwise, we risk signaling to future generations that these are the people in charge and that nothing is going to change.
We need to send a strong, clear message to that 13 year old girl, the 13 year old black kid, and the 13 year old growing up outside of anywhere anyone thought to call a venture hotbed to tell them that they can be successful and that they'll get the help they need from openminded professionals.