An interesting comparison point is venture capital investing. VCs have a strong financial incentive to find and invest in all of the best companies regardless of location. Yet, as far as I know, networks matter a ton for getting VC funding and there are geographic clustering effects for companies get funded. We could conclude that VCs are allocating their capital inefficiently, and that there’s a market opportunity for VC firms that have partners in many different locations all over the world.
I suspect that’s not the right conclusion. Instead, I’d guess that the effect is created by lots of promising companies moving to a tech hub and the best companies being capable of networking their way to funders regardless of location. If you’re a startup CEO and can’t work out how to get a meeting with VCs, you might be in the wrong line of work.
Similarly, I think one conclusion that I’d like promising EA community leaders to reach from this analysis is that they should probably make sure to find ways to meet the people making grants in their areas. Being able to network seems like a core skill for a promising community builder, so this is an opportunity to exercise that skill. Of course, this doesn’t mean that grantmakers shouldn’t be working to expand the geographic scope of their grantmaking, it just means that if you’re concerned that you’re going to get left out of funding unfairly, there are steps you can take to prevent that.
Yes, there are steps to mitigate it. But community building is by its very nature location-constrained. A tech firm can move to a particular hub. A community can not.
Furthermore, if I recall correctly, the VC landscape was as efficient as it could be and VC’s were overreliant on their networks. Organizations like Y Combinator stepped into that market gap by being more approachable. This is a step that CB grantmakers can also take.
YC doesn’t seem like a good example of avoiding geographic clustering effects. You are required to move your company to the San Francisco area while you are going through YC, and PG (cofounder of YC) has written about why founders should move to startup hubs. One of the weirdest parts of my personal YC experience was how they paid to fly me to Mountain View and stay a couple nights in a (ridiculously overpriced, IMO) airbnb, just to have a short conversation with me because they think being in person is so important.
One thing which did differentiate YC when they started is that they had “soft” adds: they offer you a lot of connections and advice, in addition to just money. Possibly more grantmakers should do this, but I’m not sure.
Sure, “networks matter a ton for getting VC funding.” But in the VC world, business plans also matter a ton. I think in EA funding decisions, networks are overweighted and “business plans” are underweighted.
Even before EA Grants launched its referral round, it had a “plan to move the evaluation processes even further in the direction of mostly evaluating the merits of the applicants themselves rather than their specific plans.” This shift doesn’t seem to have been motivated by a belief that this is a way to identify the best projects. Rather, it seems like the grantmakers’ vetting constraints played a large part of the motivation: “We are time and resource-constrained in how continuously we can monitor projects, so we need to make sure we have high confidence in grantees. And we do not think we can develop expertise in all possible projects, but we can develop expertise in evaluating the applicants.”
Also, while the VC industry has a large presence in the Bay, it’s more geographically dispersed than you might think. The Bay accounts for ~25% of global VC investment, and the top 20 metro areas account for ~64%. And global capital markets (which I’d guess are a better reference point for the EA community and its multiple causes than the tech-centric VC industry) are even more dispersed.
“Business plans” aren’t really a part of VC evaluations as far as I am aware. It certainly wasn’t a part of YC’s evaluation process. Eye-popping metrics that show growth are relevant as are the past experiencers of the founders, but VCs don’t seem to rely much on abstract plans for what one intends to do as a component of evaluations.
An interesting comparison point is venture capital investing. VCs have a strong financial incentive to find and invest in all of the best companies regardless of location. Yet, as far as I know, networks matter a ton for getting VC funding and there are geographic clustering effects for companies get funded. We could conclude that VCs are allocating their capital inefficiently, and that there’s a market opportunity for VC firms that have partners in many different locations all over the world.
I suspect that’s not the right conclusion. Instead, I’d guess that the effect is created by lots of promising companies moving to a tech hub and the best companies being capable of networking their way to funders regardless of location. If you’re a startup CEO and can’t work out how to get a meeting with VCs, you might be in the wrong line of work.
Similarly, I think one conclusion that I’d like promising EA community leaders to reach from this analysis is that they should probably make sure to find ways to meet the people making grants in their areas. Being able to network seems like a core skill for a promising community builder, so this is an opportunity to exercise that skill. Of course, this doesn’t mean that grantmakers shouldn’t be working to expand the geographic scope of their grantmaking, it just means that if you’re concerned that you’re going to get left out of funding unfairly, there are steps you can take to prevent that.
Yes, there are steps to mitigate it. But community building is by its very nature location-constrained. A tech firm can move to a particular hub. A community can not.
Furthermore, if I recall correctly, the VC landscape was as efficient as it could be and VC’s were overreliant on their networks. Organizations like Y Combinator stepped into that market gap by being more approachable. This is a step that CB grantmakers can also take.
YC doesn’t seem like a good example of avoiding geographic clustering effects. You are required to move your company to the San Francisco area while you are going through YC, and PG (cofounder of YC) has written about why founders should move to startup hubs. One of the weirdest parts of my personal YC experience was how they paid to fly me to Mountain View and stay a couple nights in a (ridiculously overpriced, IMO) airbnb, just to have a short conversation with me because they think being in person is so important.
One thing which did differentiate YC when they started is that they had “soft” adds: they offer you a lot of connections and advice, in addition to just money. Possibly more grantmakers should do this, but I’m not sure.
Sure, “networks matter a ton for getting VC funding.” But in the VC world, business plans also matter a ton. I think in EA funding decisions, networks are overweighted and “business plans” are underweighted.
Even before EA Grants launched its referral round, it had a “plan to move the evaluation processes even further in the direction of mostly evaluating the merits of the applicants themselves rather than their specific plans.” This shift doesn’t seem to have been motivated by a belief that this is a way to identify the best projects. Rather, it seems like the grantmakers’ vetting constraints played a large part of the motivation: “We are time and resource-constrained in how continuously we can monitor projects, so we need to make sure we have high confidence in grantees. And we do not think we can develop expertise in all possible projects, but we can develop expertise in evaluating the applicants.”
Also, while the VC industry has a large presence in the Bay, it’s more geographically dispersed than you might think. The Bay accounts for ~25% of global VC investment, and the top 20 metro areas account for ~64%. And global capital markets (which I’d guess are a better reference point for the EA community and its multiple causes than the tech-centric VC industry) are even more dispersed.
“Business plans” aren’t really a part of VC evaluations as far as I am aware. It certainly wasn’t a part of YC’s evaluation process. Eye-popping metrics that show growth are relevant as are the past experiencers of the founders, but VCs don’t seem to rely much on abstract plans for what one intends to do as a component of evaluations.