I really like this post; it updated me in favor of some types of consolidation in EA (although I was already a bit sympathetic to this view). One nitpick on this:
In terms of “market cap growth”, my impression is that big companies feature a lot more growth small ones. In the period of 2005 to now, all YC companies combined grew to a net worth of $600B. Meanwhile, Apple Inc alone grew from $30B to $2.7T.
I think it probably makes sense to look at percentage growth, rather than the growth in absolute value of assets. In this post I found that YCombinator companies grew substantially faster than the S&P 500. My methodology is not super comparable with what you are doing here, but e.g. Airbnb is worth $83B compared to the $1.8M it was valued at when it received the YCombinator standard deal, for a 46,000x ROI, which compares quite favorably to Apple’s ~90x.
As an alternative approach: this review claims that angel investors average 35% IRR, which compares favorably to the returns of investing in larger companies. Numbers from angel investors are dubious for a bunch of reasons, including some of the ones listed in that paper, but my impression is that angel investing is not that much worse than public market investing.
Anyway, sorry for the long comment. I agree with the overall claim that startups are not “far more efficient” but think they might still be a bit more efficient, on average (with a bunch of caveats).
I really like this post; it updated me in favor of some types of consolidation in EA (although I was already a bit sympathetic to this view). One nitpick on this:
I think it probably makes sense to look at percentage growth, rather than the growth in absolute value of assets. In this post I found that YCombinator companies grew substantially faster than the S&P 500. My methodology is not super comparable with what you are doing here, but e.g. Airbnb is worth $83B compared to the $1.8M it was valued at when it received the YCombinator standard deal, for a 46,000x ROI, which compares quite favorably to Apple’s ~90x.
As an alternative approach: this review claims that angel investors average 35% IRR, which compares favorably to the returns of investing in larger companies. Numbers from angel investors are dubious for a bunch of reasons, including some of the ones listed in that paper, but my impression is that angel investing is not that much worse than public market investing.
Anyway, sorry for the long comment. I agree with the overall claim that startups are not “far more efficient” but think they might still be a bit more efficient, on average (with a bunch of caveats).