One possibility is that EAs are better than it might seem at first glance. The fact that there is some track-record of EA start-up success (as per the OP) may be some evidence of that.
If that is the case, then VCs may underestimate EA start-ups even if VCs are generally decent—and EA companies may also be a good investment (cf. your second paragraph).
I guess a relevant factor here is to what extent successful EA start-ups have been funded by EA vs non-EA sources.
This is my personal view, I understand that it might not be rigorously argued enough to be compelling to others, but I’m fairly confident it in anyway:
I literally believe that there are ~0 companies which would have been valued at $10b or more, but which do not exist because they were unable to raise seed funding.
You will often hear stories from founders who had a great idea, but the VCs were just too close minded. I don’t believe these. I think a founder who’s unable to raise seed money is simply not formidable (as described here), and will not be able to create a successful company.
This is particularly true right now when seed money is extremely available. If you’re unable to fundraise, something has gone wrong, and you probably should not be starting the company.
The strongest objection is that ~0 is not 0, and so we should create an EA VC even if the odds are really bad. I’m not that convinced, but it’s possible this is correct.
You don’t have to believe that VCs are generally irrational in order to believe that an EA VC could be a good idea. I think arguing against the claim that VCs are generally irrational is akin to a weak man argument.
People presumably start successful venture capitalist firms, e.g. based on niche competencies or niche insights, now and then. It’s not the case that new venture capital firms never succeed. And to determine whether an EA venture capital firm could succeed, you’d have to look into the nitty-gritty details, rather than raising general considerations.
Also, in a sense VC is just another industry, alongside, e.g. crypto, remittances, etc. The premise of the OP is that EAs companies could make become very successful. And if so those could a priori include VCs. You’d need some special argument as for why EA VCs are less likely to succeed than EA companies in some other industries.
The premise of the OP is that EAs companies could make become very successful. And if so those could a priori include VCs. You’d need some special argument as for why EA VCs are less likely to succeed than EA companies in some other industries.
I can think of at least two:
The premise of the OP is that EAs can make very successful companies in at least some sector. But successful companies in some sense arose out of exploiting a market inefficiency. Assuming we concede the argument in the OP that EAs can make very successful companies in some sector, when we consider the space of all possible sectors, we should a) not be surprised there exists a sector with large market inefficiencies that EAs can exploit but also b) the burden of proof is on the proponent of large market inefficiencies in any given sector to explain why it is so.
I think the more liquid a market is, the more I’d expect the market to be efficient. So I’d expect it to be very hard for EAs to make a better Jane Street, for example. Now VC firms are noticeably less efficient than quant finance, but probably still more efficient than many traditional industries. So the disruptive potential is less clear.
Despite those reservations, I’m still personally bullish on an EA VC fund, and would seriously consider investing 6 figures of my own money* in seed funding for an EA VC or angel investor fund if the managers are people I trust or trusted by people I trust, or have other strong evidence of potential success.
*which is a lot of money for me but not for a VC, of course.
Despite those reservations, I’m still personally bullish on an EA VC fund… if the managers are people I trust or trusted by people I trust, or have other strong evidence of potential success.
I think the most interesting point has been mentioned by Stefan Schubert here 1, 2.
Expanding on this, there is a strong niche for an EA fund that helps EAs build EA companies. I feel like I’m writing a discount hacker news comment, but maybe there’s key advantages an EA fund can use:
Startups often fail from implosion due to drama like founder splits. The strongest teams have great trust and unity (e.g. come from the same school cohort). It’s plausible EA culture provides an alternate source of unity. Many EAs have great communication skills and can credibly show that they can commit to altruistic purposes.
It’s plausible EAs could commit to much lower salary/equity (which could still be enormous in non-profit terms) and put the large majority into EA causes. This compensation doesn’t hurt EA motivation while reducing a source of tension and maybe adding enormous credibility (this might be impractical on a cap table, I don’t know.)
I think EAs are more able to grind and do heads down operational work, which I think is important (see SBF anecdotes about waiting at banks).
I think the tech narratives about changing the world are attractive and why funding, grind exist. I can see EAs getting a consistent edge at all stages of a business because they can plausibly change the world (or at least have a convincing meme).
These seem like structural things that a VC fund can be built on.
Startups often fail from implosion due to drama like founder splits. The strongest teams have great trust and unity (e.g. come from the same school cohort). It’s plausible EA culture provides an alternate source of unity
For what it’s worth, I think this appears empirically false in terms of pretty much every EA for-profit startup of a fairly large size (say >10 employees) that I’m aware of, including the successful(!) ones.
Founder or near-founder level drama that has ex ante very negative consequences (“red flags” is maybe my current preferred term) appears to be the norm rather than the exception. (Incidentally this was also true during my own brief stint as an intern in an mission-oriented non-EA startup, which is now valued at 10 or 11 figures)
Different people can learn different things from these anecdata, but hypotheses I’ve generated include:
1. Base rates of founder conflict (to a pretty extreme level, like >50% of management quitting) is just really high, and my naive impressions/prior that founder conflict should only be pretty common in failed startups is wrong.
2. Wittgenstein’s ruler: I shouldn’t trust my own instincts of what are red flags for startup success (like founder conflict) in the face of pretty strong empirical data. Maybe I’m quite bad at causal assignment here.
3. The world is just crazy/easy. There’s so much money laying on the table that you can screw up in many important ways and still come out ahead as long as you do a few other (more?) important things right.
4. There’s just too much randomness/heterogeneity in the world to say much of anything when it comes to startup success.
I’ve gone up on my belief in 1. personally updated somewhat downwards on 4, and up on both 2 and 3.
I think the most interesting point (or at least fun to write about on an internet forum) hasn’t been made, and it’s not that EAs can perform better running a general fund, but that there is strong niche for an EA fund that helps EAs build EA companies.
I related to this niche issue in two comments; 1, 2.
That’s a good clarification, I do agree that EAs should consider becoming VCs in order to make a lot of money. I just don’t think they should become VCs in order to enable earn-to-give EA founders.
Alright, but if there were such EA VCs they might want to keep an extra eye on EA start-ups, because of special insider knowledge, mutual trust, etc. Plus EAs may be underestimated, as per above.
I do agree, however, that unpromising EA start-ups shouldn’t be funded just because they’re EAs.
One possibility is that EAs are better than it might seem at first glance. The fact that there is some track-record of EA start-up success (as per the OP) may be some evidence of that.
If that is the case, then VCs may underestimate EA start-ups even if VCs are generally decent—and EA companies may also be a good investment (cf. your second paragraph).
I guess a relevant factor here is to what extent successful EA start-ups have been funded by EA vs non-EA sources.
This is my personal view, I understand that it might not be rigorously argued enough to be compelling to others, but I’m fairly confident it in anyway:
I literally believe that there are ~0 companies which would have been valued at $10b or more, but which do not exist because they were unable to raise seed funding.
You will often hear stories from founders who had a great idea, but the VCs were just too close minded. I don’t believe these. I think a founder who’s unable to raise seed money is simply not formidable (as described here), and will not be able to create a successful company.
This is particularly true right now when seed money is extremely available. If you’re unable to fundraise, something has gone wrong, and you probably should not be starting the company.
The strongest objection is that ~0 is not 0, and so we should create an EA VC even if the odds are really bad. I’m not that convinced, but it’s possible this is correct.
You don’t have to believe that VCs are generally irrational in order to believe that an EA VC could be a good idea. I think arguing against the claim that VCs are generally irrational is akin to a weak man argument.
People presumably start successful venture capitalist firms, e.g. based on niche competencies or niche insights, now and then. It’s not the case that new venture capital firms never succeed. And to determine whether an EA venture capital firm could succeed, you’d have to look into the nitty-gritty details, rather than raising general considerations.
Also, in a sense VC is just another industry, alongside, e.g. crypto, remittances, etc. The premise of the OP is that EAs companies could make become very successful. And if so those could a priori include VCs. You’d need some special argument as for why EA VCs are less likely to succeed than EA companies in some other industries.
I can think of at least two:
The premise of the OP is that EAs can make very successful companies in at least some sector. But successful companies in some sense arose out of exploiting a market inefficiency. Assuming we concede the argument in the OP that EAs can make very successful companies in some sector, when we consider the space of all possible sectors, we should a) not be surprised there exists a sector with large market inefficiencies that EAs can exploit but also b) the burden of proof is on the proponent of large market inefficiencies in any given sector to explain why it is so.
I think the more liquid a market is, the more I’d expect the market to be efficient. So I’d expect it to be very hard for EAs to make a better Jane Street, for example. Now VC firms are noticeably less efficient than quant finance, but probably still more efficient than many traditional industries. So the disruptive potential is less clear.
Despite those reservations, I’m still personally bullish on an EA VC fund, and would seriously consider investing 6 figures of my own money* in seed funding for an EA VC or angel investor fund if the managers are people I trust or trusted by people I trust, or have other strong evidence of potential success.
*which is a lot of money for me but not for a VC, of course.
I think the most interesting point has been mentioned by Stefan Schubert here 1, 2.
Expanding on this, there is a strong niche for an EA fund that helps EAs build EA companies. I feel like I’m writing a discount hacker news comment, but maybe there’s key advantages an EA fund can use:
Startups often fail from implosion due to drama like founder splits. The strongest teams have great trust and unity (e.g. come from the same school cohort). It’s plausible EA culture provides an alternate source of unity. Many EAs have great communication skills and can credibly show that they can commit to altruistic purposes.
It’s plausible EAs could commit to much lower salary/equity (which could still be enormous in non-profit terms) and put the large majority into EA causes. This compensation doesn’t hurt EA motivation while reducing a source of tension and maybe adding enormous credibility (this might be impractical on a cap table, I don’t know.)
I think EAs are more able to grind and do heads down operational work, which I think is important (see SBF anecdotes about waiting at banks).
I think the tech narratives about changing the world are attractive and why funding, grind exist. I can see EAs getting a consistent edge at all stages of a business because they can plausibly change the world (or at least have a convincing meme).
These seem like structural things that a VC fund can be built on.
For what it’s worth, I think this appears empirically false in terms of pretty much every EA for-profit startup of a fairly large size (say >10 employees) that I’m aware of, including the successful(!) ones.
Founder or near-founder level drama that has ex ante very negative consequences (“red flags” is maybe my current preferred term) appears to be the norm rather than the exception. (Incidentally this was also true during my own brief stint as an intern in an mission-oriented non-EA startup, which is now valued at 10 or 11 figures)
Different people can learn different things from these anecdata, but hypotheses I’ve generated include:
1. Base rates of founder conflict (to a pretty extreme level, like >50% of management quitting) is just really high, and my naive impressions/prior that founder conflict should only be pretty common in failed startups is wrong.
2. Wittgenstein’s ruler: I shouldn’t trust my own instincts of what are red flags for startup success (like founder conflict) in the face of pretty strong empirical data. Maybe I’m quite bad at causal assignment here.
3. The world is just crazy/easy. There’s so much money laying on the table that you can screw up in many important ways and still come out ahead as long as you do a few other (more?) important things right.
4. There’s just too much randomness/heterogeneity in the world to say much of anything when it comes to startup success.
I’ve gone up on my belief in 1. personally updated somewhat downwards on 4, and up on both 2 and 3.
I related to this niche issue in two comments; 1, 2.
Yes, thank you. I think this was useful but I neglected to mention it.
That’s a good clarification, I do agree that EAs should consider becoming VCs in order to make a lot of money. I just don’t think they should become VCs in order to enable earn-to-give EA founders.
Alright, but if there were such EA VCs they might want to keep an extra eye on EA start-ups, because of special insider knowledge, mutual trust, etc. Plus EAs may be underestimated, as per above.
I do agree, however, that unpromising EA start-ups shouldn’t be funded just because they’re EAs.