In an efficient market, non-EA venture capitalists would already invest in all and only those entrepreneurs whose ventures would in expectation yield positive returns (above those available from alternative investments). We’d want EA venture capitalists to invest in all and only those ventures. Of course, the VC market isn’t perfectly efficient, but I’m not aware of any reason to think that EA VCs are better.
EA VCs are going to assign different values to outcomes than a traditional VC would. For a traditional VC, a founder with a 1% change of making a billion dollars is as good as a founder with a 1% change of making a billion dollars and a 100% chance of donating most of that money to cost-effective charities. EAs value the second entrepreneur far more than the first.
So, in a perfectly efficient market, EA VC would evaluate the risks of a startup the same as traditional VCs, but would assign different values to the startups potential success. This might cause EA VCs to make investments that traditional VCs might not make. Two specific examples:
Meal Squares. For a traditional VC, Meal Squares probably does not have the giant exit potential that they need. But, for an EA VC, they have a strong possibility of generating lots of donations and philanthropic value. A traditional VC might pass on investing in them, an EA VC might want to invest.
Wave. Wave creates value both through being a profitable business and by helping people send money from rich economies to poor ones. A traditional VC only values the profit potential, an EA VC values both the profit and the service that the app provides itself.
EA VCs are going to assign different values to outcomes than a traditional VC would. For a traditional VC, a founder with a 1% change of making a billion dollars is as good as a founder with a 1% change of making a billion dollars and a 100% chance of donating most of that money to cost-effective charities. EAs value the second entrepreneur far more than the first.
True, but it depends on how much money an EA founder would donate in expectation, and whether this outweighs better expected returns available from non-EA startups. Meal Squares sounds like it might be a good test case to consider.
EA VCs are going to assign different values to outcomes than a traditional VC would. For a traditional VC, a founder with a 1% change of making a billion dollars is as good as a founder with a 1% change of making a billion dollars and a 100% chance of donating most of that money to cost-effective charities. EAs value the second entrepreneur far more than the first.
So, in a perfectly efficient market, EA VC would evaluate the risks of a startup the same as traditional VCs, but would assign different values to the startups potential success. This might cause EA VCs to make investments that traditional VCs might not make. Two specific examples:
Meal Squares. For a traditional VC, Meal Squares probably does not have the giant exit potential that they need. But, for an EA VC, they have a strong possibility of generating lots of donations and philanthropic value. A traditional VC might pass on investing in them, an EA VC might want to invest.
Wave. Wave creates value both through being a profitable business and by helping people send money from rich economies to poor ones. A traditional VC only values the profit potential, an EA VC values both the profit and the service that the app provides itself.
True, but it depends on how much money an EA founder would donate in expectation, and whether this outweighs better expected returns available from non-EA startups. Meal Squares sounds like it might be a good test case to consider.