I now write on Medium here. You can find some of my old essays below.

Why Everyone Should Get Funded (Once)

The smart money says there's plenty of capital out there. And from the perspective of near-term return optimization, they're right. In fact, there's probably too much capital out there, especially in major centers of innovation like New York, Boston and the Valley. If you were to seed fund the "marginal 10%" of companies -- the companies that barely miss the current threshold for funding, if such an objective measure were to exist -- the financial returns would surely be dismal. But that's not the only way to look at it. I argue that -- from a long-term perspective -- more companies should get funded.

Running a funded startup is an incredible education unlike any other. As someone who has run (a) bootstrapped startups that I couldn't get funded, (b) bootstrapped startups that purposefully didn't raise money, (c) angel-funded startups and (d) venture-funded startups, the learning experience delta between {(a),(b)} and {(c),(d)} is incredible. Taking money increases the volume of things going on and pushes your company to the next level. It increases the amount of stuff you have to figure out. It opens doors and enables conversations that few bootstrapped startups can have. If you pick the right investor and leverage it, the things they say about "opening their rolodex" can absolutely be correct. And you learn a lot of critical stuff about how to build a business from those people. Even taking "dumb money" can make it an order of magnitude easier to get in the door.

And most importantly, it's a guaranteed lifetime addiction to entrepreneurship.

Even if the companies built with this seed money don't succeed, these entrepreneurs are the foundation for successful companies in five or ten years. Every entrepreneur that fails to raise money and is forced to go back to the day job is a potential groundbreaking innovation that will never see the light of day. Claiming that "real entrepreneurs will always persevere" is bullshit. The people who create awesome, world-changing things are not always the people who are willing to work eighteen hours a day for no salary for years. They may be people without savings, with mortgages and with families. Creativity and innovation isn't the just domain of scrappy 20-somethings, so why is entrepreneurship?

In economic terms, there's a huge positive externality to all of this connecting and learning. That means that more of it should happen than will actually happen if every player is simply looking to maximize profit. If more startups are going to get funded, investors must believe in the positive social benefit of funding.

And I think it will happen. The comps are changing -- more wealthy independent investors are looking at seed funding as philanthropy rather than a component of a diversified investment portfolio. A certain group of investors are considering their seed investments in the same pot as their patronage at the Met or contribution to an off-Broadway production rather than their private equity assets. This is a really, really important distinction, as it makes the returns of these capital deployments less of a factor. Wealthy independent investors aren't blind -- they see need for funding and innovation as the savior of our nation and economy. This isn't just an investment; this is a moral imperative. And you can't ignore the sexiness and cocktail party benefit of being in on the ground floor of a new hot startup.

There are good counter-arguments to be made here, but I think they are outweighed by the curation of a future generation of entrepreneurs. For instance, it is absolutely true that more capital will lead to more competition for the means of production (e.g., developers), driving up prices and making it more difficult for "good" startups to hire. This is absolutely true, but higher salaries for developers in startups isn't a bad thing for the startup environment as a whole. After all, the world -- even the world of hackers -- operates by the rules of supply and demand, and higher salaries from startups will draw more developers from established tech companies and banks, for instance.

Seed funding is entering the world of philanthropy, and I think it's a very good thing.