Libin: Early-stage VC incentives force startups to take damaging shortcuts
Phil Libin · 20VC: Evernote & mmhmm Founder Phil Libin on Why We are Beginning a Multi-Trillion Dollar Restructuring of the World, Why Shortcuts are the Biggest Mistakes Startups Make & The Future of Video and The Unbundling of Zoom · Jan 25, 2021 · at 8:14
Phil Libin, founder and CEO of mmhmm and former CEO of Evernote, discusses how venture capital fund dynamics push early-stage founders into high-risk, shortcut-heavy behavior.
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“The incentives are when you're investing, especially if you're doing early stage investing, just like me, you're not looking for things that are likely to succeed, right? You're looking for things that have a plausible chance of succeeding, even if it's not a huge chance, but that if it does succeed, it's going to be massive, right? And so all of the incentives are lined up for deploy money, As much as you can sometimes, once your funds get bigger and bigger, and deploy them into things that are either going to fail quickly, because the last thing a VC wants is to, like, hang around a perpetually stalled startup, or succeed massively, quickly. And even if the, you know, the chance of success, like, you don't have to believe, when you make an investment, you don't have to believe that it's a 90% likely chance of success. You know, depending on the stage, maybe you think it's only a two percent likely, or 10%, or 30%, or whatever. And so all of those incentives are go fast, break things, take shortcuts. I mean, that's just the game.”
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