My First Million
The best business ideas come from noticing what's working and doing it better, faster, or for a different audience.
VCs aren't actually investors seeking maximum returns - they're money managers selling startups as an asset class to LPs, creating misaligned incentives for long-term value creation
The Reasoning
VCs need to raise next fund from LPs every 2-3 years, requiring portfolio companies that can show quick markups for fundraising, not necessarily companies with best long-term prospects
What Needs to Be True
- LP evaluation cycles are shorter than startup value creation cycles
- VC career advancement depends more on fundraising than actual returns
- Portfolio companies optimized for next fundraising round over business fundamentals
Counterargument
Top-tier VCs have proven track records and patient capital that allows for longer development cycles
What Would Change This View
Evidence that VC returns correlate with fund raising ability rather than actual portfolio performance over 10+ year periods
Implications for Builders
Expect traditional VCs to pass on genuinely innovative but slow-developing companies
Consider alternative funding sources for hard tech and long cycle businesses
Structure deals to align with actual business development rather than fundraising cycles
Example Application
“Boom struggled with traditional VC fundraising because supersonic jets take 10+ years to show returns, but VCs need portfolio markups every 2-3 years for their own fundraising.”