Permissionless Entrepreneurship

I heard from a friend this week that their company was shutting down and, frankly, I was shocked. I wasn’t an investor in the company but I knew their investors well. The company was a darling in their respective portfolios. They were executing incredibly well.

Then, they were gone.

Where, once, investors jockeyed for position to fund they politely declined to lead another round. What was once a “hot” space had cooled. What fundable milestones for the business looked like 6 months ago had now moved far beyond their reach. Short on time, options and AI (or whatever the invest theme de jour has since become) they faced the inevitable. The market had moved on, and they couldn’t continue to exist without ongoing financial support of investors.

In an email sent to his portfolio companies, and later made public, Semil shares what he’s hearing from financiers behind closed doors:

While the seed rounds were relatively easy, the next rounds of funding are (as some of you already know) pretty brutal. I would not recommend anyone assume the next round is going to materialize, even from insiders. Many big VCs won’t say this publicly, but on the whole, they’re highly skeptical of current market conditions.

In our funding fueled startup culture this is a real shock to the system, and to the mindset many have employed to scale. Historically, each seed round has come with an implied expectation of a Series A termsheet within 12 months stapled to the back. This is how founders have been conditioned and coached to think and to build. And this reality is one that their seed and angel investors have internalized into their own investment making decisions.

In a post I wrote 6 years ago, I cautioned that we would begin to see the real impact of this reliance on upstream capital play out in a few way. One feels particularly relevant here:

A third outcome could be that angel investors and seed funds, who’s companies rely heavily on upstream capital, will take less risk on ideas and entrepreneurs who don’t fit the classic Sand Hill Road mold. Say you’re not a techno Wunderkind, proven executive or repeat entrepreneur. Or, you ARE one of the above, but you happen to be working in an area of technology that isn’t in vogue just yet. The less diversity in upstream capital, the less diversity the ideas that get funded will be. And the less risky, too early, too small a market, too crazy to work ideas that get funded the worse off our ecosystem, overall, will be.

On our website we slip a line in that I think merits much more consideration than some will instinctively give it:

Real Businesses create their own source of funding and don’t have to ask anyone for permission to exist.

This is a core belief of ours.

We want to enable a world where founders don’t need permission from an increasingly small group of fickle funders to exist. We want to see companies thrive that live more than 30 min from Sand Hill Rd. or San Franciso. We want to see entrepreneurs who don’t look like, talk like, think like or see the world like they do achieve their full potential. We want a world that isn’t simply trying to get in front of the product road maps of Google, Facebook, Amazon or Microsoft.

There’s a wild, weird and wonderful world of opportunity that will go unrealized if we continue running the current VC backed startup playbook of asking permission to exist every 12–18 months.

My friends above had to ask for permission to exist. Now, they don’t.

It doesn’t have to be this way.

Our hope is to play a small role in ushering in the age of Permissionless Entrepreneurship by offering the last (only?) round of funding founders NEED to take.

And we think the world will be a lot more interesting as a result.