Entrepreneurs: Are Investors Watering Down Innovation?
by Miki Saxon
Innovation isn’t nearly as mind-boggling today when compared to what startups were doing in the late Seventies/early Eighties when I started working with them.
That’s not surprising when you consider who gets funded these days.
A recent Reuters report found that the majority of Silicon Valley startup founders that receive Series A funding come from the same pedigreed cohort: either they previously worked at a large, well-known tech firm, a well-connected smaller tech company, they previously created a successful startup, or they come from one of three universities—Stanford, Harvard, or MIT.
Not surprising when you consider the attitude of Valley stalwarts like Paul Graham of Y Combinator, who publically stated that he would be unlikely to fund someone with a strong accent or a woman.
It’s been 15 years since I first wrote about the proclivity of managers to hire people like themselves and more over the years showing it leads to homophily and the negative impact that has on a company.
It seems it’s no different for investors.
They are funding people like themselves who were raised, educated and worked along paths similar to their own who they either know or are introduced to them by a friend.
“Like a lot of the investments [Instacart] that have come our way, a friend of a friend talked to us about it, and told us about it, and encouraged the founder and the CEO to come and chat with us. One thing led to another.” –Sequoia partner Mike Moritz
When you fund from a homogenous group, no matter where they are, creativity and innovation are watered down, because those groups tend to be insular and badly interbred talking mostly to each other.
If you’re fishing from a pond of rich white guys, you’re only going to get ideas that address the needs of rich white guys.
AKA, people like themselves.
Flickr image credit: HikingArtist
