Friends Investing in Friends: When It Comes to Startups, Is the Fix Already In?

Mr. Webb.

There’s this age-old debate in startupland: whether it’s an insider’s game or not. This debate probably rages most in the comments of sites like TechCrunch, Business Insider and here at Betabeat. There are tons of people who are interested in tech, and aspire to have a startup, and read these sites, like any proper student of an industry should. And they see the same names, over and over. They see the same companies funded over and over. It’s not hard to read the headlines of tech blogs for a year and think to yourself that it’s a bunch of friends funding each other, pimping each other, and scratching each other’s backs.

I think this is compounded by the obsession with the concept of a “good idea” many people have. We are a single race of people. Many of us face the same problems and challenges. Many of us share the same hopes and dreams. Many of us, right now, are dreaming about the day we can talk to our television. Thinking that up is not invention, and it’s not a business. But when you read a headline in a tech blog that screams “company received $4 million in series A funding to explore voice commands of appliances” it’s easy to think “WTF? Why them?” It’s easy to assume the answer is because they knew someone. Because the fix is in.

What’s really going on, of course, is that people who have pushed the ball forward have gone out and gotten to know the people that can help them push it further. People don’t invest in ideas, poetic press releases to the contrary, they invest in companies. And companies need to not just have a great idea, they need to build it, grow it, sustain it and make it profitable. Having had some past experiences in those areas helps. And one does not acquire past experiences in those areas without getting to know a few insiders.

Still, there are days I feel it’s all rigged. Recently I was working with a startup. Small and scrappy, and I thought I had found a little golden nugget of innovation that no one else had found and I wanted to help them. I blinked my eye and then all of the sudden a who’s who of San Francisco and New York VCs and Angels were in on the deal, and I was fighting for some scraps. It was kind of amazing, and for a moment there I thought to myself “oh, of course they’re all in this together.”

But then I stopped and thought about it for a moment. The guys running this startup had just moved here from the Midwest. They went to a hack day, won a prize, got some free office space, built something amazing, networked the hell out of New York and were off to the races. And here I am, son of an Alaskan school teacher and fireman who recently left one career, decided I’d rather be in tech, and I’m all of the sudden in on a deal with some of the most awesome investors and founders in America.

And then it hit me—it’s both an insider’s game AND a meritocracy. It’s all about being able to do something amazing, get something off the ground, keep it going, growing it. It’s about being energetic and social and fighting and plotting to meet the right people. And the right people are meetable. You might have to keep at it, you might have to stalk them, you might have to crash a party or two or go to meetups every night of your life, but it is doable for anyone. It’s not an insider’s game. It’s a social animal’s game. Until you’re at the top (and I’m saying this as someone who believes they have a long way to go before they get there), your exposure to others in the industry is paramount.

I think we humans have a subconscious habit of setting out a goal, but then piling on requirements that are inherently antithetical to the goal. “I want to be a movie star but I don’t want to leave Topeka.” “I want to be a french chef but stay a vegan.” “I want to be your boyfriend but I don’t want to commit.” Whoops, I digress. “I want to have a successful startup, while living in Cincinatti, and I don’t want to go out every night.”

It’s not to say that these things can’t happen. There are famous actors that have never lived in Hollywood, London or New York. I recently heard about a vegan french chef from a friend. If you read OkCupid, you get the impression anyone can be in an open relationship as easily as going to the gym. And antisocial Midwesterners can still make a billion dollar startup.

But it’s not going to be you. And many, many more hyper-social New Yorkers and San Franciscans make successful startups than antisocial Midwesterners. Or even antisocial New Yorkers. These are things you can control. You can move to San Francisco. Better yet, you can move to New York. You can go to meetups. You can go to conferences. You can email investors. You can go to classes at General Assembly. It’s in your control. Or, you can stay at home in the Midwest, reading TechCrunch and talking about how it’s all rigged and an insider’s game.

It’s an insider’s game, but anyone can join it. Friends Investing in Friends: When It Comes to Startups, Is the Fix Already In?