The Silicon Valley Status Cycle

A Note To Founders Who Don't Know Any Better

Dear young fledging founder,

The venture capital industry is one built on top of status games. In fact, VCs literally get paid to have status, and to make sure everyone knows it. The reason status matters so much for VCs is because they want to make sure founders know that they are the best investors to work with. Or the most popular investors. Not because they said so, but because everyone else says so. The way to accomplish this is by climbing up the social capital ladder, from being the average Jane scout to GP at a fund with billions under management. Since venture capital is a very illustrious industry to get involved with, almost everyone in the Bay is trying to increase their status at all times to break into VC.

One of the best ways to achieve social status in tech is to find a talented person early in their career and mentor them. Other ways this unfolds is by hiring them, investing in them, or introducing them to different networks. As the mentee increases their social status over time, the person who discovered them increases theirs as well. A good example of this is Keith Rabois and Delian Asparouhov, both investors at Founders Fund now. Keith has taken Delian under his wing and he is now turning into an exceptional venture capitalist and company builder.

Most people in tech are always trying to increase their status all the time, so they are looking for the next big thing. Often what this looks like is taking a smart “normal person” and introducing them to tech. Showing them around. Inviting them to parties. Investing in their company. Making them feel special. To them, they feel like hot shit. But to a VC, they’re just hoping they become something so they can take some credit for it and increase their social status. They have no incentive to admit this though, because that would diminish their social status and hurt them from achieving their goal.

One issue is that the people in this status seeking game sometimes let their goals get in the way of what’s best for a founder. For example, a founder may have an amazing company that doesn’t need venture capital. But to a VC, they see an opportunity to increase their social status by investing, so they entice the founder with the allure of investment, putting them on the “track”. This may have never been the right path for the founder, but it’s hard to know what’s right when being courted by a VC.

Y Combinator does this exceptionally well. They tell founders to think and go bigger, which is really a disguise for saying “we want to make as much money as possible, so may as well shoot for the stars. If you fail, we will have 349 other companies that could still succeed.” And lord knows know they don’t walk the founders through the true cost of the program.

A Word To The Wise

If you’re a young and smart founder and someone is trying to pull you into tech and make it seem almost too easy for you, it’s probably because they are trying to increase their social status more than they actually want to be friends or genuinely help you. Does it matter if the help is genuine vs. self serving? I don’t know. It really comes down to values.

For you, maybe this self serving behavior is something you can greatly benefit from in your career and you go with it. Or maybe it takes you down a path no one prepared you for where you need to face the consequences. It’s up to you, as life is a “Choose Your Own Adventure” game. Just note, everyone has an incentive and sometimes, they don’t have an incentive to share it with you :)

Good luck out there,