Founder Archetype, YC, and AI Start-ups
Yours truly got into a bit of Twitter Drama on Friday when Sam Lessin (VC and husband to Mir.Report’s competing tech opinion publication, TheInformation) posted part of my email to him publicly. Before you play a judge do know that
1) I did offer Sam something of value in return,
2) I did state that I have ways to reach him via an intro, but explicitly wanted his decision to be based on true (merit) intentions - not as an obligation to some investor friend.
Also, I stand by my words. Sam is one of the more obnoxious VCs out there with little to no visible empathy gene. Everyone knows it and he is probably quite proud of it, so whoever is claiming that I “hate” him (or “dislike” him), is imagining that this is a game of checkers, while us, actual adults, are playing chess. (Former chess player here…)
But let’s talk substance….
Ideal Founder Archetype: Older is Better!
To give Credit where it is due, Sam posted this earlier in the week:
Those who read this publication regularly know how critical I am generally of YC lately precisely for this point. They have tilted recent batches to the similar age demographics they had during the early days of YC (College students, drop outs, and recent grads), and the result is that we’re seeing a flood of copy cats that are pursuing ideas on the surface without own genuine deep insight into the problem space.
The ARR numbers look great because YC is designed to make the numbers look great. Everyone knows that once you get into YC, other founders offer to buy products from you while you’re raising, but ultimately offer no long-term guarantees that the subscriptions are going to stay around.
Even if you’re building yet another AI SDR agent of which there might be 10 other YC companies, with 300+ Late stage YC alumni companies to sell to, that’s still 30+ customers each (or at a minimum $1,000 x 30 x 12 = $360K ARR) on day 1. Pretty awesome until they all churn!
But this newsletter is not aiming to be a negative critic (even though sometimes it comes across as such). It is meant as a medium that proposes solutions. So here goes my solution to Sam’s challenge…
Ideal Founder Archetype - Mir’s Appendix
The ideal founder age is indeed shifting older. For the first time in 10,15+ years, the key way to take advantage of tech is not to rediscover the wheel, but to apply one’s knowledge of why the new generation of wheels can be built differently because of AI.
Or, the example that I personally like to use (wait two weeks before every Founder pitch uses this): imagine a new car battery is invented that is 10x more efficient. While it probably makes sense to invent a new type of car from scratch, it still helps to know how and why the old car was built the way it was.
Which brings me back to the challenge: who is the ideal archetype of 2025?
Professional Services…
“ProServ..” - The words that should never be mentioned in a fundraising meeting
Anyone raising $$ for an enterprise software in Silicon Valley knows one golden rule: initial businesses are built via services, but money is raised for them without ever mentioning services. VCs hate to hear that revenue is services-led. Never mind that some of the most successful enterprise companies were built this way: Looker, Palantir, Oracle - to name a few.
Now, the criticism of services is understandable. On average, owners of IT service firms are not the smartest of the pack. It is literally the business where being a schmoozer at conferences is rewarded, and being a technical domain expert is not. Companies bring on PS firms for highly technical domains, even though Partners have barely completed their University of Phoenix English degree. The main skill that matters is whether this Partner goes to all the right parties - less so if they have the chops. Often (not always) even their technical employees are 3rd tier.
Furthermore, building a services organization is very different than building a product - requires a different kind of Founder DNA. Someone Uber-successful at Services probably has no Product DNA. Looker was unique here - Lloyd Tabb, the Founder, had both, the consultant’s DNA and the Product builder’s DNA - but such Founders are rare. And it is difficult.
And yet, the trend is clear. Yours truly is leveraging AI on top of what previously would have been Data Engineering work. Many of the more capable people in my network, who previously were in services are now starting their own software product firms where they leverage AI on top of the manual processes that they already had before.
It essence, it is the perfect business model. Take a customer-centric business that is filled with flawed human interactions, and replace it with an automated AI agent service. Still plenty of questions about quality and level of sophistication, but if we’re being honest, most PS firms in IT with more than 20/30/50 employees are pretty low standard - not to mention the typical 200+ employee outsourcing shops.
Alright, enough of the weekend drama. Stay heathy and have a good weekend!