|
The proposition can be disproved very early in the chain of logic, actually. 1. Startups are risky. True. 2. Raising capital to do a startup reduces skin in the game (you’re spending other people’s money, after all). Arguable, but not a given. Raising capital does not eliminate risk, especially if one has their own money in it, and/or are using it as a job. Just because someone else invested doesn't necessarily reduce my incentive. I lose money, time, face, and opportunity with or without investment. 3. Once you have less skin in the game, it is easier to make bad decisions. The author argues this is due to a) having a capital buffer to cushion you, and b) having more time to waste. 100% false. It is no easier or harder to make bad decisions with outside money. It is ALWAYS easy to make bad decisions, having more money simply makes it easier to make costlier bad decisions faster. Buying real estate in late 2006 was a bad idea regardless of whose money you used. If anything, having that outside money means you have people to be accountable to, people to run decisions by, and thus it's HARDER to make a bad decision. |