As of right now, I’m trying to decide whether to start a new startup, versus raise for an incubator or venture fund. What are considerations for whether I’d do better as a founder or investor?
(By “investor”, I’m also lumping together different portfolio-based careers, including starting an incubator, advising companies, or community-building. This is oriented at early/seed-stage investing; I have even less of an idea what later stage looks like.)
Starting a startup is an act of self-confidence, a bet that your own skillset will carry you to greater heights. Eventually, you’ll be finding cofounders and employees, but even then you’re in the driver’s seat.
Investing is a bet on your existing network and your ability to grow it, a bet on your interpersonal skills, that you can convince great founders to accept your money, advice, intros.
(For engineers, this is similar to the distinction between being an individual contributor and an engineering manager.)
The thing that founders do is build a product; the things that founders sell to are users.
The thing that investors do is invest in founders; the things that determine the valuation (what investors “sell to”) is the market.
Founders hear from their IDE on the order of seconds, and from their customers in minutes to days; investors get updates from portfolio companies in months, and exits take years.
Perhaps it takes more experience and wisdom, to do well in fields with longer feedback loops, and more neuroplasticity to tackle rapidly changing fields grounded in the “real world”.
From the outset, investing involves reviewing many different things at a pretty shallow level, compared to building a product. At later stages, a good founder-CEO also often becomes a manager, with the context-switching that demands (see: maker’s schedule vs manager’s schedule) — but I imagine switching contexts on different areas of a single company still feels less burdensome than switching between different companies and fields.
In our society, money is a ledger which reflects your past performance; that is, money in your bank account is the result of work you’ve done to add value to the world via positive-sum trades, through past labor (selling your own time) or past investment.
To start investing, you need access to a sizable amount of money; either your own, or the ability to convince others with money, which also requires a strong track record. Meanwhile, starting a startup just requires your own time.
If only successful people can become investors, but anyone can become a startup founder, that might imply that there’s less competition in being an investor. (Sam Altman: “Be hard to compete with”; Peter Thiel: “Competition is for losers”)