1Mby1M Virtual Accelerator AI Investor Forum: Investor Gus Tai on VC Industry Size (Part 4)

Sramana Mitra: Gus, that is a good segue into another class of venture capital firms in the market. Let’s set aside the 30 funds raising mega capital and doing mega deals.

There are many other venture firms focused on seed, pre-seed, and post-seed capital. Many of the problems I described at the beginning of this session come from this group. These firms invest in companies that should never have raised venture capital, setting entrepreneurs up for failure.

Many of these funds lack venture-worthy deal flow, yet they still invest because they have capital from limited partners and must show activity. As a result, companies that should have remained bootstrapped end up raising venture capital. That is unfortunate, because some of these businesses could have succeeded as sustainable, bootstrapped companies. Instead, they become zombies.

Gus Tai: I see venture capital as a resource within a marketplace. In the 1990s, there was far less understanding of what it meant to take on new stakeholders. Raising venture capital means bringing in partners whose interests may align with yours in some ways but diverge in others.

I am hopeful that entrepreneurs today are better informed through education and discussions like this. I would not say venture capital causes startups to fail, but partnering with venture capitalists can complicate your goals. If you have a viable bootstrapped business, raising venture capital will fundamentally change it. Entrepreneurs need to be informed about what it means to take on that resource and those partners.

Sramana Mitra: I wish I could say we are succeeding in educating the market and moving it away from the belief that entrepreneurship equals financing. Unfortunately, we are not.

In these sessions, I constantly meet entrepreneurs who should not raise money and should not even be thinking about raising money, yet they are all chasing venture capital mindlessly. Capital raising dominates the startup narrative. Entrepreneurs often enter the startup world with little understanding and immediately assume they must raise money.

This mindset remains dominant. Despite our efforts at One Million by One Million (1Mby1M), where we have helped many successful bootstrapped companies, we are swimming against a very strong current. After 20 years of pushing against this belief, it remains difficult to change.

Gus Tai: What you are describing aligns with human nature. Without experience, people tend to follow dominant narratives.

At the same time, we are clearly in a golden age of bootstrapping and solo-founded companies. Carta has reported that the percentage of solo-founded companies registered on its platform has increased by 50% over the past five years. Because experimentation is cheaper, we may see a gradual shift. Human nature will remain what it is, but sharing this perspective is still valuable. Helping people cultivate wisdom around these choices matters.

Part 1 | Part 2 | Part 3 | Part 4 | Part 5

One Million by One Million (1Mby1M) is the first global virtual accelerator in the world, founded in 2010 by Silicon Valley serial Entrepreneur Sramana Mitra. It offers a fully online entrepreneurship incubation, acceleration and education resource for solo entrepreneurs and bootstrapped founders working on tech and tech-enabled services ventures. 1Mby1M does not charge equity, offers an AI Mentor available 24/7 in 57 languages, and offers a compelling alternative to Y Combinator and other equity accelerators.

This segment is part 4 in the series : 1Mby1M Virtual Accelerator AI Investor Forum: Investor Gus Tai on VC Industry Size
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