Protocol Pipeline
The inside story of the venture capital and startup world by Biz Carson.
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How many founders does a startup really need?

Two interlocking puzzle pieces over a background of other puzzle pieces

Hello and welcome to Pipeline. This week: a $1.5 billion series A, how many founders a startup needs and what happens when a VC walks into a bar.

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Overheard

  • "Be less stylish": Greylock investor Sarah Guo was told her fashionable clothes "might intimidate" the engineers she was working with. "Five years ago I suppressed my feelings and nodded blankly when told this, but this time I just blew up," she tweeted. "Reinforcing Silicon Valley brotopia is not helpful."
  • A $1.5 billion Series A? No, it's not just this insane funding cycle. Here's what it really means when companies announce these mega A rounds.
  • Do lead investors deserve credit for closing a round? A VC's request for an extra 1.5% of a company for their work in closing the deal set off a debate about whether the work should be rewarded or not.
  • "A VC walks into a bar ..." and asks what everyone else is having, discovers that Tiger already bought the bar or ignores the bartender because they didn't meet through a warm intro.

Biz on Biz

Are two heads really better than one?

Silicon Valley is made up of a lot of dynamic duos: Larry and Sergey. Jobs and Woz. Hewlett and Packard.

Now, Y Combinator now wants to help founders find their other half. This week, it launched its own co-founder matching site to help entrepreneurs partner up.

  • "We realized this is a problem a lot of founders face, particularly internationally," YC Startup School head Kyle Corbitt told me. "I think it's less of a problem if you've gone to Stanford or live in San Francisco where there's a stronger established network that makes it easier to find people, but our community is all over the world."
  • Its new founder-matching site feels a bit like dating: Entrepreneurs can fill out the characteristics they're looking for in a founder (like technical vs nontechnical) and narrow it down based on geography if they're looking for someone in the same city or the same time zone.
  • Already 4,500 people (including an NFL player!) have used its test version to find matches, and two companies currently going through the YC program found their co-founders through the service.

Only four of YC's top 100 startups came to the accelerator without a founder, Y Combinator discovered. (Those would be Ryan Petersen's Flexport, Blake Scholl's Boom, Aaron King's Snapdocs and Ryan Chan's UpKeep.)

  • That's despite the fact that roughly 10% of the founders going through a batch are solo founders. Today, the average number of co-founders at startups going through a batch is 2.3.

But do founders really need a partner? Consciously coupling with another entrepreneur may not be a determinant of success. I also spoke this week with Ali Tamaseb, a partner at DCVC who analyzed more than 200 unicorn startups between 2005 and 2018. He ended up writing a book, "Super Founders," based on 30,000 data points to try to bust some of the common myths about founders, like you have to be a college drop-out or be in your 20s.

He found 20% of billion-dollar companies were founded by solo founders, a much higher proportion than at YC. But 20% was still higher than the companies that had four or five or more founders. In the end, the number of co-founders doesn't matter, Tamaseb found.

  • Digging deeper, many of these solo founders were not working on their first companies but were experienced founders, like Marqeta's Jason Gardner. He started an earlier company with co-founders, but decided to go solo to build Marqeta, the card-issuing fintech that now has a market cap of over $14 billion.
  • "In my previous company, my co-founders and I didn't set up clear ownership and responsibilities for each part of the business," Gardner told Protocol. "The business succeeded and there was a lot of unnecessary friction between us co-founders. When I started Marqeta it was important to me to set the pace, our values, our mission and ultimately our strategy."
  • As an accelerator, Y Combinator may attract more first-time founders so its percentage of successful solo founder companies could be lower, Tamaseb speculates.

So is it better to have a co-founder? Maybe if you're going through YC, but maybe not.

  • After studying all of the unicorn startups, Tamaseb's advice is to forget the rules and any founder tropes. "The mythical Ivy League college dropout who launched a company in his or her dorm room makes up only a tiny percentage of billion-dollar startup founders," he wrote. Instead, on average, unicorn founders had 11 years of work experience.
  • Marqeta's Gardner said it was the right choice for him to build solo. "When you're building a business, you collaborate and work with a lot of very smart and driven people, however, you don't necessarily need a co-founder to succeed," he said.
  • But for those who do want a partner to conquer the highs and lows of startup founding, finding a match may just be a little bit easier. There's Y Combinator's free tool, but it's not the only one experimenting. (To find out who else, you'll have to read more in my interview with Meka Asonye below.)

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How can cities get smarter without crushing city budgets, wasting money, or violating the privacy of citizens? Join Protocol's David Pierce for a conversation with Smart Columbus' Jordan Davis, Sidewalk Infrastructure Partners (SIP)'s Jonathan Winer and Microsoft's Jeremy Goldberg on what it takes to build smart cities right.

Learn more

Inside Track

  • "The truth is that business names fall on a bell curve — you have a small number of outliers that actively contribute to your success and a small number of outliers that actively impair your ability to succeed," says High Alpha's Drew Beechler, who has named over 30 startups.
  • A startup will 10x the number of employees it has between its Series A and Series D rounds, according to Carta's analysis of how much headcount growth a company experiences when it fundraises.

Need to Know

  • Venture funding smashes every record. Global funding hit an all time high of $288 billion in the first half of 2021.
  • DiDi Chuxing's woes could diminish Chinese startup IPOs in the U.S. "The takeaway: More Chinese firms will IPO in the U.S. in the future, but their stars are surely dimmed," wrote Protocol | China's David Wertime and Shen Lu. Now there's a "Delete DiDi" campaign.
  • Palantir's got some weird SPAC business going on. Palantir has been active in investing in SPACs, but many of the companies have also signed on as customers, reported Eric Newcomer, leading him to ask the question: Is Palantir buying revenue?
  • Instacart orders a new CEO. It poached Facebook's Fidji Simo from running the Big Blue app.
  • TikTok is challenging Cameo … and LinkedIn? I get the celebrity shout-outs as an easy TikTok feature, but it's also trying to make video resumes a thing again.
  • All eyes on LatAm. "X but for LatAm" used to be a startup pitch, but now firms are seeing real differentiated business. Sequoia said it's going to be investing more in the region at the same time SoftBank is said to be preparing its own $5 billion fund. Meanwhile Lightspeed's also been spending more time traveling south and made a handful of investments in the region.
  • Buy Robinhood on Robinhood? There's a lot of things going on in Robinhood's S-1 filing, but it also stands out for allocating a larger-than-normal share for retail investors.
  • On Protocol: In SaaS, it's private equity's time to shine.
  • Also on Protocol: A VC-backed formula company turned the tables and let moms invest too.
  • Your weekend reading: Insider has a look inside the secret club for young CEOs, which has an unofficial motto of "Nothing, Nobody, Never."

Five Questions With...

First Round's Meka Asonye

Meka Asonye joined First Round in March. A veteran of Stripe and Mixpanel, Asonye's seen all stages of a startup's sales growth. He invested early as an angel investor in Rimeto, Coda, Snackpass and Stytch.

What is the biggest issue that your partners are thinking and talking about at your Monday partner meeting?

First Round still behaves like a startup and we are constantly working to figure out how to be the best partner to ambitious founders. Right now, we're seeing founding teams move through our process at an incredible clip. We're talking about how we can run a process that's quick and efficient yet still allows us to go deep on diligence.

Separately, we're thinking about how to continue to go earlier in the stack. We've been developing programs that help founders find co-founders and help them test their ideas with potential design partners and early customers. Our hope is that these programs will help people from all backgrounds consider starting companies.

What's an interest or obsession of yours that most people don't know about?

I'm a huge aviation geek. As a kid, when my family would go on vacation, I was most excited about the flight versus the destination. I have my pilot's license and am always looking for an excuse to explore the West Coast via a tiny plane. There's no better view than watching the sunset from 10,000 feet.

An alien visits Earth and you can show them one movie. What would it be?

"Independence Day." I'm a huge Will Smith fan plus it'd be super meta watching aliens watch a movie about aliens visiting Earth. I could watch the scene where Will flies the spacecraft out of the mothership 100 times.

What's on your bucket list in a post-vaccine world?

I'm getting married in August. Well actually, I got married in a micro COVID wedding last summer, so we are throwing a huge party for all of our friends and family. Bucket list is hugging and dancing with all of the important people in our lives and then going on a super relaxing honeymoon. Let me know if you have ideas on where we should go!

Who is a tech leader you haven't met, but would love to get dinner with (and why)?

Andy Jassy. Despite all the success he's had building AWS, I bet his most challenging days are ahead. I'd love to hear how he's dealing with the pressure of filling Jeff Bezos's shoes. I'd also try to poke around to figure out what ideas are in the works for their next billion-dollar business line.

JOIN US

How can cities get smarter without crushing city budgets, wasting money, or violating the privacy of citizens? Join Protocol's David Pierce for a conversation with Smart Columbus' Jordan Davis, Sidewalk Infrastructure Partners (SIP)'s Jonathan Winer and Microsoft's Jeremy Goldberg on what it takes to build smart cities right.

Learn more

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