One of the perks of being a Stanford student is that I get to try out all the new and upcoming startups in Silicon Valley before they gain widespread appeal. Part of this is because some of the startups are founded on campus, but even companies that do not have direct ties to the university love to get the Stanford students’ seal of approval.
Some of the startups are really useful. Others are useful only in hyperlocal niches. A few are just plain ridiculous.
In a History class I took last year, my professor commented “we live on islands of memory, surrounded by seas of forgetfulness”. In this current mania, it feels like all the investors are comfortably sunbathing on the islands, and ignoring the sunken remains of the dot-com era bust.
There have recently been signs that venture capital is cooling off a bit, with increased scrutiny being placed on pitches. Unfortunately, this has only worsened the diversity that exists in the startup environment. Over the past few decades, venture capital has denigrated into a “good ol’ boy’s club” mentality, becoming just as bad as cigar-smoking Wall Street tycoons that people on the West love to poke fun at. A recent Harvard Business School study found that venture capital investors substantially favor investing in men than women, even if the exact same pitches are delivered; furthermore, handsome men outperform average-looking men (Source).
On the topic of diversity, a buzzword in Silicon Valley (but sometimes little more than that), 83% of startup founders that successfully raised money had a completely Caucasian racial makeup (Source). It has been proven time and time again that diverse founders and employees lead to long-lasting companies, and it’s easy to see why. If everyone on your founding team shares all of the same life experiences and interests, then it’s completely possible that the need your company seeks to fill is not a realistic need with room for expansion. If, on the other hand, people from several walks of life come together and form a business targeting a need, it’s far more likely that this is a true need for a wide array of people.
After the next boom-and-bust cycle in Silicon Valley, maybe new VC firms will rise that adequately take into account the importance of ideas that are valid for a wide swath of the world. Then again, maybe not.