The Class Asymmetry Between Investors and Founders is Real
Most founders are educated, but they are not high-net-worth individuals. They may know rich folks. They may have gone to school with them, but they are not from that lifestyle.
What lifestyle?
One in which people don’t look at the price of most consumer goods, their housing, clothing, medical bills, etc. Folks who have staff, multiple homes, and who travel whenever they want. They have more liquid capital than they need to spend on an annual basis. They’re rich. They’re in the top .1% of net worth. And there’s a vast difference between being in the top 10% and the top .1% of net worth.
Here’s an excerpt from my upcoming interview with Greg Shepard, a serial tech entrepreneur who describes a surreal experience he had while running a startup on behalf of a very wealthy trust fund recipient who had bankrolled the venture.
Gregory Shepard:
It’s very different when you’re on the ground, and you’re down there, and you’re taking the beating. And a lot of times, you’re doing 50 things simultaneously as an entrepreneur; you don’t have a team that can do a bunch of things and all this stuff; it’s all just scrappy. It’s just scrappy; it takes a lot of grinds and a lot of grit to get through it. And then you got this investor, who’s sitting there sitting in a big office with a window view on the corner, looking down at Alcatraz in San Francisco with his air conditioner and his $250,000 base pay plus bonuses and car and all this stuff. Starting right there, how are you going to have a conversation?
How will you have a conversation with somebody when you’re coming from this perspective, and they’re coming from that perspective? I can tell you a story. I did a startup one time for this guy who was a trust fund baby from a very well-known company. He was a billionaire trust fund baby. And I did a round of funding, and I was building this company. This was in the eighties, and I’m building this company, and the guy took the money out of the bank account and went and bought a Lamborghini because his dad was giving him money, and the payroll bounced. And I’m calling the CFO; I’m like, “What happened to the payroll?” And he goes, “Oh, so and so took it out of the account.” And I’m like, “How did he just take it out of account?”
He’s like, “Well, he just took it out of the account. He’s a signer on the account.” And so, I called that guy, and I’m like, “Hey man, you took the money out of the account, so people can’t do their payroll.” And he says to them, “Well, tell them to go to the ATM.” That’s what he tells me. I’m like, “Dude, they don’t have money in their account, so they can’t go to the ATM and just take money out.” And that is the delta between some wealthy people and an entrepreneur. They don’t even understand that there are people who don’t even have enough. They don’t have a savings account to just tap into.
ME: Well, it’s funny. Would you say that’s a red flag, or is that just a reality you have to deal with, with institutional investors that they’re all like that? Or are there enough of those folks who understand that they’re a privileged asshole?
It’s not that investor guy is always a raging jerk like the kid in this photo; they’re entirely insensitive to the realities of an upper-middle-class founder who could easily lose their life savings and their house if their venture tanks. The investor’s lifestyle won’t change a bit.
Above is a quote from Episode 70 of Startup Confidential, which will go live on May 15. Please subscribe here, so you don’t miss it.