People look at high valuations in early-stage venture and conclude there’s too much capital.

Another explanation for high valuations is we’re suffering a scarcity of (great) founders.

First off: Why can high prices be partially explained by a scarcity of great founders? Typically high prices signifies a scarcity of something. When oil prices are high that means there’s a scarcity for oil.

There’s a saying in commodities that the cure for high prices is…high prices. Usually, when you raise prices, you get more demand. Pay engineers more, and you’ll get more engineers. But with founders that’s not the case. Higher valuations doesn’t mean more founders. Why?

It's too risky! The average founder does well, but the median founder flounders. Which is partially (among other reasons) why so many people take exec jobs or want to be VCs:

Exec jobs will be there. Your startup might not. VCs have a portfolio, and founders don't.

Indeed: There are lots of VCs who could make great founders, who would actually prefer to build a business than do a financial services job, but they just prefer the economic calculus of venture capital.

We need more founders & VCs.

Why? Schramm's law:

The single most important contributor to a nation’s economic growth is the number of start-ups that grow to a billion dollars in revenue within 20 years.

We produce ~33 unicorns a year.

We need ~100 unicorns a year to maintain post WWII growth rates.

More people founding successful companies would increase economic growth, and I don't think we're near the upper limit of potential successful founders. In other words, there's a lot more people out there who could start big & meaningful businesses.

How can we get more founders?

De-risk it. We should systematically reduce friction & remove barriers for people interested in starting companies.

VC firms can give upside in portfolio, VC founders can become scouts, or they should engage in founder pooling activities. (Employees too, ideally)

We also should decrease cultural friction to starting companies: