Risk Capital

I got an email last Thursday. Subject line: "TenOneTen scout program"

TenOneTen, one of my earliest investors, wanted me to help source deals. No office, no Patagonia vest. Just 5% carried interest and a mandate: find companies worth betting on.

I said yes before I finished reading.

Because for five years I've been the supplicant, and now it’s my turn to have a say in who gets a shot.

Venture Capitalists like to say they back bold founders. They fund innovation. They allocate capital to the future.

It's a compelling narrative. But it’s mostly self-aggrandizing bullshit.

Here's what venture capital actually is: a financial instrument that pools money from institutional investors and deploys it into high-risk, high-return bets. The business model requires the entire portfolio to return 3-5x over 7-10 years.

VCs expect 9 out of 10 bets to fail completely, which means they need unicorns: the 0.00006% of companies that return 100x or more.

That structure creates specific, predictable incentives: optimize for exponential growth curves that justify billion-dollar exits. Reward revenue growth that can be monetized later, profitability optional. Back scalable platforms that can dominate markets fast.

The system selects for speed over wisdom, scale over sustainability, narrative over fundamentals.

And it breaks most of the people who enter it. Including me.

In 2020, I sat on a hardwood floor in Boulder with a pitch deck full of vapor. TenOneTen wrote a check anyway.

A few weeks ago, I was refreshing our dashboard. Again. Watching a metric that had been green for several quarters look uncomfortably flat.

At our most recent board meeting, I announced "we're crushing it" while my leg bounced under the table. My co-founder toured investors through an update with graphs angled upward. The next morning, I sat in the shower for 40 minutes and cried for reasons I couldn't articulate.

This is the performance. The cognitive dissonance required to project absolute confidence while navigating radical uncertainty. To grow faster than sustainable while maintaining team cohesion. To burn capital while being judged on efficiency.

A 2024 study found 72% of startup founders report mental health struggles, compared to 48% of the general population. I'm not special. I'm just tired of being on the wrong side of the power dynamic.

You walk into pitch meetings knowing the investor has 47 other meetings that week. Your entire trajectory depends on whether they find you compelling in 30 minutes. They can ghost you with no consequences. You send follow-up emails threading the needle between persistent and desperate.

You are always the one who needs something.

Now I get to be the one who has what someone else needs.

I'd be lying if I said that wasn't part of the appeal.

We all know the greatest hits of VC delusion. WeWork's "community-adjusted EBITDA." The Theranos black box. The years Uber spent burning billions to subsidize a $12 ride across town. But you don't need fraud to destroy capital; you just need a spreadsheet that ignores human behavior.

Peloton's bike worked fine, it was the business model that was insane. At its peak ($50B valuation), the company's growth projections essentially assumed the Total Addressable Market was "every household with $45k in income." They priced in a world where grandmothers in rural Nebraska would permanently trade cable subscriptions for competitive spinning. The math worked only if you assumed the pandemic would last forever.

Bird became the fastest startup to reach a $1 billion valuation by flooding cities with electric scooters. The thesis was "micro-mobility will replace cars." The reality was a hardware problem: the scooters cost $550, generated $3.65 a day, and had a lifespan of about 29 days before breaking or ending up in a river. VCs subsidized a business model that was effectively a donation to local landfills.

Fast raised $102 million to revolutionize online checkout. They hired hundreds of employees, burned $10 million a month, and even sponsored a NASCAR team. When they collapsed, it was revealed that their massive valuation was built on generating just $600,000 in total revenue. The system demanded speed. Revenue could wait.

When you need 100x returns, you can't waste time on sustainable businesses growing 20% annually. You need exponential curves, even if they're built on subsidized growth and hallucinations about the size of the market.

If I'm honest about pattern recognition, I'm selecting for two specific signals that defined my own trajectory.

First: the inability to accept that something can't be done. That peculiarly American pathology where you've done the math, understand the odds, and build anyway. Where quitting feels worse than pivoting and failure just means you haven't found the right approach yet.

Second: co-founders who are best friends. My co-founder and I text each other at 2am because we both know the other is awake, staring at the same dashboard. We've had the kind of brutal fights that only survive when the relationship predates the company. When the product fails, when investors ghost, when revenue flattens, you need someone in the trenches next to you who remembers who you were before you became "founder."

That combination is rare. Most founding teams are marriages of convenience: complementary skill sets discovered at a hackathon or brokered by a mutual connection. They work until the pressure cracks the foundation.

Every unicorn started as a delusion believed by people who couldn't be separated.

Airbnb: two broke roommates convinced strangers would sleep on their air mattress. Waymo: a group of Stanford friends betting they could make cars drive themselves. SpaceX: Musk assembled engineers willing to rebuild rocket science from first principles because NASA wouldn't.

The VCs who funded those didn't have better information. They found founders they couldn't talk out of it, who'd already survived the kind of interpersonal stress that destroys most partnerships.

I'll look for that same thing. The founders who've optimized their entire identity around a problem that might not have a solution. Who've already been through enough together that bankruptcy won't be the thing that ends them.

The system breaks most of them.

But the ones it doesn't break sometimes bend reality.

If I find a unicorn (odds: 0.00006%), my 5% carry might generate $500k. After a decade. Pre-tax.

It's a pretty terrible deal, economically speaking.

But I'm not doing it for the carry. I'm doing it because I'm tired of refreshing dashboards at 2am while someone else decides if my vision gets funded. I'm doing it because I want the power I've been on the wrong side of. I'm doing it because venture capital has never been about the math.

It's about allocating capital to bets banks and governments won't make. To companies that shouldn't exist yet. To founders building solutions for problems we don't know we have.

Moderna shouldn’t exist. Nobody was asking for genetic vaccines. Pharma saw mRNA as too unstable, too experimental, too far from commercial reality. The consensus was that biology couldn’t be programmed at scale, and startups had no business going after global pandemics.

Stéphane Bancel built it anyway, and VCs funded him because someone has to bet on unreasonable conviction.

China can manufacture faster. Europe can regulate smarter. But America still has more capital willing to fund things that probably won't work.

I still believe in that bet.

Everyone in venture thinks they're the exception. The investor who'll actually support founders through the plateau. The scout who'll prioritize long-term value over quick exits.

Maybe I will be. Maybe I'll push back when TenOneTen wants to force premature scaling. Maybe I'll tell founders "don't raise money" when bootstrapping makes more sense.

Or maybe the system's incentives will prove too strong and I'll become what I've resented. Maybe in two years I'll be the one ghosting desperate founders. Maybe I'll start optimizing for what gets funded instead of what matters.

I don't know yet.

But here's what I do know: I remember what it felt like on the other side. To perform confidence I didn't feel. To sit in a board meeting, dying inside, while projecting certainty. To send investors a story that highlighted every bright spot in the data, even as my co-founder and I sat awake at 2am staring at the full picture and bracing for the quarter ahead.

Most VCs have forgotten. They've been on the power side too long. They see founders as excel rows rather than people navigating impossible odds.

I'm still close enough to remember the desperation. The shower unraveling. The mental fortitude required to keep building when everything suggests you should stop.

That memory might make me better at identifying founders worth backing. That memory means I know where the bodies are buried. I know which corners to inspect, which numbers matter, and which questions reveal how a founder holds pressure.

I can't fix venture capital. I can't promise I won't be corrupted by the incentives I just spent 1,500 words critiquing.

But I can try to find the resilient founders who'll build things that shouldn't exist yet and bet on them before anyone else believes.

That's the job. And I'm hoping the memory of what it felt like to need that bet will make me better at placing it.

Up and to the right.