> The reason there aren't more Googles is not that investors encourage innovative startups to sell out, but that they won't even fund them.
The core problem is how investors are compensated. A managing partner's performance is directly linked to how many bad deals they avoid - avoiding "true negatives", minimizing "false positives". Because of this performance metric, investors are risk-adverse and I can't blame them for it. If we want innovation to be funded, the LP's need to tweak how the managing partners are measured. Managing partners are paid for their "insight" into emerging industries. Well, then penalize them for great deals that they passed on - the "false negatives". They should be accountable for the "false negatives" as much as the "false positives". That's what they are paid to do.
The core problem is how investors are compensated. A managing partner's performance is directly linked to how many bad deals they avoid - avoiding "true negatives", minimizing "false positives". Because of this performance metric, investors are risk-adverse and I can't blame them for it. If we want innovation to be funded, the LP's need to tweak how the managing partners are measured. Managing partners are paid for their "insight" into emerging industries. Well, then penalize them for great deals that they passed on - the "false negatives". They should be accountable for the "false negatives" as much as the "false positives". That's what they are paid to do.