Why Top Founders Are Abandoning Venture (And Where They're Heading Next)

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Explore how the venture capital exodus reveals a shifting landscape of influence and impact in entrepreneurship.

What you'll learn:

• How disillusionment with the VC world is driving a mass exodus of experienced entrepreneurs

• The concept of "leverage" as a mental model for understanding career evolution and impact

• A framework for identifying and applying different forms of leverage in your own career

Reading Time: 5 min

The Story: The Great Venture Exodus

For over a decade, I've been deeply embedded in the European venture community. Recently, I've noticed a striking trend: many of my peers, those who joined before or alongside me, are becoming disillusioned with the promises of the venture narrative.

In private conversations, they confide how people they once looked down upon - those building "simple" e-commerce businesses or investing in real estate - are now in far better positions. These "traditionalists" seem to have taken less risk, perhaps brought less innovation to the world, but find themselves in a more favorable and balanced place, both personally and financially.

This disillusionment has sparked an exodus. I'm watching as talented individuals migrate to various new territories:

• Real Estate development and investment

• Politics and activism

• Private Equity, both as fund managers and executives

• Fund Investing, providing VC and PE managers with capital

• Service Businesses, from coaches to advisors and agencies

• Search Funds seeking to acquire and transform stable, profitable SMEs

It's a fascinating shift, one that speaks volumes about the changing nature of entrepreneurship and success.

The Insight: The Quest for New Leverage

As I reflected on this exodus, a pattern emerged. These individuals aren't abandoning their ambitions or desire for impact. Instead, they're seeking new forms of leverage.

Leverage, as Naval Ravikant articulates, is a force multiplier. It's how some people can accomplish 10x, 100x, or even 1,000,000x what others can. In the context of careers and entrepreneurship, leverage can multiply outcomes from your effort, skill, and judgment.

In the VC world, leverage came primarily through capital - the ability to raise funds and grow rapidly. But the stress, lifestyle demands, and low probability of significant outcomes for founders have led many to reconsider this path.

Now, they're exploring alternative forms of leverage. Drawing from and expanding on Ravikant's framework, we can identify five distinct types of leverage:

1. Tools:

   • Physical or digital objects that amplify individual productivity

   • Examples: computers, software applications, machinery, vehicles

   • Key aspect: Multiplies the output of a single person's efforts

2. Labor:

   • Human resources working towards a common goal

   • Examples: employees, contractors, freelancers, virtual assistants

   • Key aspect: Scales effort through collaboration and delegation

3. Capital:

   • Financial resources that can be invested or deployed

   • Examples: money, credit, investment funds, cryptocurrencies

   • Key aspect: Enables acquisition of other forms of leverage

4. Code/Media:

   • Scalable digital assets that can serve unlimited users

   • Examples: software, apps, podcasts, videos, digital books

   • Key aspect: Creates value that can be replicated at near-zero marginal cost

5. Ideas/Network:

   • Conceptual frameworks and connections that attract followers or opportunities

   • Examples: thought leadership, political ideologies, social media influence, professional networks

   • Key aspect: Generates influence, attracts opportunities, and shapes perceptions at scale

What's fascinating about the exodus I'm observing is how people are shifting from one form of leverage to another:

• Those moving into real estate, search funds, or private equity are still using capital leverage but with more sustainable underlying assets.

• People becoming politicians or activists primarily leverage ideas and the political platform attached to those ideas. (I know, this is a gross oversimplification of today’s politics.)

• Those starting agencies or becoming advisors leverage ideas to gain trust and access, often to people in the center of power.

• Individuals moving into content creation or thought leadership (authors) are primarily leveraging code/media (books, blogs, podcasts, videos) and ideas/network (their unique perspectives and growing influence).

• People becoming fund investors are adding layers of diversification between themselves and individual businesses but still employing capital leverage.

The key insight? 

The desire for leverage - the ability to create outsized impact - remains. What's changing is the specific form of leverage they're choosing to employ.

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Your Quick Win: Identify and Apply Your Leverage

Let's put this insight into action with an exercise to help you identify and apply leverage in your own career:

1. Assess Your Current Leverage (5 minutes):

   • List the ways you currently create impact in your work or life.

   • Categorize each into one of the four types of leverage: Tools, Labor, Capital, Code/Media, Ideas/Network.

2. Explore New Forms (5 minutes):

   • Brainstorm potential new forms of leverage you could develop in each category.

   • Consider how these align with your skills, interests, and long-term goals.

3. Evaluate Potential (5 minutes):

   • For each new form of leverage you've identified, rate its potential impact (1-10) and the effort required to develop it (1-10).

   • Calculate an "efficiency score" by dividing impact by effort.

4. Action Plan (5 minutes):

   • Choose the form of leverage with the highest efficiency score.

   • Outline three concrete steps you can take in the next month to start building this leverage.

5. Accountability:

   • Share your chosen form of leverage and action plan with a colleague or mentor. (cc me, I’d love to know!)

   • Schedule a check-in one month from now to review your progress.

Remember, leverage is a powerful force multiplier. By consciously choosing and developing your sources of leverage, you can dramatically increase your impact and success, even as you navigate shifts in your career path.

What's your leverage strategy? I'd love to hear about the forms of leverage you're currently using and those you plan to develop. Share your insights and let's learn from each other!