We need a middle class for startups
I&#x27;m having a hard time understanding how you could do a funding mechanism for &quot;mid-market&quot; startups.<p>Contra the subtext of this post, it is not in fact low-risk to take a company from 0 to $5-10MM annual revenue. Companies that do this quickly tend do it with substantial funding, which is predicated on them aiming for much, much higher revenue and valuation numbers. Companies that don&#x27;t take funding that eventually hit those numbers run for a long time before they get there. And those kinds of companies fail all the time; failure is their default mode.<p>As I understand it, a basic fact of life for venture funding is that the winners have to pay for the winners. Do the math with a portfolio of 10 companies taking $1 each to see what the winners have to make just to break even at various hit rates.<p>Further, targeting &quot;mid-market&quot; startups with growth targets low enough to somehow derisk them would also drastically reduce the amount of funding you could provide. You can&#x27;t give $10MM to a company that&#x27;s going to grow slowly and organically from low-7-figures; that company has such a low valuation that $10MM would buy too much of it. My first impression is that you&#x27;d be able to do something early-stage-YC-ish, giving a single founder ramen wages for a year or two, and not much more than that. But you&#x27;d have to take a huge chunk of equity to do that, so it&#x27;d be a terrible deal for the founder.<p>This model would make sense if there was a reliable path to get to $5MM&#x2F;yr, such that you could build a portfolio of a bunch of companies taking that path with a very high hit rate. But there isn&#x27;t? You are very likely to fail trying to start a company like that. Worse: the resources you&#x27;ll need to operate a company doing $5MM&#x2F;yr will rapidly outstrip any amount of funding a VC could provide. The VC-funded companies doing $5MM&#x2F;yr got that money because they promised they&#x27;d soon be doing $500MM&#x2F;yr.<p>What am I missing? Obviously, I&#x27;m not a golfer.