The paradox of 2020 VC is that the largest funds are doing the smallest rounds

I talked yesterday about how VCs are just tired these days. Too many deals, too little time per deal, and constant hyper-competition with other VCs for the same equity.

One founder friend of mine noted to me last night that he has already received inbound requests from more than 90 investors over the past year about his next round — and he’s not even (presumably) fundraising. “I may have missed a few,” he deadpans — and really, how could one not?

All that frenetic activity, though, leads us to the paradox at the heart of 2020 venture capital: It’s the largest funds that are writing the earliest, smallest checks.

That’s a paradox because big funds need big rounds to invest in. A billion-dollar fund can’t write 800 $1 million seed checks with dollars left over for management fees (well, they could, but that would be obnoxious and impossible to track). Instead, the usual pattern is that as a firm’s fund size grows, its managing partners increasingly move to later-stage rounds to be able to efficiently deploy that capital. So the $200 million fund that used to write $8 million Series As transforms into a $1 billion fund writing $40 million Series Bs and Cs.

That’s logical. Yet, the real logic is a bit more complicated. Namely, that everyone is raising huge funds.

As this week’s big VC report from the National Venture Capital Association made clear, 2019 was in many ways the year of the big fund (and SoftBank didn’t even raise!). Twenty-one “mega-funds” launched last year (defined as raising more than $500 million), and that was actually below the numbers in 2018.

All that late-stage capital is scouring for late-stage deals, but there just aren’t that many deals to do. Sure, there are great companies and potentially great returns lying around, but there are also dozens of funds plotting to get access to that cap table, and valuation is one of the only levers these investors have to stand out from the fray.

This is the story of Plaid in many ways. The fintech data API layer, which Visa announced it is intending to acquire for $5.3 billion, raised a $250 million Series C in late 2018 from Index and Kleiner, all according to Crunchbase. Multiple VC sources have told me that “everyone” looked at the deal (everyone being the tired VCs if you will).

But as one VC who said “no” on the C round defended to me this week, the valuation last year was incredibly rich. The company had revenues in 2018 in the upper tens of millions, or so I have been told, which coupled with its publicly reported $2.65 billion Series C valuation implies a revenue multiple somewhere in the 30-50x range — extremely pricey given the company’s ongoing fight with banks to ensure it can maintain data access to its users’ accounts.

Jeff Kauflin at Forbes reported that the company’s revenues in 2019 are now in the lower three digits of millions, which means that Visa likely paid a similarly expensive multiple to acquire the company. Kleiner and Index doubled their money in a year or so, and no one should complain about that kind of IRR (particularly in growth investing), but if it weren’t for Visa and the beneficial alchemy of exit timing, all might have turned out very differently.

Worse than just expensive valuations, these later-stage rounds can become very proprietary and exclusive. From the sounds of it, Plaid ran a fairly open process for its Series C round, which allowed a lot of firms to look at the deal, helping to drive the valuation up while limiting dilution for earlier investors and the founder. But that’s not the only way to handle it.

Increasingly, firms that invested early are also trying to invest later. That Series A investor who put in $5 million also wants to put in the $50 million Series B and the $250 million Series C. After all, they have the capital, already know the company, have a relationship with the CEO and can avoid a time-consuming fundraise in the process.

So for many deals today, those later-stage cap tables are essentially locking out new investors, because there is already so much capital sitting around the cap table just salivating to double down.

That gets us straight to the paradox. In order to have access to later-stage rounds, you have to already be on the cap table, which means that you have to do the smaller, earlier-stage rounds. Suddenly, growth investors are coming back to early-stage rounds (including seed) just to have optionality on access to these startups and their fundraises.

As one VC explained to me last week (paraphrasing), “What’s weird today is that you have firms like Sequoia who show up for seed rounds, but they don’t really care about … anything. Valuation, terms, etc. It’s all a play for those later-stage rounds.” I think that’s a bit of an exaggeration, to be clear, but ultimately, those one million-dollar checks are essentially a rounding error for the largest funds. The real return is in the mega rounds down the road.

Does that mean seed funds will cease to exist? Certainly not, but it’s hard to make money and build a balanced, risk-adjusted portfolio when your competitors literally don’t care and consider the investment a marketing and access expense. As for founders — the times are still really, really good if you can check the right VC boxes.

VCs are just tired

I was in SF last week and met with more than a dozen VCs over the course of two days. This was post the holidays, post their visits to the ski chalets in Tahoe and the island beaches, and in the smack dab of one of the most important fundraise periods of the year — the mid-to-late January to April stretch when all the backlog of startups from Q4 initiate their fundraises for the new year.

And the one constant refrain I heard over and over again across these conversations was just this: VCs are tired.

The reasons were similar if not perfectly overlapping. The biggest driver was the sheer flood of venture dollars targeting too few deals in the Valley these days. Consumer investing has become passé as exits disappear and the mobile wave crests (last year was the first year B2B investing overtook consumer investing in modern memory), forcing everyone to chase the same set of SaaS companies.

VCs described to me how the top deals start and close their fundraises in 48-72 hours. Several VCs groused that dozens of firms now descend like hawks on the unwitting but fortunate target startup, angling for a term sheet and willing to give up valuation and preferences left and right for any chance at the cap table. Earlier investors are just as desperate to own that equity, and no longer play any sort of honest broker role that they might have in the past.

Plus, the FOMO of the moment is more acute than ever — a VC at the end of the day might have already seen a dozen companies, but gets a late night intro to one last company — perhaps the company that could make or break their career. And so they will take that one last meeting, and then one more last meeting, hoping to find some meaningful edge against the competition.

And so VCs are running ragged around South Park, and increasingly, flying around the world scouring for any alpha wherever they can find it. Increasingly, it feels, they aren’t finding it though.

Firms are doing what they can. They are staffing up, trying to hire more raw talent in the hopes of finding that last undiscovered company. They scour their own portfolios and probe their founders, trying to find a tip to a deal that their competitor may have missed. They host dinner after dinner (sometimes multiple in one night — as I sometimes witness when I get an invitation to all of them as if I can be in more than one place at the same time), again, hoping to find some bit of magic.

Ironically, the “tired” line was something I used to hear from seed investors, who constantly had to churn through dozens of under-hearted startups to find the gold. Now, I’ve heard this language more and more from later-stage VCs, where the Excel spreadsheet drives the valuation more than a relationship with a founder — and everyone can read the gridiron of SaaS metrics.

All of this in some ways is good for startup founders (and their earliest investors) — higher markups are going to result in more resources with less dilution, and that’s always nice. The challenge is that relationships are being forged in the most intense of sale processes, and that means that founders may only have a short period of time to work with a partner before committing a board seat to that individual. Personalities are hard to judge in such a crucible.

As are the numbers. We’ve chatted a bit about reneged term sheets on Equity, but it’s a pattern that I hear whispered about more and more. Less due diligence is happening before the term sheet is signed (again, to beat out the rabid competition), and there is now more buyer’s remorse from VCs (and very occasionally founders) that can lead to a botched round along the way.

Lack of bandwidth, hyper-velocity, a pittance of sleep — all of these are intensifying the sensitivity of VC returns. Email a VC an hour before or after and it may well change the result of a fundraise. VCs once had a reputation for plodding and slow deliberation. That old normal is definitely dead right now, and in its place is a new, modern VC who is going to determine millions of dollars in a few minutes on a jet fuel of caffeine and ambition.

It’s the best and worst of times, and I can’t help but wonder what the results of the 2019 and 2020 vintage years are going to look like 8-10 years from now.

Don’t be a selfless startup

One of the enduring truths of big companies is that they aren’t innovative. They are “innovative” in the marketing sense, but fail to ever execute on new ideas, particularly when those ideas cannibalize existing products and revenues.

So it often takes a real competitor to force these incumbent, legacy businesses to evolve in any meaningful way. Usually that change leads to disruption, in the classic way that Clayton Christensen describes in “The Innovator’s Dilemma.” An upstart company creates a new technology or business model that is better for an under-served segment of a market, and as that company improves, it competes directly with the incumbent and eventually wins over its market with a vastly superior product.

Unfortunately, real life isn’t so easy, as WeWork and MoviePass have shown us over the past few years.

In both cases, there were incumbents. In movie theaters, you had AMC and the like, which built a business model around ticket sales (shared with movie studios) and food/beverage concessions that targeted occasional customers at a high price point. Meanwhile, in commercial real estate, you had large landowners and family holders who demanded extremely long rent terms at high prices, often with personal financial guarantees from the CEO of the tenant firm.

Reading Ted Chiang’s ‘The Merchant and the Alchemist’s Gate’

What would we do if we could visit our own pasts or futures? Are we more likely to change our timelines, or will our timelines actually project themselves back on to us more forcefully?

This is the first discussion post of this beta-testing, informal TechCrunch book club, which is starting with the first short story in Ted Chiang’s science fiction collection “Exhalation.” Join us as we walk through each story in succession in the coming weeks and explore a wider expanse of technology and its effect on society.

The first story in the collection is “The Merchant and the Alchemist’s Gate,” a compact, interwoven series of tales that discusses a time-shifting “gate” that allows people to move forward and backward in time at a specific interval. Chiang takes the familiar device of the time-travel machine and repurposes it for a deeper introspection of how humans consider their own lives and the lives they affect.

For this first week, I want to start with some reading questions (posted below) to think about before presenting deeper thoughts from me and readers. As I mentioned before, you can email me your thoughts at [email protected] and include them below in the comments, as well. Several communities online on Reddit and Twitter have already begun conversations, as well.

My friend and occasional Extra Crunch contributor Eliot Peper wrote in to describe what he considered the most foundational passage of the piece, and his thoughts:

“Past and future are the same, and we cannot change either, only know them more fully. My journey to the past had changed nothing, but what I had learned had changed everything, and I understood that it could not have been otherwise. If our lives are tales that Allah tells, then we are the audience as well as the players, and it is by living these tales that we receive their lessons.”

This passage resonated with me deeply because it hints at one of the reasons I love reading science fiction like Chiang’s: Not to catch a glimpse into the future, but to inspect the present more closely, and from fresh angles—learning lessons along the way.

We will return next week on Tuesday with more fully formed thoughts on this short story, as well as a similar reading guide for the second short story, the eponymous “Exhalation.”

Some questions to ponder about “The Merchant and the Alchemist’s Gate”:

  • What is Chiang trying to convey about the meaning of destiny? Are we really “the audience as well as the players”?
  • Do we have agency in our own lives? Can we really affect the future with our own actions?
  • How should we observe what happens around us? Is consideration of what is happening enough to bring understanding and contentment, or do we have to have a stake in every outcome for us to feel satisfied?
  • Why did Chiang choose this particular time and setting (historical Baghdad) for this short story?
  • Similarly, why did he choose to include three tales in such a short story? What did this structural device provide us as readers?
  • What does the introduction of the gate imply about how new technology is accepted? Is it believable that such a wondrous device would be accepted so readily?
  • Is the gate neutral? Could it be used for good or evil, or does it depend on the user themselves?

Join us for the TechCrunch 2020 book club, starting next week

It’s a new year, a new decade and a renewed opportunity to read great non-fiction and fiction that strikes at the heart of the ambition, power and challenges of technology and its effect on society at large.

That’s why TechCrunch is launching an informal “book club” for our readers, starting next week. The idea is to bring our audience together around an important piece of writing, discuss it and, perhaps, learn a thing or two (or just enjoy great writing). This is a beta test — we are going to figure out the logistics a bit along the way (“move fast and read things”).

Late last year, we published three different best-books-of-the-year lists, with recommendations from our own TechCrunch writers, Extra Crunch readers and leading venture capitalists.

I’m borrowing from Josh Wolfe at Lux Capital to select Exhalations by Ted Chiang as our first book.

As Arman Tabatabai wrote in our overview:

Chiang’s newest work is a collection of science fiction short stories and novelettes that stray away from the speculative dystopian side of the genre. Using common sci-fi motifs such as aliens and AI proliferation, the selected writings instead dial-in on the characters living in these imagined universes as they examine how societal and technological evolutions impact the ethical, philosophical and cognitive aspects of the human psyche and existence.

“Exhalations” has not only been lauded by the likes of VCs, but was also selected as a top 10 book of the year by The New York Times for 2019.

For next week, we will start slowly and just read the first short story in the collection, “The Merchant and the Alchemist’s Gate.” There are nine chapters in “Exhalations,” some very short, some longer, and we will balance out the reading over the next 4-6 weeks or so.

Each week, we will read a story or two from the book, and I will curate responses from any reader who wants to email me their thoughts about what they just read for a post on Tuesday (email: [email protected]). TechCrunch has discussion comments available on our posts, so we can continue the conversation there, as well.

Update: There is no sign up mechanism. You can follow our feed for these posts here.

Join us! And if you have feedback on this concept, feel free to email me at [email protected].

Google has little choice to be evil or not in today’s fractured internet

Well, we got to January 2nd before the latest angry resignation published by a tech executive on Medium.

Today’s installment comes from Ross LaJeunesse, who was head of international relations at Google and served for more than a decade in various roles at the company. He denounces what he sees as Google’s increasingly failed ambitions to be a company principled on human rights, and poses a series of questions about the future of tech and capitalism:

I think the important question is what does it mean when one of America’s marque’ companies changes so dramatically. Is it the inevitable outcome of a corporate culture that rewards growth and profits over social impact and responsibility? Is it in some way related to the corruption that has gripped our federal government? Is this part of the global trend toward “strong man” leaders who are coming to power around the globe, where questions of “right” and “wrong” are ignored in favor of self-interest and self-dealing? Finally, what are the implications for all of us when that once-great American company controls so much data about billions of users across the globe?

The whole read is interesting, and covers Google’s China operations, its Project Dragonfly censored search crisis, Saudi Arabia’s apps in Google Cloud, and his own personal experience with Google HR.

It’s a manifesto of sorts, and perhaps that isn’t surprising given that LaJeunesse is also running for the Democratic primary in Maine’s senatorial election to compete against Republican incumbent Susan Collins. His critiques of Big Tech seem to be channeling Missouri Republican senator Josh Hawley, and that makes it a fascinating political strategy.

But let’s focus in on the key question at the heart of this debate: does Google have the ability to be “good” or “evil” when it comes to tech’s influence on society? Does it have agency to make a difference on human rights in countries around the world?

My answer is: Google used to have a lot of agency, which is unfortunately declining very, very rapidly.

I’ve talked about the fracturing of the internet into different spheres of influence for quite literally years. Countries like China in particular, but also Russia, Iran and others are seizing more and more exacting control of the internet’s plumbing and applications, subsuming the original internet’s spirit of openness and freedom and placing this communications medium under their iron fists.

As this fracturing has occurred, companies like Google, or Shutterstock, or even the NBA have increasingly faced what I’ve called an “authoritarian straddle” — they can either work with these countries and follow the local rules, or they can just get out, with serious ramifications for their home markets.

Those are the extent of the choices these companies have. Shutterstock is not going to change China’s policy toward photos of the Tiananmen Square protests, any more than Google can try to launch a search engine on the mainland or change Saudi Arabia’s deplorable women’s rights.

To have any agency here at all, you need a monopoly on a product or service so important that the dictatorship has to accept the terms you offer. In other words, these companies need extreme leverage, essentially the ability to go to the regimes and say, “No, fuck you, here’s how it is going to work, we’re going to follow human rights, and you have no choice in the matter.”

What tech companies are discovering — even massive giants like Google, Facebook, Apple, Amazon, and Microsoft — is that they really, truly don’t have that kind of leverage in these countries anymore. Not even Apple, which employs hundreds of thousands of manufacturing workers through its subcontractors in China, can move the needle in that country anymore. Iran shut off the internet for a period of time to dampen the intensity of political protests in that country. Russia last week tested shutting off the internet to make sure it can just pull the plug when it wants.

If whole countries can just flip the switch and turn off “tech,” exactly what leverage do any of these companies have in the first place?

And that diminution of power is a trend that tech companies, and particularly American tech companies, haven’t fully grappled with. They don’t really get a choice anymore in the decisions here. China has its own search engine, and increasingly, its own mobile phone ecosystem unencumbered by U.S. patents and therefore U.S. policy. If Azure leaves Saudi Arabia, Alibaba Cloud is more than willing to step into the gap and make the money instead.

So when you get to LaJeunesse’s comments that he pushed Google internally to formalize some of its values:

My solution was to advocate for the adoption of a company-wide, formal Human Rights Program that would publicly commit Google to adhere to human rights principles found in the UN Declaration of Human Rights, provide a mechanism for product and engineering teams to seek internal review of product design elements, and formalize the use of Human Rights Impact Assessments for all major product launches and market entries.

… one can’t help but feel solace for an optimistic world where a better product design review process might have once improved global human rights.

The issue is far simpler though than it was in the past. You don’t need a human rights protocol, or some sort of review process for market entry. You are either in, or you are out. You either launch in these countries and deal with the inevitable human rights abuses and concomitant consumer protests in the home market, or you maintain your values and you walk away, ignoring the profit mirage from these regimes in the process.

That’s why I recently argued that Google and the NBA should just walk away. I still hold that belief. It’s also why I called on Shutterstock to leave China and return to its more open and free values. No U.S. tech company today has the leverage to make a dent on human rights the way that they did a decade ago. The internet has fractured, data sovereignty is on the rise, and there’s a binary choice to be made whether to engage or to flee. Ultimately, I take LaJeunesse’s side — these companies should walk, because there really isn’t much choice otherwise.

Should you pay $50K for your pitch deck? Yes, why the hell not?

Every once in a while on VC Twitter, a comment or statement seems so outlandish, so completely outrageous, that it must be — certainly has to be — false. Such as it was for Primary Ventures investor Jason Shuman, who commented on the recent prices for pitch deck advice in the Valley today:

You can almost hear that plaintive scream, “My mind is officially blown” (Shuman doesn’t scream, mind you). And indeed, in a world where more and more founders are worried about a bubble; assets are more, let’s say, Notionally expensive than ever before; and everything just seems a little bit crazy these days, it seems downright, fucking insane to think that a PowerPoint file and some “thoughts” are worth tens of thousands of dollars, and a goddamn term sheet to boot.

But they are.

Or at the very least, they can be. And I say that as the guy who wrote an article last week entitled, “How to avoid the startup trap of the parasitic consultant.”

For sure, not every pitch deck consultant is worth top dollar, any more than not every croissant in New York’s West Village is worth $10. But some are, and certainly an elect chosen set of consultants are worth every penny they demand.

The best consultants are not luxuries to plaster on your WeWork’s walls, but critical tools to invest in your startup. Framing a startup’s thesis, product, team, and market exactly right is a qualitative skill that can’t be learned from reading a book or scanning through a founder friend’s deck or two. Get a single slide wrong, or hell, a single bullet point wrong and the whole thing can blow up in a pitch meeting in thirty seconds or less.

Trust me. As a former VC investor, I have gotten hung up on single sentences before. A founder has put their life’s work into a company, synoptically condensed it to a handful of slides, and I am stuck on eight words. But those eight words make no sense, and once something doesn’t make sense, the whole edifice of excitement and confidence comes crashing down. Eight words — one badly chosen verb and adjective.

A good pitch deck consultant may barely move the needle on a fundraise, while a superstar may not just get you a better term sheet, they may fundamentally transform the entire course of your startup’s trajectory. Those are the stakes.

And of course, it’s not just pitch deck consultants who can do this. The right PR consultants can potentially get you traction that no one else can. The right sales consultants may lock in those critical early design customers that represent the difference between an orderly liquidation and a massive Series A. The right product marketing specialists or pricing experts may be what drives conversions and eliminates churn.

What’s so hard today for founders is that the Valley has indeed matured, and all these consultants and more are available. There are the hucksters and the tricksters, the bon vivants thriving on naive capital, the idiot clowns cloaked in their own compelling pitch decks.

But as the market has expanded for these services, at least some superstars are emerging from the marketplace, people who can offer more value for you in a week or two than the mediocrities can in a year.

Your job as founder is to constantly probe and find those diamonds, and get them working on your idea at any cost — even costs that might at times seem insane.

The thing with tech startups today is that they are built upon strata of superstardom. Superstar talents lead to superstar products, superstar VC capital, and ultimately, superstar exits. Superstar momentum is real. Yes, yes, yes, not every time, and every stage in the pipeline is multiplied by a stochastic chance of failure, for sure. But idiocy has rarely been a path to success.

And so as with all parts of innovation, it’s all about making the right investments in the right people and the right ideas. $50K or even $500K for a consultant won’t do anything if they are the wrong person working on the wrong idea — parasites are parasites after all. But leverage that early seed capital into the right people working on the right problems, and that’s where the magic happens.

And so I can understand some of the outrage over these figures, as well as the lingering presumption behind them that VCs care more about a startup’s deck than the underlying startup itself. Those frustrations are palpable and not insane, but let’s not avoid the tough question: everything has some value attached to it. It shouldn’t surprise anyone that top experts in their fields, who understand their own leverage, would take advantage of their expertise and drive their own prices higher.

Paying tens of thousands of dollars for a pitch deck consultant isn’t a prerequisite for securing a venture capital round. There are founders whose entire skill is securing capital for their companies who have never paid a penny for this skill.

Yet ultimately, all early-stage startups face the same challenge: too many activities, too little time. Something, somewhere is going to have to get outsourced today and the quality of that external work is largely going to be determined by how much you are willing to pay for it. What you choose to spend whatever capital you have will determine the trajectory of your startup. So whether it is pitch decks or another activity, never blink from those top dollars. It may very well be what gets you the top dollar in the end.

TikTok’s national security scrutiny tightens as U.S. Navy reportedly bans popular social app

TikTok may be the fastest-growing social network in the history of the internet, but it is also quickly becoming the fastest-growing security threat and thorn in the side of U.S. China hawks.

The latest, according to a notice published by the U.S. Navy this past week and reported on by Reuters and the South China Morning Post, is that TikTok will no longer be allowed to be installed on service members’ devices, or they may face expulsion from the military service’s intranet.

It’s just the latest example of the challenges facing the extremely popular app. Recently, Congress led by Missouri senator Josh Hawley demanded a national security review of TikTok and its Sequoia-backed parent company ByteDance, along with other tech companies that may share data with foreign governments like China. Concerns over the leaking of confidential communications recently led the U.S. government to demand the unwinding of the acquisition of gay social network app Grindr from its Chinese owner Beijing Kunlun.

The intensity of criticism on both sides of the Pacific has made it increasingly challenging to manage tech companies across the divide. As I recently discussed here on TechCrunch, Shutterstock has actively made it harder and harder to find photos deemed controversial by the Chinese government on its stock photography platform, a play to avoid losing a critical source of revenue.

We saw similar challenges with Google and its Project Dragonfly China-focused search engine as well as with the NBA.

What’s interesting here though is that companies on both sides are struggling with policy on both sides. Chinese companies like ByteDance are increasingly being targeted and stricken out of the U.S. market, while American companies have long struggled to get a foothold in the Middle Kingdom. That might be a more equal playing field than it has been in the past, but it is certainly a less free market than it could be.

While the trade fight between China and the U.S. continues, the damage will continue to fall on companies that fail to draw within the lines set by policymakers in both countries. Whether any tech company can bridge that divide in the future unfortunately remains to be seen.

With $4B food delivery acquisition, Korea poised to enter upper tier of startup hubs

Seoul and South Korea may well be the secret startup hub that (still) no one talks about.

While often dwarfed by the scale and scope of the Chinese startup market next door, South Korea has proven over the last few years that it can — and will — enter the top-tier of startup hubs.

Case in point: Baedal Minjok (typically shortened to Baemin), one of the country’s leading food delivery apps, announced an acquisition offer by Berlin-based Delivery Hero in a blockbuster $4 billion transaction late this week, representing potentially one of the largest exits yet for the Korean startup world.

The transaction faces antitrust review before closing, since Delivery Hero owns Baemin’s largest competitor Yogiyo, and therefore is conditional on regulatory approval. Delivery Hero bought a majority stake in Yogiyo way back in 2014.

What’s been dazzling though is to have witnessed the growth of this hub over the past decade. As TechCrunch’s former foreign correspondent in Seoul five years ago and a university researcher locally at KAIST eight years ago, I’ve been watching the growth of this hub locally and from afar for years now.

While the country remains dominated by its chaebol tech conglomerates — none more important than Samsung — it’s the country’s startup and culture industries that are driving dynamism in this economy. And with money flooding out of the country’s pension funds into the startup world (both locally and internationally), even more opportunities await entrepreneurs willing to slough off traditional big corporate career paths and take the startup route.

Baemin’s original branding was heavy on the illustrations.

Five years ago, Baemin was just an app for chicken delivery with a cutesy and creative interface facing criticism from restaurant franchise owners over fees. Now, its motorbikes are seen all over Seoul, and the company has installed speakers in many restaurants where a catchy whistle and the company’s name are announced every time there is an online delivery order.

(Last week when I was in Seoul, one restaurant seemingly received an order every 1-3 minutes with a “Baedal Minjok Order!” announcement that made eating a quite distracted experience. Amazing product marketing tactic though that I am surprised more U.S.-based food delivery startups haven’t copied yet).

The strengths of the ecosystem remain the same as they have always been. A huge workforce of smart graduates (Korea has one of the highest education rates in the world), plus a high youth unemployment and underemployment rate have driven more and more potential founders down the startup path rather than holding out for professional positions that may never materialize.

What has changed is venture capital funding. It wasn’t so long ago that Korea struggled to get any funding for its startups. Years ago, the government initiated a program to underwrite the creation of venture capital firms focused on the country’s entrepreneurs, simply because there was just no capital to get a startup underway (it was not uncommon among some deals I heard of at the time for a $100k seed check to buy almost a majority of a startup’s equity).

Now, Korea has become a startup target for many international funds, including Goldman Sachs and Sequoia. It has also been at the center of many of the developments of blockchain in recent years, with the massive funding boom and crash that market sustained. Altogether, the increased funding has led to a number of unicorn startups — a total of seven according to the The Crunchbase Unicorn Leaderboard.

And the country is just getting started – with a bunch of new startups looking poised to driven toward huge outcomes in the coming years.

Thus, there continues to be a unique opportunity for venture investors who are willing to cross the barriers here and engage. That said, there are challenges to overcome to make the most of the country’s past and future success.

Perhaps the hardest problem is simply getting insight on what is happening locally. While China attracts large contingents of foreign correspondents who cover everything from national security to the country’s startups and economy, Korea’s foreign media coverage basically entails coverage of the funny guy to the North and the occasional odd cultural note. Dedicated startup journalists do exist, but they are unfortunately few and far between and vastly under-resourced compared to the scale of the ecosystem.

Plus, similar to New York City, there are also just a number of different ecosystems that broadly don’t interact with each other. For Korea, it has startups that target the domestic market (which makes up the bulk of its existing unicorns), plus leading companies in industries as diverse as semiconductors, gaming, and music/entertainment. My experience is that these different verticals exist separately from each other not just socially, but also geographically as well, making it hard to combine talent and insights across different industries.

Yet ultimately, as valuations soar in the Valley and other prominent tech hubs, it is the next tier of startup cities that might well offer the best return profiles. For the early investors in Baemin, this was a week to celebrate, perhaps with some fried chicken delivery.

How to avoid the startup trap of the parasitic consultant

Early-stage startups have a massive problem: there are way, way too many things to do, and never enough people to do them. Whether it’s growth marketing, or product design, or software engineering or a myriad list of other tasks, something somewhere isn’t going to get done by the founding team and early employees.

And so it is only natural to seek outside help to assist with those tasks, part-timers (and sometimes full-timers) who can add their talent and experience to a company’s early success.

There’s just one problem: consultants are horrifyingly misaligned with startups, as a recent discussion about how to be a great consultant attests. And so if you are going to work with consultants as a founder, there are massive traps you must avoid in order to make effective use of these people.

I’m a big fan of The Browser, an email newsletter by Robert Cottrell which curates a list of five articles a day across the web that Cottrell thinks are the best of the day. One of his selections in a recent issue was part two of a four part series on being a great consultant written by Tom Critchlow, who is adapting lessons from the theater world into the work of being a consultant.