They Built the Team. They Raised the Money. Now What?

Every era of startups brings with it new canonical challenges.

The 2010s was a period dominated by Enterprise software, and the main challenge was finding a big enough market and broad enough surface area to build a large company that could get public. By far, most companies with PMF never made it that far.

Today, we are in an amorphous period, which I wrote about in “After Certainty.” The market’s response to this has been to invest in teams, rather than ideas. This was a rational adaptation: Ideas change, teams remain the same. Further, young teams fresh out of college — or dropouts — seem to be having the most success right now in adapting to a changing world.

But every zig brings with it a zag. Today that zag is that there are many wonderful teams out there chasing big visions — but they don’t actually know how to get there. “I know what the destination is,” one founder told me, “but I’m trying to figure out the steps along the way.” This is an inversion of last decade’s problem, which is that people knew the immediate steps in front of them — build and sell software — but finding a true promised land with milk and honey was something that required hand-waving, and rarely materialized.

In my conversations with founders, this new conundrum has become front and center. In order to recruit an amazing team, you need to promise them the world. Often, this requires a big undefined vision. Most startup employees now have never worked in a startup, so they don’t ask the question of — well, how are we going to get there? In fact, they think that this is simply how startups work, you set a big future vision, and then you grope in the darkness for a while figuring out how to manifest that future. Investors aren’t asking this question either, they are just happy to be along for the ride, viewing these investments as valuable call options.

It’s not to say this can’t work — I’d like to believe it can — and certainly it has resulted in many a successful acqui-hire, but it’s been interesting to me to encounter so many founders at this stage of the journey — team assembled, capital raised, hoping no one will ask them the question, “Now what?” or “What are you actually having all these employees do every day?”

Often, when I encounter these founders, I want to give them thoughtful advice on how to navigate the path ahead. Indeed, to their credit, assembling a strong team and capital is extremely valuable, and if only they could find the steps in front of them, what a wonderful company they’d have in their hands. But I think this is very, very hard. While some things change in each startup era, the Paul Graham canon seems to rear its head every time. PMF is black magic, and more people does not help you get there. Also, you can’t hack the test to get PMF, you actually have to do it. This last PG principle feels more relevant than ever today.

As a student of markets, I understand how we got here. The combination of a) Talent being attracted to big problems and repelled by details (which are always messy), b) The venture capital ecosystem shifting more and more to a call option mentality vs. an equity mentality, c) Recent successful companies having navigated from amorphous goal to real business (providing a wellspring of hope), d) A thriving seed ecosystem that trains founders to play this game (because it is high EV on paper mark ups), and e) Smart founders distilling this knowledge and using it to guide their company building efforts, has resulted in this new playbook taking shape.

Even as I understand the root cause of this issue, I empathize with the founders actually in the trenches, now on their own trying to figure out the next play. There are very few people they can turn to, because admitting the lack of a plan will demoralize the team and investors they’ve brought on board already. Going forward, I expect we will see more, not fewer, companies of this shape in the market, because so much of the company creation in the last 12-24 months has followed this formula. This is a clear sign of froth, too.

Notably, many of the most valuable startups of this AI era have not been nearly this amorphous. Clay solves very concrete problems in sales, as does Harvey in law. Cursor saw tremendous PMF in its coding product before headcount took off. Scale and Mercor both faced critiques as “mere data labeling companies” and overcame these issues. Even Anthropic was founded on a very clear objective, which was to get to the AI frontier leveraging the very team that had done it before. The one company that followed the open-ended search formula and succeeded was OpenAI.

What makes markets so interesting is not only that they are rational — e.g., you can clearly trace how these new phenomena emerge and why they become popular — but you also never know how they will end. It is possible that the old Paul Graham canon will break down, this new playbook will have more success stories, and suddenly this will be the dominant way to build startups. Only time will tell.

For founders facing this wall of uncertainty, the best way forward is to hearken back to the mission. If you are truly serving some greater purpose in the universe, then the mission itself should provide some mechanism to reduce the big problem into smaller ones that are solvable, and on the critical path to the bigger one. Indeed, this is how Anduril went from border defense towers to multi-product national champion.

There is a big difference between “big vision for the sake of big vision” and “big vision because I cannot live with myself if I don’t solve it.” You can viscerally feel the difference in a founder’s emotional commitment and posture toward their company. For those serving a high purpose, I think the steps do eventually materialize. For those playing the startup game, it rarely does.