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CNBC’s Jon Fortt sat down with some heavy hitters in Silicon Valley to discuss entrepreneurship, venture capital and scaling start-ups on Wednesday in conjunction with the “Fortt Knox” podcast series.
The panel includes LinkedIn co-founder Reid Hoffman, who is a partner at venture capital firm Greylock and has served on the boards of companies like Mozilla and Microsoft, and Tim O’Reilly, founder and CEO of O’Reilly Media, a pioneer in trends such as open source software and defining “Web 2.0.”
The discussion comes as “unicorn” start-ups are seeing valuations climb well past $1 billion, and technology giants like Facebook and Amazon continue to compete with upstarts across industries, raising questions on how entrepreneurs can best compete.
“You either become a really successful giant, or after a few years, the VCs are done with you,” O’Reilly said.
Trying to compete with the big guys by raising a huge amount of money could unnecessarily dilute founders’ stakes in their companies, O’Reilly said. O’Reilly said that “aggressive bros” playing the hyperscale game tend to get more funding than women of color, for example.
“This is a game, it is a horse race by definition one or two players win, and all of the rest of them lose,” O’Reilly said. “The mythology is you have to raise huge amounts of money in order to get to scale. But it’s also possible for small companies to get to scale.”
Hoffman conceded there are problems with raising money: It could wear away a founder’s financial discipline and push the company past what’s sustainable. But he said that large-scale technology businesses create productivity across the economy, and that should be encouraged.
“If you can raise money at reasonable terms — and that doesn’t necessarily mean nosebleed terms —that capital can help you navigate appropriately,” Hoffman said.”Raise more money than you think you need to be ready for all those things — everything from competition to pivots, to questions of suddenly exploiting opportunities.”
O’Reilly said big technology companies should think about their role in enabling industries to be built on top of their platforms, versus just taking more profits.
Hoffman pointed to autonomous vehicles, which analysts predict could replace many jobs. But that could also create opportunities for new large-scale companies to create other jobs, from adult education to new industrial areas connected by the cars.
Source: Tech CNBC
Watch: LinkedIn co-founder Reid Hoffman and web icon Tim O'Reilly debate the state of start-ups