This just in: Twitter Co-Founder Ev Williams Believes All Startup Advice Is Wrong (Yet it is valuable anyway).

“Why is it wrong?…Deep down we know we can’t possibly apply everything we read and often even if we could, we shouldn’t.”

Ditto to investors. We often hear that investors look for newcos focused on big markets (fair enough – everyone wants a unicorn/substantial ROI); were founded by successful serial entrepreneurs (again, fair enough: less handholding; potentially lower risk/known entity). Still, again, they can’t possibly apply everything they hear or read and even if they could, they shouldn’t. Which may contribute to why the VC model is broken.

We do know that the bar for seed rounds has been raised as we recently reported, and if you follow the Strictly VC newsletter, you’ve noticed that when reporting recent fundings, there are both Massive Fundings and Big-But-Not-Crazy-Big Fundings designations, Massive usually being in the neighborhood of at least $100M and more often than not, above $300M. Nice neighborhood, but are these companies the real deal or just so many more not-well-constructed McMansions?

CBInsights did a recent analysis, querying whether or not Raising More VC Lead To Bigger Outcomes. The received wisdom in Silicon Valley is that raising more capital in larger and larger rounds is an essential part of the formula for success. But is this idea supported in the data?

Survey says: not so much.

Key takeaways:

• After IPO, the most highly funded startups tend to underperform those who raised less.
• In fact, the companies that raised the most almost uniformly struggled to create long-term growth.
• Plenty of companies that raised <$100M have seen top exits.
• The biggest exits, backed by the deepest-pocketed investors, are returning less and less as foie gras’ing becomes more common — and more extreme.

Which leads us to Quibi, which, as Om Malik (Don’t Be Surprised that Quibi Failed) very accurately described it, was “a mobile-first video startup primarily known for being an extremely well-funded pet project of woefully out-of-touch co-founders Jeffrey Katzenberg (a former Walt Disney executive and co-founder of Dreamworks) and Meg Whitman (the former CEO of eBay and HP).” The value proposition: the service signed up many famous people and content creators to make shows that last between 5 and 10 minutes – often episodic – that would be doled out, rather than allowing for binge watching. While the mobile-based short takes might have been good for people on the go who had time to fill, their launch during the Wuhan flu and the lockdowns was bad timing: people had nowhere to go! Despite the fact that the company had raised nearly $2B, the other fact is that they were addressing a problem that no one had.

In a sit-down with Upfront Ventures founder Mark Suster at the Upfront Summit prior to Quibi’s launch, the investor covered Why Meg Whitman is Betting on Quibi as“The Da Vinci Code of Content” and note to self: Whitman referred to Quibi as a technology-first platform, pointing out that she was the technology partner of the pair. Lest we forget, it was Whitman who was at the helm of eBay when the company acquired Skype, which TechRadar (et al) called the worst ever tech deal.

In all fairness and here’s a red flag: no true white shoe Silicon Valley VCs invested in the service.

We often hear that one of the strongest components that lead investors to write the checks is the team. They do consider reputation, but they really should also consider whether or not it’s a good one.

We have no hard and fast solution to solving the ‘VC model is broken’ conundrum, but here are some things to consider, and heads up to both investors and founders: David Hite, Managing Partner of B37 Ventures, noted in an interview with the National Venture Capital Association that his firm only invests once they’ve “helped a startup win a big customer.” Nothing like basing the decision on a solid proof of concept and always good to have investors who are also ‘subject matter experts’ backing you.

Investor Om Malik’s litmus test seems to be to ask the question, “What makes services/apps work and get our attention? They either bring happiness, utility, or both. Value, not valuations is what makes a business work…Put all the things that are part of your daily routine into these two buckets — happiness and utility — and you will see it for yourself that in the end, those two are the driving forces behind a successful app, service, device or media property.”

Hiring talent scouts is also an element that’s missing from many funds – compulsive networkers who see new technologies all the time, some of which might not cross the desks of investors. Oh, and pay them, or give them a piece of what they may bring into the fund. Everyone’s time is worth something.

And investors do have a tendency to follow trends and missing the white spaces.

We are all well aware at this point that investors have their check list: ‘team,’ ‘traction’ and ‘subject matter expertise’ are important touch points for them, or so we’ve heard ad nauseam – and worthy of note is the fact that, speaking of traction, Quibi did have some 500k subscribers in the short time that they were available to the public. Amazon struggled for years (six) before they hit profitability. With his Hollywood background, was Katzenberg too focused on the Hollywood-driven first-weekend-box-office-receipts model? If so, so much for subject matter expertise being as important a measure as we’ve been led to believe rather than that ‘fire in the belly,’ which may also explain the CBInsights report on startups that are truly successful verses over-funded ones that are not.

As important as knowing the space is having the ability to successfully address the problem/need, to pivot, if necessary, and to have the fortitude to see it through in the long run – and more often than not, it is a long run.

We always enjoy quoting investor Jeanne Sullivan on the topic of subject matter experts, who once pointed out that the Wright Brothers didn’t have a pilot’s license. Good to have the expertise to address the pain point but also necessary to have the resilience to go through the pains of building a company or let’s face it: as we’ve witnessed in the case of Quibi, you’re never going to really get that thing off the ground. And as we’ve seen time and again, speaking of the VC model being broken, no matter how much big money you throw at an inherently flawed model, you’re simply not going to that Hollywood ending. Onward and forward.