Adults in the Room
SBF gambled away billions of dollars of customer deposits. I'm amazed that elite VC funds allowed a 20-something MIT "Wunderkind" to operate without a board, without adults in the room.
My college roommate, Zach, founded his first startup right out of college. In 2002-2005, the idea was ahead of its time. They made a device you put into golf clubs so they could track the exact path of a swing. If you ever watch people playing indoor golf on a virtual course projected on the wall, you've seen this tech in action.
The idea was great but a hard sell 20 years ago. The devices were expensive, the accuracy wasn't perfect, and not everyone loved the idea (yet). This was years before the release of the iPhone.
Zach and his co-founder were also "young," which made pitching investors, businesses, and clubhouses challenging. They could feel the objections. "They are just kids. What do they know about running a business? How can we trust this will work?"
For sure, this was ageist. Still, it was a barrier to overcome.
Hiring Token Adults
One bit of advice Zach received was to hire a more seasoned executive on the team. Ideally, (and I wish I was joking) someone with some "graying hairs" with a solid 20+ years in the industry. This person's fundamental value proposition was attending meetings as the token adult.
Isn't that ridiculous?
As a 5x startup founder and Techstars mentor, I talk to many first-time founders. Unfortunately, most struggle with balancing optimism (which you need to be to start a startup) with delusion (which can lead to SBF-like disasters).
Zach's adult-in-the-room addressed a fundamental concern of their audience. "Well, this older guy looked at the business model and didn't quit. So it must be somewhat legit. What could go wrong?"
What Could Go Wrong?
Turns out a lot.
When Terra collapsed (spectacularly) in under 24 hours in 2022, many were baffled. But Mike Novogratz is a serious VC and went as far as getting a tattoo on his fucking arm. How could he not have done due diligence?!
But it wasn't just Luna.
FTX. Celcius. 3AC. BlockFi. Terra.
All lost billions of dollars and had adults in the room as investors or operators.
The point is that having adults in the room won't guarantee success or integrity. Fraud can be perpetuated by anyone at any age. Flops can happen even for people with an excellent track record.
And someone in their 40s or 50s can become so blinded by their greed or ego that it can hijack their ability to think clearly. They can also create a reality distortion bubble around them, duping otherwise intelligent people into going along for the ride (before going over a cliff). Hell, SBF took out Tom Brady and Shark Tank’s Mr. Wonderful. Anyone can be pulled under if they aren’t doing proper due diligence.
So, sure, a seasoned pro can bring a lot to the table and help shore up trust in a way that a first-timer cannot. However, silver hair isn't a silver bullet. While age may and experience can be used as proxy for intelligence, experience, or probability of success, it can also blow up in your face if you trust it too much.