I think the author's Simon Cowell example actually disproves his point. If you wanted someone to win American Idol who would choose to do it? Someone who who you have to train to sing well and coach them on the judges preferences? Or would you choose the person who has worked with the judges for years, knows exactly what makes contestants win or lose, and helps to make the decision themselves. I would choose Simon Cowell, not because it would warm my heart to see him win, and make me believe in the Meritocracy of American Idol, but because he would be the best bet. Venture Capital is about making money, not about giving everyone a chance to make their start up happen.
The problem is you're feeding the other candidates (and the audience) the illusion that they have a fighting chance against the insider. This deceit won't be taken kindly after they realize how they were beat out.
This is the equivalent of insider trading among government legislators. It's a very real problem, and there is no realistic solution since it is a systemic flaw of the startup/VC model.
It's quite possible startup culture can't continue working forever, and if this is a growing trend, that eventually too much encroachment by VCs will smother and scare away everyone who isn't an insider.
I don't want someone to win American Idol, I want American Idol to pick the best singer, whether or not said singer is a judge.
As an investor in a venture capital firm, though, you would expect the firm to award funding to the best, not to the insiders.
As a politician interested in fostering a successful startup environment in your district, you would expect the firm to award funding to the best, not to the insiders.
As a fledgling startup yourself, you would expect the firm to award funding to the best, not to the insiders.
As Simon Cowell, you would want to pick yourself. Therein lies the issue. Only Simon Cowell wants Simon Cowell to win over other, more qualified startups.
But the thing is, being an insider is usually a good indication of future success.
If you already have those connections, that means you have a huge leg up on the competition. You can raise more money at better valuations (meaning you can make longer term bets, build a better team), you have access to better talent, and you have access via your network to other executives that can make deals happen.
We are upset because it isn't fair, but that isn't really the point. They want to make a ton of money. Yes, they also want to change the world, but tenacity and people skills (required in the VC word) are huge indicators of executing on whatever vision you have.
