Guest Post: Founder Opportunity Cost
A key leading indicator of early-stage outperformance
The following post was contributed by Sai Mattapalli, co-founder of vytal.ai, a recent graduate of Thomas Jefferson High School for Science and Technology, and one of our summer scout fund partners.
It’s no secret that in early-stage investing, betting on founders consistently leads to greater returns than betting on ideas. In an effort to source and make quality investments this summer, I’ve put a significant amount of time into learning what makes a founder good vs. great.
One method I’ve found to be consistently reliable is evaluating founder opportunity cost (“FOC”). To put it simply, FOC is a measure of what a founder is sacrificing or putting on the line to pursue their company. Uniquely high FOC serves as a proxy for a founder’s unwavering conviction in the success of their business, a characteristic shared amongst great founders like Doug Bernauer at Also Capital portfolio company, Radiant.
In a Not Boring profile published yesterday, Packy McCormick details how Doug left his decade-long career and senior role at SpaceX to start Radiant, even selling personal SpaceX stock to initially fund the company. It’s just one poignant example, but very little is more indicative of high FOC (and by extension, a high potential investment opportunity) than a founder leaving a lucrative corporate path and/or investing their own money into a business. It’s a lot easier to bet on a founder when it’s clear they’re willing to bet on themselves, which is why I believe overweighting FOC early can help identify winners early on, well before they’re obvious.
