In 2025, Following the Money Doesn’t Work in Startups Anymore
Sam Lessin
Context:
Let’s be real: 2025 is shaping up to be the year when “understanding incentives” can’t just be hand-waved away. For a long time, money was the cleanest, simplest API for human behavior. You want to know what someone’s going to do? Just see where the dollars flow. The beauty of capitalism—at least the American flavor—was that everyone’s money was as green as everyone else’s. No discrimination, no secret handshakes, no gatekeeping: Benjamins be Benjamins.
But here’s the rub: this system is starting to break down. And it’s not just a vibe shift; I see it every day in our investing practice. The tidy assumption that “everyone wants money, more or less the same way” is fraying. Why? Three big reasons:
Inequality:
Money is money, until it isn’t. When folks have 100x or 1000x more than their neighbor, the “value” of a dollar warps. If you’re sitting on a mountain of cash, the next dollar doesn’t mean what it means to someone scraping by. Incentives start to fragment. People aren’t optimizing for money in the same way, and that old open API gets buggy.The Re-rise of Social Capital (and its Weird API):
Social capital predates financial capital. For a hot minute (think: industrial age), money was king because it bought you washing machines, cars, houses—stuff. But now, with the internet, social capital is back and more tradable than ever (hey, I’ve been ranting about this since my 2009 TEDx talk). Social capital is subtle, less obvious, and way less open as an API. But it’s real, and it’s guiding incentives in ways that are harder to model.Economic Randomness:
Covid, GME, Bitcoin, meme stocks—these wild swings have made people skittish about long-term building. Instead, everyone’s angling for the next power-law “serve.” The difference between $100 and $110 is meaningless compared to $100 and $10,000. The incentive structure is now about being in position for the next big swing, not slow, steady optimization.
Market Signal:
The upshot? Incentives are getting complicated again. The Econ 101 model—where money is the incentive and you can predict behavior by following the dollars—was always a simplification, but it’s now borderline useless. I feel this every day in our seed practice: Why is this founder doing this? Why will customers actually care? What do people really want? We used to gloss over these questions because the answers were “obvious.” Not anymore.
Takeaways:
We can’t just assume financial incentives are the whole story.
Social capital is a real, powerful, but less legible motivator.
Founders, customers, and users are optimizing for a much more complex set of rewards.
As investors (and operators), we need to get way more precise about mapping motivations, otherwise, we’re flying blind.