Startup stagnation

Walk into a coffee shop in NYC, Berlin, or Tokyo, and you will likely see the same minimalist furniture, the same exposed brick, and the same sans-serif menu. This sameness isn't limited to architecture. In movies, the share of blockbusters that are prequels, sequels, or spin-offs has tripled since 2000. In music, the charts are dominated by catalogs of dead or aging artists owned by private equity firms.

Culture is stuck. It has become an oligopoly where fewer players control more of the market, recycling the same intellectual property.

We are seeing the exact same phenomenon in the startup ecosystem.

Venture capital relies on power laws. It needs massive, non-linear outcomes from high-variance bets to work. But the current crop of startups feels decidedly low-variance. We are drowning in consensus incrementalism. AI for legal and AI for customer support. AI notetakers. AI voice agents. Each category pure consensus. Each category funded to the gills.

Venture capital is designed to hunt for black swans. Why are we filling our portfolios with white ones?

I found a potential answer while listening to Derek Thompson’s podcast Plain English over the weekend. If we overlay the theories explaining cultural stagnation onto the tech sector, a unifying theory emerges. We aren't suffering from a lack of creativity. We are suffering from an excess of optimization.

Reputation optimization

One of the most compelling explanations for why culture has stagnated comes from Adam Mastroianni: we value our lives too much.

Data shows a massive decline in deviance across the board. Teenagers drink less, smoke less, and break fewer rules. Adults commit fewer crimes. Even the number of serial killers has collapsed since the 1980s. Mastroianni argues that as life becomes safer and wealthier, the "value of a statistical life" has risen. And when you have more to lose, you take fewer risks.

This applies to careers as much as it applies to wearing seatbelts.

Twenty years ago, founding a company was a deviant act. It was for misfits who couldn't function in a traditional corporate hierarchy. Today, entrepreneurship is a high-status career path. It is the logical next step after Stanford or ETH and a stint at McKinsey.

The modern founder has a reputation to preserve. Building something truly weird, something illegible that might fail embarrassingly, threatens that asset. A "respectable failure," like a legal AI startup (an obviously good idea!) that gets acqui-hired, preserves optionality. You can still get a job in Big Tech or one of the AI labs afterward.

The rebel has professionalized. But you cannot professionalize deviance. When you remove the risk of social and reputational death, you remove the mechanism that produces outliers.

The curse of feedback

In the 1990s, movie studios didn't have perfect data on what audiences wanted globally. They took bets. Today, technology allows for much tighter feedback loops, and that has changed what we create. We know exactly what worked yesterday, so we make more of it today.

This creates a "competence trap." In science, despite more researchers than ever, experts rate new discoveries as less impressive than older ones. Scientists, overwhelmed by the glut of publications, cluster around safe, established subjects.

Startups are stuck in the same loop. For a decade, ZIRP made money free. This didn't create weirdness; it created noise. To filter that noise, investors retreated to pattern matching. So we codified the act of starting a company. The Lean Startup. YC Startup School. SaaStr and SaaStock. Whether you’re building a marketplace a DevOps tool or enterprise SaaS, we had benchmarks for every stage of growth. We knew exactly what a Series A company should look like.

Now that money is expensive, the pressure to show immediate, legible progress is even higher. Founders are smart; they reverse-engineer the metrics. They build companies designed to get funded, not companies designed to exist. They optimize for probability of success rather than magnitude of success. And investors are just as much to blame. Why do you think founders are fudging revenue growth metrics, annualizing mere weeks of sales data to insane “ARR” numbers? They’re responding to what investors say they want.

The cover band economy

In music, copyright laws and streaming platforms have made the past as accessible as the present. Investors buy rights to old hits because they are safe assets. It makes more financial sense to produce a biopic about Elvis or sample an old hit than to break a new artist.

The tech equivalent is the “X for Y” startup. This isn’t a new phenomenon. We all remember when “Uber for X” startups were a dime a dozen. Now it’s “Cursor for X.” Or the “AI rollup.” Or the “full stack AI-powered services business.” So many of these startups feel like cover bands, playing a slightly different version of a song we all know, hoping to ride the wave and fundraise quickly based on the legibility of a theme we’ve all decided is “smart.”

This environment kills "cults." Mastroianni notes that cults peaked in the 1970s and vanished after 2000. As Peter Thiel wrote in Zero to One, a great startup is effectively a cult: a small group of people bound by a secret or a belief the rest of the world rejects. But secrets are hard to keep in a world of total information transparency. As soon as an idea shows traction, it is cloned. This has become even more true as the startup world has gone mainstream and as the cost of code has gone to zero. Anything that is seen to work is copied endlessly, mined for capital and influence. The marginally weird doesn’t stay weird for long.

A return to weird

A society that minimizes risk is a pleasant place to live. It is safer and cleaner. We are less likely to be murdered or join a dangerous cult. All good things!

But a startup ecosystem that minimizes risk is a disaster.

The market is efficient at pricing known quantities, but it is inefficient at pricing weirdness. That is the reason venture has historically worked. By optimizing for reputation and consensus, we are filling portfolios with ideas that look smart, but won’t change the world.

There are signs the pendulum is swinging back. It’s a promising sign that a solid portion of that latest YC class are companies that previously would be considered “frontier” tech. But the real outliers are likely operating even further out. And if our dealflow is at all representative, we are seeing a resurgence of super technical, deeply weird companies with maverick founders innovating on the edges. At Angular, my partner Gil has started calling this weirdtech: companies that don't fit existing categories and that operate in markets others avoid either because they’re boring or hard or both. These are exactly the areas we unabashedly love.

The advantage of an overcrowded consensus is simple: the field is wide open for things that are actually different. As consensus ideas soak up attention and capital, the founders building in weird markets have zero competition. They have time to be illegible, to iterate without the spotlight and to build credible monopolies. The cover bands will keep playing the hits. But somewhere, quietly, the new music is being written.