Larry Summers’ Advice to Startup Founders: Raise Early, Raise Often

Former U.S. Secretary of the Treasury Lawrence Summers joined the 2023 Upfront Summit Thursday, and among his insights was some interesting advice for tech founders – an industry, he said, that should be better supported by the government.

Speaking to moderator and Economist senior reporter Alexandra Suich Bass at Upfront Ventures’ annual Upfront Summit, Summers (who served as Treasury secretary under President Bill Clinton) said he thought the FTC and Justice Department under President Joe Biden are “highly misguided” in targeting Big Tech with antitrust actions. Summers instead argued that instead of “constantly overreaching, and therefore stumbling and failing,” the FTC should encourage competition.

“My view is that consumer welfare is exactly the right standard for antitrust, [and] that one should be supporting competition in order to produce the lowest possible prices for consumers, including through the greatest efficiency,” Summers said. For its part, the Biden Administration claims to want the same thing, though Summers’ remarks indicated that he didn’t think over-regulation was the right method to foster competition in the tech industry.

Part of that, Summers added, is fostering startup growth. “Nobody would check into a hotel that they weren't going to be allowed to check out of; and so it seems to me that if you want people to enter startups of various kinds, in a world where 90-plus percent of startup exits are sales and acquisitions, you wouldn't want to shut down that market,” he said.

Adding that, “having new startups seems to me to be central to having the kind of competitive economy that we want to have. So I'm all for competition.”

In addition, Summers said that startups should be aggressively seeking funding, in spite of the overall downturn in venture funding.

There’s been a slight drought in venture capital over the last couple of years, as investors have been even more cautious in the last several years. While VCs have ample cash, they’re a lot slower to deploy it and are favoring smaller, strategic investments over big IPO or SPAC bets, which were once a startup’s ideal path to raising huge rounds. The IPO market remains pretty stagnant, after grinding nearly to a stop by the end of 2022. Of course, there’s exceptions, especially as VCs earmark money to invest in hot-topic startups, like March Capital’s recently announced $650 million fund for artificial intelligence.

Perhaps with that context in mind, Summers advocated for fledgling companies to take any funding offer they get.

“Don’t be greedy,” Summers cautioned. “Raise cash, even if you don’t particularly like the terms, [and] slow the disbursement of cash.”

Stephane Lintner, CEO of San Francisco-based money management startup Jiko, joined the panel and had advice for startup founders that somewhat contrasted with Summers’ encouragement to not dole out funding immediately. “The one thing you should do right now is deploy your cash in high-yielding instruments, treasuries,” Lintner asserted.

When asked about his predictions for the tech industry’s future, Summers noted, “I think it’s not likely to be as spectacular a period as the last 15 years have been, but these are clearly institutions with enormous staying power.”

Summers also briefly tossed in his thoughts on TikTok. When Suich Bass asked if he was long or short on the app, he replied he was bullish on its prospects despite numerous bans. “At the end of the day, the political system will not decide to ban something 100 million Americans love,” the former Chief Economist of the World Bank said.