Uncles, Aunties, and How They Could Be the Next Force in Venture Capital

Growing up in Silicon Valley, it seemed like everyone's parents worked at a tech company. From Google to Nvidia, name a big tech company, and I probably grew up with a child of an employee. That means most of these employees have been working at, and more importantly, getting stock in, these companies for decades. Some were early at Google, Nvidia, Tesla, you name it. So much so that a lot of these companies now have brain drain: their senior engineers and managers are retiring because their stock is worth so much.

The most important thing, however, is that most of these employees are Chinese or Indian. They are first-generation Americans who are highly educated (master's and up) and have put down roots in the US. Go to any tech company now and look at their new grads: a large majority of them will be second-generation Chinese or Indian Americans. This is no surprise: their parents put an emphasis on education because that's what "got them out," what allowed them to make it in the US.

So it's two-fold. The people with more money than they know what to do with are these Chinese and Indian parents. That means their kids can afford to do more with their lives. If you had just arrived in America with no money, no network, and no place in it, you would spend a generation building that up. But these kids grew up in suburban America with their parents as a safety net; they no longer need to grind through corporate America striving for middle management. They can afford to take bigger swings.

This doesn't apply only to the US. Go to literally any country with a strong education system (Canada, the UK, and Sweden, to name a few), and the highly educated Chinese and Indian diaspora are absolutely killing it: high-paying jobs in the first generation, bigger risks in the second.

Take Y Combinator, for example. Look at the founders in each batch: many, if not most, are second-generation kids of Chinese and Indian immigrants. They learned the work ethic of the previous generation, but since they grew up in the West, they also have the ingenuity and entrepreneurial spirit their parents couldn't afford.

Where the gap lies is that the first generation has built up all this wealth but, aside from a few exceptions, has yet to build up the sophistication to deploy it in private capital markets. They mainly invest in traditional vehicles such as real estate or public markets (stocks, bonds, etc.). I believe they should instead be investing in their own progeny. This new generation of founders is ambitious and creative, and set up for incredible success.

It is easy to see why. Take the typical YC founders: two guys, both from a top-tier CS school (Stanford or UC Berkeley). They know how to build products and have a huge network to distribute them to. If they build enterprise software (say, legal tech), they can tap their own network of other high-achieving second-gens who are lawyers, or go to their parents and all the uncles and aunties who definitely know lawyers they can sell to.

And we're not even talking about growth-stage startups yet. Many of these new Chinese and Indian founders will go back to their ethnic homelands and build networks there early. Simply speaking native English, let alone holding a prestigious university degree, gives you instant credibility in the East, an unfair advantage compared to local entrepreneurs.

Now the challenge is how to convince the uncles and aunties, who have a lower risk appetite. I can think of ten people off the top of my head who have either founded a high-growth software startup or are building a category-defining company. If you are interested in investing, shoot an email to allenshen2002@gmail.com.