Why Can't Capital Reach Promising Founders? Jeff Hoffman on Building the Ecosystem That Absorbs It
The deployment gap is also an ecosystem problem, according to Jeff Hoffman, co-founder of Priceline and chairman of the Global Entrepreneurship Network. Capital cannot flow toward founders who have not been equipped to absorb it. Hoffman sees three gaps: founder education, design for scale and connectivity. Closing them builds the conditions under which founders can receive, deploy and return capital.
Key takeaways
- Jeff Hoffman, co-founder of Priceline and chairman of the Global Entrepreneurship Network, argues that the gap between proven ventures and institutional capital is mainly a founder education, design-for-scale and connectivity problem, not a capital availability problem.
- The Global Entrepreneurship Network, which Hoffman chairs, operates in 190 countries.
- Portfolio companies of The Unreasonable Group, whose founding board includes Hoffman, have raised more than $6 billion and impacted more than 720 million lives.
- Coachability is the most reliable leading indicator Hoffman sees in founders who scale.
- There are thousands of "how to pitch" programs, but almost none that teach founders what investors want and why they are in the room.
- Investors and founders who agree on January 1st what a good and a bad year look like avoid the year-end mismatch.
- A founder should take institutional capital when competition is about to enter the market and the cost of not moving is greater than the cost of dilution.
"Coachability. The founders who succeed are genuinely thirsty for knowledge they don't yet have."
Jeff Hoffman, Co-Founder, Priceline, and Chairman, Global Entrepreneurship Network, RootsToFoods Capital Series, Episode 5
The founder's side of the deployment gap
Wave 1 of the Capital Series traced the deployment gap from four angles: conditions, instruments, advisor relationships and institutional architecture. Hoffman adds the entrepreneur's view. Founders who have never been taught how investors think cannot close the gap. Ecosystems where the players do not know each other cannot absorb capital at scale. And companies that did not design for scale from day one will not reach the middle, however much capital becomes available. Hoffman and host Ovidiu Bujorean worked together 12 years ago at the GIST Initiative in Jakarta, where Tiket.com was among the companies in the room. The founders were always there, Bujorean notes; the question is whether the ecosystem found them.
What an ecosystem needs before capital can scale
Hoffman names three things an entrepreneurship ecosystem needs before it can absorb capital at scale. The first is good connectivity, meaning all the players actually know each other. The second is a shared understanding of market opportunities. The third is structured communication between founders and investors, so no one is surprised at the end of the year. His practical tool for the third is the January 1st alignment practice: investor and founder agree before the year begins on what a good year and a bad year look like, and which metrics both sides accept.
What is working
Emerging-market ecosystems are maturing
Accelerators, co-working spaces and returning diaspora founders are all growing. Post-Covid global connectivity has spread resources and best practices faster than any deliberate program could have. Countries like Sri Lanka are producing founders that investors in New York or London would never think to look for, and should.
A generational shift in founder motivation
Millennial, Gen Z and Gen Alpha founders are building with impact first. They are better connected and more globally aware, and they ask not only what they can build but what they can build that makes things better. This talent pipeline already exists.
The January 1st alignment practice
Investor and founder set shared benchmarks before the year begins. That single practice removes the December mismatch and puts the relationship on shared ground from day one.
Investors who leave the office
The investors getting this right sit with founders in their own environment and visit the markets. They come to understand founders in a way no pitch deck can convey, and they see differentiated deal flow as a result.
What is not working
Founders without scale education
Most founders were never taught how to scale. Many can start a business on their own, but scaling means learning from people who have done it, and in most markets that knowledge is hard to reach. Companies that never ask "would this work elsewhere?" do not design for scale, and by the time they think about it, it is too late to build it in properly.
The missing class on understanding investors
Thousands of programs teach founders how to pitch. Almost none teach what investors want, why they are in the room and what makes them want to invest. Founders pitch, the phone never rings, and they have no idea why. Hoffman puts the onus for closing that gap on the founder.
Programs that extract without building
Initiatives that take value from an ecosystem without transferring knowledge to the founder build nothing that lasts. The goal is a founder who can do it without the program. A program that cannot make itself unnecessary has built a dependency, not an ecosystem.
Founder-centric pitch decks
If the whole pitch rests on the founder's personal ability, investors should worry. No company has scaled without leaders willing to let go. The question to ask is how the founder is building a team that can run parts of the business without them.
Frequently asked questions
Data points
| Figure | What it means | Source |
|---|---|---|
| 190 | Countries in which the Global Entrepreneurship Network, chaired by Hoffman, operates. | Global Entrepreneurship Network, cited by Jeff Hoffman, RootsToFoods Capital Series, Episode 5 |
| $6B+ / 720M+ | Capital raised by portfolio companies of The Unreasonable Group, whose founding board includes Hoffman; lives those companies have impacted worldwide. | The Unreasonable Group, cited Episode 5 |
| 12 years | Time since Hoffman and host Ovidiu Bujorean worked together at the GIST Initiative in Jakarta in 2014. | Ovidiu Bujorean, Episode 5 |
Rapid insights: Jeff Hoffman's verbatim closing answers
An entrepreneur is genuinely ready for institutional capital when…
"Competition is about to move into their market and they will miss the open window if they don't move fast. That's when you take capital, when the cost of not moving is greater than the cost of dilution."
The most exciting thing happening in emerging-market entrepreneurship that most investors are missing is…
"That entrepreneurs all over the world are sharing best practices with each other. They're accelerating to the level of the best entrepreneurs far faster than anyone expected. Someone in Sri Lanka can be as strong as someone from Stanford or Silicon Valley right now."
The investors who are getting this right do this one thing differently…
"They leave their office. They actually visit these markets and sit with founders in their environment, so they understand them at a much deeper level than any pitch deck can convey."
The most powerful source of competitive advantage that capital providers consistently undervalue is…
"Strategic partnerships, specifically, whether the founder has aligned with partners who can accelerate their entry into the market. Most capital providers evaluate the product and the team. Very few ask: who do you have around you?"
An entrepreneurship ecosystem is ready to absorb capital at scale when it has these three things…
"Good connectivity: all the players in the ecosystem actually know each other. A shared understanding of market opportunities. And structured communication between founders and investors, so no one is surprised at the end of the year."
The experiment I most want to see someone run in the next 24 months is…
"Gather founders from across different geographies, put them on one team, and see if one plus one equals five. I want to see what happens when you break the bubble and let the best entrepreneurs in the world learn from each other directly."
Practical implications for capital allocators
For a development finance institution, impact investor or institutional allocator looking at emerging markets, Hoffman's argument is that the founders you are not funding may be failing your screening because no one has shown them what it looks for, not because they are not ready. Coachability is the most reliable leading indicator he sees in founders who scale. The investors who see the best exits back coachable founders early, invest in their education alongside their growth, and put alignment practices in place that prevent year-end surprises. The barrier is the gap in understanding between the two sides of the table, and the investor who helps close it wins the deal.
About the practitioner and the host
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