Founders don't know how to employ capital profitably because for any individual startup the best course of action is to return the funds to the shareholder because it's a virtually assured failure.
However, in aggregate the serious performers outweigh the losses from the 99% failure rate.
So given that I am about to give 5 years of my time to something that is most likely a failure I'd like some compensation for my time, just like every VC takes 2% to flush the LPs money down the toilet, and 20% when they return.
Think of how terrible that sounds from an investor's perspective. "I don't know how to employ capital profitably because my best course of action is to return my funds to you because my startup is a virtually assured failure." Would you invest in a startup that just told you that?
If you're going to bother founding a startup, you should have some reason to believe that you are in the 1% that is going to be a success. You might be wrong in that belief, and that's why startup success continues to be fairly rare, but if you don't even have a reason to believe that much you might as well pack up the startup, get a good-paying job, and invest the money you earn.
Being honest and forthright goes a lot further than you think. Startups have risk, outline the risk, and ask for what you want.
You don't need the thousands of investors who want you to work for free, you need one who believes in the business enough to think the CEO is worth being paid. If the CEO isn't worth being paid the startup isn't worth investing in.
However, in aggregate the serious performers outweigh the losses from the 99% failure rate.
So given that I am about to give 5 years of my time to something that is most likely a failure I'd like some compensation for my time, just like every VC takes 2% to flush the LPs money down the toilet, and 20% when they return.