From my European perspective, VC capital increases social mobility for the "engineering class" and the builders of society. Those who have talent but no access to capital. The alternative is, that there is no VC capital and only people who are already wealthy are allowed to undertake entrepreneurial ventures. Is that somehow better?

So I think VC firms reduce wealth inequality over all.

A lot of comments focus on examining who gets their startups funded, so looking at founders or maybe the lucky few early staff who get super rich from an IPO.

I’m thinking about the effect on smoothing the other end of the wealth curve, pulling people out of poverty or near-poverty into the middle class and upper middle class.

I’m a complete nobody, didn’t go to a notable school, have zero family connections, and I’ve been grazing at the VC trough by working for startups the majority of my career. Without a startup ecosystem, I would probably be hanging Wi-Fi access points or building PCs at Best Buy. There are thousands like me.

I think without the VC idea, a few rich people would still start new companies, but they’d be less fit due to so much less competition. Neat prototypes of ideas like we see all the time on HN wouldn’t usually be able to get big enough to threaten the incumbents unless they were lucky enough to be dreamed up by a nepo baby.

Well, let's figure out such an experiment.

Compare areas with VC funding and areas without VC funding. The bigger the barrier, the better the data. I think it doesn't do to compare American cities as the barrier is so low. It would probably have to be culturally and economically similar countries, one with lots of VC funding, another without.

I would count the number of unicorns. Do unicorns remove or add inequality? I don't know, but whatever it is, it's the multiplier. Unicorns tend to pay in the top 5-20% of salaries for engineers, and still the top 50% or so for ops and gig workers. There's also a lot of businesses created to handle infra, whether it's logistics or software.

Gini data seems to be highly lacking. Ideally, you'd measure around the VC-sponsored areas and compare it to non-VC covered areas. But this is also difficult because companies like Stripe affect things far beyond their HQ. That said, country Gini data is often missing, and city data even rarer.

Wealth inequality is not an important thing to worry about by itself. The Gini coefficient undergoes a U-shape growth curve in economies as they move from under-developed, to developing, to developed. A better thing to worry about is wage growth and wealth growth among the bottom 50% of the population. Correlating that metric to the Gini coefficient seems like an exercise for an ideologue not a rigorous thinker.

Speaking to your point about VCs. They represent a minuscule amount of capital investment in the US economy. Of course, on this website, they predominate thought and discussion. However, the simple fact is that VC money is a rounding error in overall capital investment.

VCs more often than not just pick who they want to run a company in some vertical. So like, an AI company for lawyers, they just go find some Harvard guy and fund him. It increases wealth inequality, bc they choose who to write the check to. Hard charging entrepreneurs from underdog backgrounds do get funded, but its way harder for them, many hurdles to clear.

Only inadequate taxation rules and state failure to enforce such rules (corruption) contribute to wealth inequality.

As much as possible, right? The whole point is to increase the wealth of their investors...

It is equally important to learn how much VC firms contribute to improving quality of life, creating jobs etc.

It's a lot. Think about it this way with taxis. That was an economy that prior to ride-sharing stayed entirely within the local economy. Now there is a giant funnel the takes most of that money and funnels it to Silicon Valley and investors. That money exits the local economy for the most part now. And take this and apply it to everything tech.

How do you mean?

The moment the Soviet Union crashed, capitalists had no reason to sit on the table and negotiate salary increases, welfare, etc. That's what effectively drove inequality up.

The biggest problem with tech companies and wealth inequality is tax evasion. Big Tech, Big Pharma, Big-anything in the west pays no taxes.

Assuming that (a) taxation is progressive and (b) everyone pays their share, VCs are a net positive because the _move_ money from those who have it to those who don't, giving them chance. Even if the startup fails, the overall result has a net positive effect on the economy and society on multiple levels.