99% (schematically) of new businesses should indeed optimize for flexibility.

But, if you judge yourself to have a real shot at the >> $100M exit, then optimize for that path and foreclose the flexibility.

There's a real truth to the idea that you will be putting your all into any business, so if you have one that really can create an entire career's worth of wealth at once for you and your whole team, you should optimize for that.

If on the other hand your business doesn't have a realistic shot at that, stay the hell away from VC. Waste of time and cash is king anyhow.

That's the "truth" convenient for VCs. Even if a startup has a realistic shot at >> $100M exit, it doesn't automatically mean that the founders should go that route. It depends on their risk tolerance and particular circumstances. If a startup could exit at $200M with a much lower risk than them exiting at $600M, some/many founders might prefer the former route. And that still would be "an entire career's worth of wealth at once" for them and the whole team (if the team is small enough), or pretty close to that, or simply just a very very good outcome.

I think the specific numbers you're providing are tricky, because generally, getting to $200 M exit within, say, a decade, involves institutional funding (VC, PE, "growth", whatever).

(As a relatively small non-Valley funder, I would generally also prefer to be an investor in a company that exits at $200 M with a much lower risk than a $600 M exit, given that getting to $600 M might mean another $50-100 M in late-stage, first-money-out, preference overhang capital.)

I think the real question usually has orders of magnitude difference here. Internally-fundable businesses tend to opt for business models like services, consulting, etc., since they can scale without a lot of invested equity. Hence a lot of times you wind up growing a business semi-organically and end up getting a 1-2x revenue multiple for a modest growth, modest gross-margin, consulting type business. Or, if you do get a good SaaS operation going and grow it organcially, you might find yourself faced with the late-arriving roll-up play heavily funded by private equity, who will buy you at a 3-5x in an attempt to consolidate the market and float it at a 6-10x.

And yes, if you as a founder have a 90% shot at $10 M in 10 years, vs. a 9% shot at $100 M or a 0.9% shot at $1 B, most rational founders should and do take the safe road. Stipulated :)

But in my experience and observation, getting over the hurdle of product-market fit and a repeatable go to market strategy is what tends to kill startups. If you get that PMF and GTM working, it often makes sense to fund hypergrowth. If you don't, the company is walking dead anyway.

YC does indeed optimize for power law outcomes, but then again so does every venture investor (or at least, so should every venture investor).