There can be no startup ecosystem without social trust. The US leads the world in innovation, which is due, in large part, to the unrivaled level of trust between founders, funders, employees, and other stakeholders. Innovation is essential, but there can be no real progress without institutions. Consider the amount of trust required in a partnership between investors and entrepreneurs. Social trust drives early-stage venture capital: 🏫 Most VCs can trust that entrepreneurs will be truthful about where they went to school and what they studied while pitching their startups. 🌇 We can take it on faith that they have worked at all the companies where they have claimed prior employment. 🏦 After an investor wires the funds, investors can assume a founder will deposit money in a safe bank account. 💳 Ditto; the founders will spend the funds on projects roughly aligned with their presentation. 📜 We can expect they will hire a team following all relevant laws and not show undue favor to family or unqualified friends. Founders also benefit from high levels of social trust: 💱 Founders can avail themselves of technical frameworks and banking relationships that are transparent, easy to enter and exit, and dependable. ⚖️ Entrepreneurs know that the law will hold them legally blameless if their startup fails (assuming they follow well-understood rules and regulations.) More importantly, founders can also have confidence that if they conduct themselves well, they’ll have the opportunity to raise capital again. 🧮 Entrepreneurs can rest assured that most serious VCs will offer terms and valuations that fall within a typical band for their industry and stage. Stepping back, it’s astonishing how much entrepreneurship is enabled by leaps of faith. For instance, in over 20 years of investing across hundreds of companies, I’ve never had a founder make a material misrepresentation about their background. I’ve never witnessed a case of the founder stealing funds. To be sure, I am the beneficiary of good fortune, but even more so, to operate in an environment where the overwhelming majority of people play by the rules. Of course, VCs/entrepreneurs spend tens of thousands of dollars on legal protections to ensure they’ll be protected if that trust breaks down, but the system functions because it so rarely does. If even a few percent of participants in the ecosystem failed to follow these norms, the system would break down. If players routinely broke the social contract, the need for more legalistic arrangements would increase, and the pace of innovation would slow – dramatically. While we still operate in a largely high-trust society, a noticeable erosion should give us pause. The economic engine that powers the startup ecosystem, the United States economy, and the free world is powerful but delicate. As stakeholders of that system, we need to be thinking about how to preserve it and make it resilient to hostile actors, both foreign and domestic. It’s not enough to think of our job as searching for the next breakthroughs in technology. We must also seek to fill gaps in the framework of social trust, wherever they appear. The methods will vary, but startup community members can’t ignore the necessity to do so. I’m excited to learn if you agree and how we can ensure this ecosystem thrives for decades to come.