In the biblical story of David & Goliath, two armies are at a complete standstill - each occupies a defensible hill on either side of a valley.

Goliath is a hardened soldier from the Philistine army, and stands taller than any other man. The scripture puts him at ‘six cubits and a span’ which translates to 9-foot-9.

The tallest player in the NBA - Victor Wembanyama - is only 7-foot-5, meaning Goliath would’ve had over 2 feet on that bean stalk.

For 40 days, Goliath stands in the valley and challenges the opposing army (the Israelites) to have their best warrior fight him in a winner-take-all proposition.

This goes on for 40 days because the Israelites are terrified of Goliath and no one is willing to fight him.

That is, until someone passed the smelling salts to an Israelite named David.

As the story goes, David approaches Goliath with nothing more than a slingshot and 5 smooth rocks he fished out of a nearby river. It turns out he would only need one.

The first rock strikes Goliath in the forehead, and the future dunk champion falls face-first into the ground. David takes Goliath’s own sword to finish the job, and the Philistines are defeated.

This story rose to prominence because of how unlikely the outcome was. Goliath is taking an easy victory 999 times out of 1,000 in that scenario. But the parable’s point is to show that a smaller opponent can come out on top.

If you zoom out, startup investing today can feel a little bit like David vs. Goliath.

Retail investors are David - smaller check sizes, less access, and fewer connections. And Venture Capitalist firms are Goliath - armed with massive funds, deep networks, recruiting power, institutional credibility, and the ability to keep writing checks long after retail investors are tapped out.

Now I don’t love the framing of VC and Retail Investors as enemies, because they aren’t. But we play in the same sandbox and sometimes the VCs take all my toys.

There are two startups in my own portfolio that really drove this point home for me.

The first is Clockwork Nails - they had built a robotic nail technician that got you looking glamorous in 10 minutes. I invested in the company because I believed the thesis made sense. Automated beauty services are a compelling idea - lower labor costs, scalable locations, and a consumer experience that feels novel enough to attract attention (full investment thesis can be found here).

But only a few months after I invested, one of Clockwork’s primary competitors raised $38 million from VCs.

That changes the game.

Suddenly, one company has the resources to hire faster, market harder, survive mistakes longer, and potentially outlast everyone else in the category.

Without getting into it, Clockwork is no longer operating today, while the better-funded competitor is still alive and fighting.

Now, that doesn’t necessarily mean Clockwork would have succeeded if both companies had equal funding. Maybe the market was never going to work. Maybe execution would’ve been an issue regardless.

But it is frustrating when your investment thesis can be directionally correct while the outcome still goes against you because another player in the space simply had a much larger war chest.

The second example is more recent and still unfolding.

A few months ago, I invested in Skinbit, and I took a larger position than I normally do relative to my average check size. ($3k vs $1.7k). SkinBit is building a full-body scanner that detects skin cancer with over 90% accuracy.

Then, just this past week, one of Skinbit’s competitors started generating a ton of buzz after announcing an $18 million funding round.

Now, this cuts both ways.

On one hand, VC money flowing into a space is validation. Venture capital firms are effectively signaling that they believe the market opportunity is real and large enough to matter. That’s encouraging as an investor.

But on the other hand, capital creates advantages.

More money means more time. More experimentation. More hiring. More distribution. More opportunities to survive long enough to figure things out. And in startups, survival alone can sometimes be the difference between winning and disappearing.

That’s why startup investing can be emotionally confusing at times. You can feel more confident in your thesis after seeing competitors raise large rounds, while simultaneously realizing your investment just became riskier.

So what does all of this actually mean for retail startup investors?

First, it reinforces something that is already true: startup investing is extremely risky. The odds of any single startup investment becoming a massive winner are low.

That’s why diversification matters so much.

You are not trying to predict the future with perfect accuracy every single time. You are trying to build a portfolio where a small number of big winners can outweigh the inevitable losses.

Next, I want to make it clear that more funding does not automatically crown a winner. Look no further than equity crowdfunding platforms - Republic raised $200M+ but in my opinion is considerably behind StartEngine and Wefunder, both of which raised less than half that amount.

Lastly, there are ways to slightly de-risk the equation. One of the more interesting trends in recent years is companies allowing retail investors to participate alongside venture capital firms.

Both Replit and Substack are examples of companies that raised venture capital while still preserving allocations for retail investors.

That dynamic can create a much more attractive setup.

Retail investors get exposure to the upside, while the startup itself still has access to the institutional capital needed to compete aggressively in its market. In a way, you’re getting to stand beside Goliath instead of directly across from him.

And ultimately, that’s probably the healthiest way to think about the relationship between retail investors and venture capitalists.

We aren’t enemies.

Retail investors and VCs exist in the same ecosystem, and both groups influence each other more than people realize. Venture firms help validate markets, fund growth, and create the infrastructure that allows startups to scale. Retail investors help expand access, build communities around companies, and increasingly provide early momentum that institutions can’t ignore.

David and Goliath may stand on opposite sides of the valley, but in startup investing, they’re often fighting the same battle - just with very different weapons.

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