Startup Insanity - Relearning some painful lessons
At times, it seems that nobody learned from the dot-com crash of the early aughts. Startups and VC's are in for a funding winter me thinks, and that those who win will have concrete paths to revenue
I will admit that I am not a “startup guy”, and that while I understand those who roll the bones hoping that they hit the big payoff, the truth is that most of the people I know who have lived the startup life over the long term fail to get any major payout.
But that gambler’s ethos is there, often masked as entrepreneurial spirit. Yet, reality regularly intrudes, and metes out some painful lessons. You can’t swing a dead cat in Silicon Valley without hitting someone who is being affected by, or terrified about the coming startup and venture funding winter.
Case in point, in today’s New York Times, there is an article about reality settling in on the startup scene and while reading it, I can’t help but shake my head. VC’s telling founders that it is OK to have an $8B company as a goal, instead of $100B. Hell, one of the index companies they discuss is a startup called “Party Round” an expression for a late funding round, when you are a unicorn, and you use that to fund lavish ski trips to the Alps, or to buy Tesla’s for the team, or other stupid uses of money.
From the NY Times article- Silicon Valley’s Unbridled Optimism Runs Into Economic Reality :
Despite the rocky market, Mr. Azhang is confident that NextRound can raise its own next round of funding. The company recently focused its efforts on helping start-ups raise money from cryptocurrency investors, including a product that provides legal protection to the creators and owners of crypto projects. That option costs money, which Mr. Azhang expects investors will find appealing.
“It’s the first time in my entrepreneurial career that I’ve ever charged for anything,” he observed.
This right here seems to capture my incredulity with the average startup/founder. Here is a founder, who after several years doing “founding” is finally “charging” for something he makes. The whole fund growth, even without any revenue, era is something I believed was truly over, but it appears to be alive and well. If you really go through life as an entrepreneur and never actually monetize your ideas or products, then why the fuck are you doing it?
This folks, is why I don’t work at startups, this is why I ask my leadership team how we monetize, and what financial success looks like, and why vanity metrics like “engagement”, “New Customer Acquisition” and the like are not things I put stock into.
It is also why when I am doing market research, or voice of the customer to validate an idea, or product, I ask point-blank “will you buy this”, and if the answer is regularly no, it gets binned.
Seems like the unbridled irrationality of the 1990’s dot-com era never really disappeared.
