Shout Out to Seth Levine – Seth Levine’s VC Adventure – “I’m getting sick of the bull$%!^”
Seth Levine, a successful VC with the Foundry Group, wrote a great blog entry about all the hype going on currently in the startup world. Worth the read. His focus is on people bragging about how amazing they and their startup are when they usually have close to n o t h i n g, which goes against the karma good business and screw it up for those really trying to build strong long lasting companies. If more people like Seth step up with their qualified voice, they could help save us from or lessen the big crash coming.
I’ve been harping about this a lot (too much?) for over a year:
Currently Los Angeles is in what could be a startup renaissance or an apocalypse, dependent on how long the hype goes on. Based on Seth’s article, I realize it must be happening everywhere. The signal to noise ratio continues to degrade, but it’s actually moving into the next phase. Investor groups are cutting out the management, bus dev, sales, and marketing professionals, trying to get raw, young engineering teams that have never negotiated a term sheet to give away their IP rights and equity for next to nothing.
Some of these projects will produce amazing companies. But most participants (young developers) will raise their hopes, fail and get spit back out into the cruel world within 2-3 months(!) and become a jaded unemployed 25 year old. Or realize down the road that they gave away a lot for a little. Many investors now advertise that want only developers, they will cover all business/marketing/etc. needs. Don’t put real business people on the actual team. To reuse an overused term – Wait what? They offer them zero to a few thousand dollars and office space. I call it harvesting youth.
Recently there was a developer only coding party where, in a few hours, you form a team, think of an idea, then design, develop, deploy a website. The compensation? All the alcohol you could drink and In-N-Out burgers. Now don’t get me wrong, I love In-N-Out burgers, some of the best in the world. My favorite is the Double Double animal style (see photo). But the sad thing here is that after that party many of the participants think they have a startup.
The word startup used to be about very unique technologies being deployed in very unique ways, creating new markets and capabilities in the world. Having knowledge and experience had value and a balanced team was required. Balance, humility, hard work. Facebook and Google had plenty of business people deeply involved. In fact, Mark Zuckerberg is a great salesman, and a pretty mediocre programmer. Now almost anything is a “startup”, and almost everyone is “doing” a startup. And bragging about it before it happens. We’re spreading resources over way too many businesses, knowing most have no change. I know it’s a risk game, I’ve been in it 25 years, but there should be some intelligence invested in the outset. One VC recently told me that his investors don’t care if he does no due diligence, as long as he “brings them another Facebook”.
Real startup successes are measured by growth, revenue, shareholder value, making something from nothing, ROI, longevity. Not just this weeks buzz or a $25,000 seed round. They devised with strategy, ingenuity, an ecosystem. Long term employment, new jobs.
The good news is that this hype period will end, probably soon. Then the remaining companies will be much easier to watch and enhance and benefit from. @tomnora