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Sean Parker: “Little Startups Are Ridiculously OverFunded”

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Re: Sean Parker: “Little Startups Are Ridiculously OverFunded”

#81

Post by jroseattle »

chwahoo wrote: post #16
jroseattle wrote: post #13

What Sean left out was -- overfunded for whom? He implied it, but didn't say it: the bigger dogs in the fight (Facebook/Twitter/Google) have to compete for talent like everyone else. The overfunding is mostly a problem for those larger tech companies, not the little guys.

I suspect he means that investors are overvaluing small startups (relative to their chances of becoming successful). The consequence he worries about is that having too much funding available makes the opportunity too appealing to the best engineers, making it harder for ventures that will succeed to keep/attract talent.

His arguments seem a big reach, though. Lots of investment means opportunity recognition, and there are a finite number of engineers, so supply/demand takes it course.

He's arguing against capitalism, and not making a very good one at that. While trying to sell this as an industry-wide issue, I suspect his real concerns are more immediate -- for his own ventures.

Re: Sean Parker: “Little Startups Are Ridiculously OverFunded”

#82

Post by mattdeboard »

jseliger wrote: post #78
georgemcbay wrote: post #30

I don't think he is completely wrong but I think this is just another (higher-end) instance of the age-old tradition of companies saying it is too difficult to find engineers while being unwilling to pay fair value for said engineers. To be clear, I know that Facebook does pay quite well by industry standards (offset somewhat by the bay area cost of living) for top talent, but if this situation is causing them an iss…

"offset somewhat by the bay area cost of living" This is a much bigger problem than many people realize; Ryan Avent discusses it in his ebook The Gated City ( http://www.amazon.com/Gated-City-Kindle-Single-ebook/dp/B005... ) and on this Econtalk podcast: http://www.econtalk.org/archives/2011/10/avent_on_cities.htm... . Basically, housing costs in Silicon Valley are eating up all the salary increases tech companies ar…

Uh, I dunno. I lived in the Bay Area (Santa Clara & San Jose, specifically.. far from the city but still enjoyably commutable by rail) for a couple years. I then moved to Indiana and took a 65% pay cut. The bay is expensive, but it's not THAT expensive. As long as you live within your means and understand that 80k in the bay area is not the same as 80k in Indiana (where I live now) you can have a very nice lifestyle.

Housing "eating up all the salary" is hyperbole, plain and simple, unless you're talking about the segment of people who make 100k+ but are still living paycheck to paycheck because they live outside their means.

Re: Sean Parker: “Little Startups Are Ridiculously OverFunded”

#83

Post by long »

earl wrote: post #5

"The problem in his view is that many of the talented engineers and product designers who are now starting their own companies could have a bigger impact at places like Facebook, and they in turn will have a hard time attracting the best talent because those people can get funded to start their own projects as well." Obviously I just read TC's article and didn't see what Parker said, but what's notably missing from t…

What if the engineer's goal is to have the biggest possible impact on the world?

Re: Sean Parker: “Little Startups Are Ridiculously OverFunded”

#84

Post by earbitscom »

psychotik wrote: post #50

At Startup School, the Sequoia guy showed a bunch of slides which had two main points highlighted: - Companies like Microsoft, Google, Yahoo, LinkedIn raised very modest amounts of funding and has multi-billion dollar IPOs - Cost of creating a company (and associated technology) is down over 90% from what it was back when a lot of these companies were started. Given these two, it's amazing to see VCs pouring in milli…

Valuations are set by the current value of the company and the projected outcome. Lower costs to launch and iterate actually increase the likelihood of success, as well as mean that net margins can be higher than if you had to invest in significant infrastructure. The fact that you don't need very much money and will be able to try all kinds of things on a shoestring budget is exactly why valuations are so high. Since VCs still want the traditional 20-40% of companies, they give them more money than they need out of their own desire to take a big stake - not because the valuation is out of whack.

Said another way, the less a company needs your money, the more you have to pay to get in.

Re: Sean Parker: “Little Startups Are Ridiculously OverFunded”

#85

Post by earbitscom »

cpeterso wrote: post #61
ericd wrote: post #23

This isn't just whining. My theory is that 500 2 person companies have a worse chance at making a real splash than if the 100 best ideas from that group had 10 good people working on them. That's part of what he's saying - it's harder now for good startups to grow when everyone wants to and is incentivized to make their own web startup. The other part he's saying is that people can have a larger marginal impact on th…

> My theory is that 500 2 person companies have a worse chance at making a real splash than if the 100 best ideas from that group had 10 good people working on them. I wonder if there is an opportunity for matchmaker investors to scoop up like-minded startups and consolidate early companies to build those 100 10-person winners.

I often think that if I had $500M, I could buy 4 companies whose assets and teams combined with ours would create a company with massive potential, huge remarketing opportunities and defensibility that the companies alone do not have. There is definitely an opportunity to do this in theory. The issue is the problems that arise when you merge 5 companies with different cultures, strong-headed leaders and passions for solving problems that the new company may not find as much value in addressing.

Re: Sean Parker: “Little Startups Are Ridiculously OverFunded”

#86

Post by earbitscom »

kalvin_ridejoy wrote: post #45

Pretty sure it's not a coincidence that Mark Zuckerberg emphasized a related message at Startup School ("don't start a company unless you're really, really passionate about it"). Facebook, like every other tech company in the valley, is having trouble hiring enough engineers, and this is a campaign to make would-be founders think twice.

I think they're very different messages. Sean Parker's message comes off as more self-serving - saying don't start a company because it's not as good for the world as joining one that can effect change to a greater degree. Zuckerberg's comment was about not starting a company for the sake of it, the same message PG had and a very good one. Start a company because they're the most efficient vehicle to solve a problem you care about. Don't fabricate some problem that doesn't exist because you want to start a company.

Re: Sean Parker: “Little Startups Are Ridiculously OverFunded”

#87

Post by wavephorm »

firefoxman1 wrote: post #44
wavephorm wrote: post #33

Parker suggests that one reason it will end badly is because the Internet industry will ultimately consolidate just like the PC industry did in the 1980s and 1990s. Why? Why does the future have to be like the past? As rich and well connected Sean Parker is, he cannot predict the future. Coincidently given his stature it makes him probably the least qualified to predict what will ultimately happen in the computing in…

"Why does the future have to be like the past?" That's what everyone says in a bubble: "History won't repeat itself this time!" Unfortunately, while industries and companies change and evolve, human nature (specifically fear, greed, and hype) doesn't change. The wise learn from history while the rest keep repeating the mistakes from 15-20 years before.

Did the Internet repeat the same cycle as the Industrial Age? Did cell phone uptake follow the same patterns as rotary phones?

The idea that history repeats itself is, itself, dated. Technology changes things in ways people cannot really predict. The only thing you can reliably predict is what is expensive to do today will be cheap tomorrow. What these many small startups will collectively build on top of cheap "cloud services" and "mobile devices" will change the world.

Re: Sean Parker: “Little Startups Are Ridiculously OverFunded”

#88

Post by niketdesai »

long wrote: post #83
earl wrote: post #5

"The problem in his view is that many of the talented engineers and product designers who are now starting their own companies could have a bigger impact at places like Facebook, and they in turn will have a hard time attracting the best talent because those people can get funded to start their own projects as well." Obviously I just read TC's article and didn't see what Parker said, but what's notably missing from t…

What if the engineer's goal is to have the biggest possible impact on the world?

That's a fair goal, and I believe the answer breaks down like this:

You can work for a big company that serves billions of people, claiming that you are making an impact on the world, while in reality doing nothing.

On the other hand you can start your own company, perhaps only directly impacting a few hundred people, and still accomplish the goal of maximizing your change on the world (as that was your ceiling).

Re: Sean Parker: “Little Startups Are Ridiculously OverFunded”

#89

Post by long »

niketdesai wrote: post #88
long wrote: post #83

Earlier quoted context omitted.

What if the engineer's goal is to have the biggest possible impact on the world?

That's a fair goal, and I believe the answer breaks down like this: You can work for a big company that serves billions of people, claiming that you are making an impact on the world, while in reality doing nothing. On the other hand you can start your own company, perhaps only directly impacting a few hundred people, and still accomplish the goal of maximizing your change on the world (as that was your ceiling).

Parker is arguing that in many cases, the engineer can actually have a bigger impact at the bigger company (e.g. because it leverages economies of scale and having lots of startups fragmentizes the talent pool).

Re: Sean Parker: “Little Startups Are Ridiculously OverFunded”

#90

Post by dylangs1030 »

I disagree entirely. Here's why:

1. Social psychology shows us that, smaller, more focused groups perform better and have superior productivity to larger groups, which tend to become disorganized and derailed. (http://sgr.sagepub.com/content/40/2/247.abstract) Startups tend to have fewer employees (this is universal), and, even in hugely successful companies like Google, work is divided into highly productive nuclei of coordinated, amicable teams. This is a trend that repeats in very successful companies, and when startups pick up and start gaining more employees, though they decentralize, the "small team > big force" mentality remains.

2. If you outsource all the miscellaneous things a company needs to do to get a product out, you find that a) each of those outsourced functions is done on a much more quality level than if the company tried to do it all on its own, b) the company doing the outsourcing can focus more on its principal product. This actually spreads the wealth and improved productivity for every company involved. (http://www.industryweek.com/articles/breaking_the_rules__whe...)

I could see why Sean Parker would be a bit concerned, but, really, I think the explosion of new startups is fantastic for the overall quality of products.

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