Sure, Silicon Valley might produce only 10 great companies a year, but where I'm from (Ottawa, Canada), we'd produce only 1 great company every 10 years. (I'm referring to tech companies)
You got my up vote just for being from Ottawa.
Let's All Shed Tears For The Crappy Startups That Can't Raise Any More Money
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Re: Let's All Shed Tears For The Crappy Startups That Can't Raise Any More Money
#32How do you report on business for a decade and yet hold such a visceral and character flaw type thesis about behavior that's nothing more than the intended, text-book result of specific monetary policy decisions?
What's the monetary policy that's influencing startups?
Well, I think monetary policy is more a symptom of a larger trend than the cause, but since the massive deleveraging (or Lesser Depression) the world has been awash in excess savings looking for somewhere to go.
A good explanation is here: http://krugman.blogs.nytimes.com/2009/05/02/liquidity-prefer...
[edit: wording]
Re: Let's All Shed Tears For The Crappy Startups That Can't Raise Any More Money
#33Seems like a touch too much schadenfreude. I've seen some genuinely awful ideas in startupland, but one has to remember that predicting success is really hard , especially the big types of success like Facebook or Google. Google itself started as a product with no revenue stream, only a highly ephemeral "well we could sell ads?" one that almost didn't pan out . Facebook in its early form seemed like a website for Ivy…
Selecting the outliers as exemplars of what is typical doesn't make much sense. What about the 100,000+ non-Googles and non-Facebooks that very much fit into what the author is stating here? Poor businesses funded by poor investors supported by a poor media is the problem here and all that the "Series A Crunch" will do is "expose those who were swimming naked" as so eloquently stated by Warren Buffet [1].
Companies with good business models or great technology or great ability to persevere or the ability to iterate will always survive. The point of this article is that the clock has already run out for the ones that don't.
[1] http://www.brainyquote.com/quotes/quotes/w/warrenbuff383933....
Re: Let's All Shed Tears For The Crappy Startups That Can't Raise Any More Money
#34Was the article crude, and maybe more harsh then is needed? of course. Still, the general point is correct. The thing that is great about start-ups is the ability to solve real problems using innovative approaches. Large companies have processes in place to stay steady, to minimize risk. Start-ups thrive on risk. The problem though, is the glamour of the concept has made people more excited about the status of the st…
The "general point" that is "correct" in this article is someone everyone commenting on this thread already knew; it's a point almost every credible technology has been making for years. A well-known Google engineer made news simply by moving from "cat picture" projects to "meaningful" projects. Anybody in the world could have made that "correct" point.
The problem is that the specific points Lyons builds on "don't sell cat pictures" are either useless, false, or both. Getting a real job and learning engineering aren't a solution to the problem of selling cat pictures. When you take someone whose first instinct is to build a cat picture app and train him on type theory, the CAP theorem, quorum commits, compiler backends, and linear algebra, guess what you get? Thermonuclear cat pictures.
In the end, the only actionable advice Lyons has that you should consider taking is "avoid long bus rides with Scoble".
To answer your question: which person at 37signals do you think built Basecamp for the love of project management? And how many entrepreneurs can we name who are passionate about dumb problems?
Re: Let's All Shed Tears For The Crappy Startups That Can't Raise Any More Money
#35One of the things I love about HN is that a scathing article criticizing startups and tech entrepreneurs can make the front page.
Re: Let's All Shed Tears For The Crappy Startups That Can't Raise Any More Money
#36I don't understand this ranty article...
Aren't startups called startups for a reason? Some aren't going to thrive, some really suck, others can't pivot their talent and drive toward something grandiose and earth shattering for their next round of investment but all should be better because of the experience, investors and entrepreneurs alike.
The failure rate of startups has always been high, especially over time, right?
"There are also different definitions of failure. If failure means liquidating all assets, with investors losing all their money, an estimated 30% to 40% of high potential U.S. start-ups fail, he says. If failure is defined as failing to see the projected return on investment—say, a specific revenue growth rate or date to break even on cash flow—then more than 95% of start-ups fail, based on Mr. Ghosh's research." via Shikhar Ghosh, a senior lecturer at Harvard Business School http://online.wsj.com/article/SB1000087239639044372020457800...
Re: Let's All Shed Tears For The Crappy Startups That Can't Raise Any More Money
#37The bombastic tone of this article obscures some nuggets of truth. The most promising startup founders I know have 5-10 years of experience in an industry, enough to have some domain expertise and insight into the needs of that industry. This contrasts with people who move here to "do a startup" - largely producing clones of the latest consumer success story (in my time in the valley, the cycle of clones has been Fou…
I personally think you hit the nail on the head when you say " The most promising startup founders I know have 5-10 years of experience in an industry". Yes, there are exceptions, like any other thing in life, but experience in a sector is underrated by many of the recent graduates I meet who want to start a company. The problem I think is that youngsters only read TechCrunch and other similar blogs, which to me is like Warren Buffet trying to read insurance/risk management news on Seventeen magazine - flashy headlines with irrelevant information, in a world fuelled by cotton candy and hairstyles.
Re: Let's All Shed Tears For The Crappy Startups That Can't Raise Any More Money
#38I think people are missing the biggest takeaway: everyone wants to get rich writing Rails apps in a weekend that really don't contribute, that our brightest minds are being wasted. Rather than creating things that are truly innovative, we're barely iterating on things that were barely iterations to being with.
The world is full of weekend-hard Rails apps that can both contribute and make loads of money. The problem has nothing at all to do with engineering, and everything to do with echo-chamber marketing. The apps don't need to be harder to write; they just need to solve problems for nurses or attorneys or auto mechanics instead of early-adopter tech consumers and advertisers. David Heinemeier Hansson put this as succinct…
While I agree with the quote "build something useful and charge money for it; it's not rocket surgery." I think it over simplifies things.
What exactly is "useful" anyway? How do I find a useful idea? Who do I charge for it? How much should I charge?
I think the real trick is finding that idea.
Re: Let's All Shed Tears For The Crappy Startups That Can't Raise Any More Money
#39I really don't understand the hate with which Dan Lyons is speaking. Startups are crazy, sometimes hugely profitable companies that sometimes start up with the same money it takes to start a restaurant or less. Sometimes they succeed, sometimes they fail, sometimes they are a complete joke. It's intense and awesome and that's why we are all drawn to it: huge potential. VCs are a part of it and without them this marke…
I understand it perfectly. The foundation of that hate is seeing an incredible amount of money, time, and energy devoted to a particularly brutal and inefficient way of finding the next startup that becomes Facebook, and getting in early.
There's a saying: "Lotteries are a tax on stupid people". I would extend that to the 'circle jerk' in the Valley. You have people with money throwing it at people with ideas, hoping to win the lottery, basically. Along the way, you get a thousand crappy startups burning out ten thousand 19 year olds who dropped out of school because Zuckerberg did. It's wasteful. It generates companies like Flooze. It's a massive hype machine sucking up all the oxygen in the room, depriving other, more sensible, but less glamourous businesses of resources.
The first comment on the article really captures it: "And you know what also sucks about this whole craziness that went on during these hard years?"
"That minority of mid-career people like me, with both real-word business experience and multiple engineering degrees and realworld P&L and people management experience, who started companies this past 3 years with good solid ideas that can make money but couldn't raise much money due to a combination of age discrimination and the fact that the money was going to young, inexperienced entrepreneurs with stupid but frothy sexy ideas like Gourmair."
Indeed. Lyons also identifies another real cost to the startup mania: "Meanwhile our country is facing a crisis because we have a shortage of students in STEM -- science, technology, engineering and math. Every big company in Silicon Valley is starved for talent. And there is an entire generation of young people who, instead of studying those hard subjects, would rather slap together the fourteenth version of a peeer-to-peer car sharing service or alternative taxi service. Because it's easy and you might get rich quick."
Re: Let's All Shed Tears For The Crappy Startups That Can't Raise Any More Money
#40I'm going to kill this article as a dupe. It's just other articles rewritten in more colorful language. But it's giving this thing too much credit even to call it a dupe, because in the process of making the language more colorful, he's now describing something that is definitely not the case. The other articles are talking about a trend that's happening as slowly as global warming. No door has suddenly crashed down, cutting off series As. It's just gradually getting harder to raise later rounds. But the tightening up is so slow that even I, who am arguably among the best positioned to see it of anyone, can barely notice it. Which means for sure Dan Lyons has no evidence of it himself.