
No Exit - rohin
http://www.wired.com/2014/04/no-exit/?hn
======
ontoillogical
I read the Kindle version (not sure what's cut in this one) and quite liked
it.

This is the crux of the piece

> All the while, Martino’s ultimate warning—that they might someday regret
> actually getting the money they wanted—would still hang over these two young
> men, inherent to a system designed to turn strivers into subcontractors.
> Instead of what you want to build—the consumer-facing, world-remaking
> thing—almost invariably you are pushed to build a small piece of technology
> that somebody with a lot of money wants built cheaply. As the engineer and
> writer Alex Payne put it, these startups represent “the field offices of a
> large distributed workforce assembled by venture capitalists and their
> associate institutions,” doing low-overhead, low-risk R&D for five corporate
> giants. In such a system, the real disillusionment isn’t the discovery that
> you’re unlikely to become a billionaire; it’s the realization that your
> feeling of autonomy is a fantasy, and that the vast majority of you have
> been set up to fail by design.

The rest is the story of Nick and Chris intertwined with the writers
impressions of the people he met at a $1250/mo for a mattress Hacker Pad he
moved into.

The author is only slightly contemptuous of the young tech guys who made his
beloved San Francisco shitty

> “When you have an early-stage company,” he said, “there’s no time to hang
> out at a cool, trendy bar.” He was 23. The bar might have been cool and
> trendy in Miami in 2004.

~~~
argonaut
The author is not an SF native and is currently living in New York according
to his bio. So "made his beloved San Francisco shitty" is a bit meaningless.

The article is nearly at the point where you could claim it's drenched in an
air of East Cost condescension, but since the author lived in SF before,
that's probably too far.

------
brc
This entire story underlies to me the need to bootstrap into something that is
already working and has numbers before talking to anyone about taking money.

I enjoyed the piece - the writing, the story. It's meant to have a melancholy,
no-end-to-the-story tone. That's the entire point of it.

What people have to realise is that most of the rest of the world sees silicon
valley entrepreneurs based on what they saw in The Social Network. Ziplines
into the pool and young girls hitting bongs while nerds with headphones bashed
out code nearby, oblivious. So something like this would serve as a strong
counter-current to the prevailing narrative, that it's just a case of hopping
the bus and pitching your ideas and becoming rich and famous while still
young.

Realistically many career paths have low probability, high reward exit points,
and that continues to attract youth. The movie or music businesses are really
no different. It could easily have been a story about LA and a bunch of
wannabe actors waiting tables and going to auditions - some will luck into
roles, others will burn out and take normal jobs, a lucky few will walk into
top roles because of connections, family or supreme talent.

~~~
madaxe_again
Afraid to say this isn't quite right - we followed this path.

Essentially, the moment you have a functioning, profitable company, your value
becomes rooted in multiples of ebitda. When you have a pie-in-the-sky idea,
gaggles of engineers, huge running costs and no product, your value is based
on "????? Profit!"

We're 8 years in, driving about £1bn of ecommerce transactions a year, and
there is no exit.

~~~
brc
I would guess the valuations are based on the expected targeted size of the
market and defensible market position. Without a reason why your current
growth will accelerate, it's only reasonable why a valuation would be done on
a cashflow/profitability basis.

You also have to remember that you got to choose your business strategy to
this point, you presumably can't be removed from your own company, and your
ownership is worth something. There is always an exit for a well-run business,
but it's probably not going to be through a VC funded growth-then-exit unless
they can see a way to 10x your existing business at a minimum.

------
VexXtreme
Living in a re-purposed warehouse, subsisting on ramen and not knowing whether
you'll be able to pay for food tomorrow seems like a very high price to pay
just to be physically close to something that mostly lives just as an idea in
these young people's minds. If anything, it strikes me as a terribly dismal
existence for not a whole lot of reward and enjoyment. The most ironic thing
is that the people who reap the most benefits of living in the Valley are the
ones working for big established companies.

I think it is more probable that many people who decide to do this do it for
the lifestyle and for the image they associate with the "startup" life, the
same way some people decide to live in hippie communes. It's just a lifestyle
choice.

~~~
soup10
It's basically just stupid. Lots of people with little to no exceptional
talent or skill thinking that they if they just grind it out long enough
they'll strike it rich with their mediocre business idea. In NY these people
are called naive and stupid. In SV these people are called bold risk-takers.

~~~
rralian
I think it's quite similar to the aspiring actor taking a bus to Hollywood
with a backpack and a dream, and roughly the same chances of making it big.
Except it's probably easier to make a go at tech outside of SV than to make a
go of acting outside of Hollywood (and New York). And a lot easier to
bootstrap too. But from the aspirant's point of view it's similar.

~~~
danielweber
Actually, there are a lot of movie-making hubs popping up around the US. Lots
of cities (mine included) are trying to grow a film industry with incentives.

(I think it's a poor policy decision, since it's just another beggar-thy-
neighbor system, but that's a separate issue.) If you are trying to get into
film you don't have to go to Hollywood these days. Hollywood is still the
plurality of US film-making, but I don't think it's the majority any more.)

~~~
hessenwolf
It's not really beggar-thy-neighbour if we just end up with more
entertainment. If there were more good shows, I'd watch more tv. (not sure I
want that outcome!)

~~~
danielweber
I meant the "come here, we'll give you bigger tax breaks" rat chase.

------
nutjob2
I live in SF and pay myself about $25K a year. I'm self funded on about $150K
cash (since 2010) and live very comfortably. I haven't taken VC money and I
have no plans to.

My question is: why do people insist on playing this game the same broken way?
Raise money, try to grow as quickly as possible to raise more money, getting
massively diluted along the way, and hope that you sell or IPO at $1B+ or $19B
or whatever valuation? It's a mug's game given that only a tiny, tiny, tiny
fraction of people get there.

What's wrong with growing organically, crafting your product as you grow more
slowly and taking less VC money and keeping more equity for yourself? You
might make less money overall but you have more chance of actually making it
if you have a real idea.

And why do you need that money again? Wouldn't you rather make a great
product? Lots of morons have heaps of money, but how many have made great
products? If you want big money and don't care about your product and are
smart and hardworking, go work in finance, it's much a more reliable way to
get rich.

It seems to me most people are taking long, long shot ideas and hoping for the
very unlikely best and being some sort of hero.

~~~
esrauch
Out of curiosity, how do you live comfortably on $25K a year in SF when the
rent for a studio apartment alone costs more than that?

~~~
htormey
His place is rent controlled and or he has roommates.

~~~
Tossrock
It would have to have been rent controlled since the 1800s to live on $25k
comfortably...

------
jfb
_Nick and Chris would never explicitly admit it, but in unguarded moments it
seemed clear that they missed their old idea, the one they’d come up with on
the boat, the one that had served a broad and stately social purpose. Their
moments of greatest animation were when they showed off their first demos and
decks, when they seemed decades younger._

That strikes a chord.

~~~
morgante
I actually didn't get that. Building a saas platform which solves real
problems for real companies seems a lot more interesting than making yet
another social app.

~~~
pekk
You don't "get" the feeling of wanting to do something with a social purpose
beyond making money by making some executive happy? Or make something that's
just recognizably cool? You don't even understand passion for things other
than making money?

~~~
ForHackernews
Maybe he just doesn't think the nth iOS photo-sharing app (or whatever) is
"cool" or has a "social purpose".

------
dirktheman
Silicon Valley today is like 1849 all over again. A gold rush. Everybody and
their cousin flock to San Francisco expecting to find gold and strike it rich.
They don't realize that it takes an insane amount of hard work and an ever
insaner amount of sheer luck to make it. Sure, some of them succeed. But most
of them don't, and several leave SF far worse off than when they arrived.

I thoroughly enjoyed this read. It's a nice counterbalance to all the success
stories. Not that I mind reading success stories, but sometimes we forget that
not everybody makes it big. Mandatory reading for anyone raising money!

~~~
digitalengineer
During the gold rush few really did find their fortune. But the ones who got
really, really rich were the guys selling the tools (to dig). Who's selling
the tools today?

~~~
dirktheman
You mean Apple? Or the vast array of organic-gourmet-breakfast-burrito-like
eateries?

All jokes aside, you're right, the analogy has some flaws. Or maybe the tools
supplier hasn't emerged yet. Talking about a big opportunity here!

~~~
digitalengineer
Perhaps AWS? 37Signals? Databoard and measuring services? There was this
startup from YC for generating leads...

------
Jun8
"Silicon valley is where the astounding success of the very few is held out to
the youth in exchange for their time, their energy, and—well, their youth."

I guess everybody should have figured this out by now. This, of course, is
exactly how LA and Nashville operate, too, for different areas. The _Pretty
Woman_ ization of entrepreneurship, if you will.

~~~
devindotcom
There's one born every minute, and more than ever they can even code.

------
tptacek
I got to " _An MIT AI PhD can generally walk alone into an investor meeting
wearing a coconut-shell bra, perform a series of improvised birdcalls, and
walk out with $1 million._ " and stopped reading; does it get better, or more
credible? Also: the rug store? Really? This is the one on University, right?

~~~
chipotle_coyote
Yep, the Medallion Rug Gallery. (I see someone else already linked to it.)

The coconut bra thing is clearly facetiously phrased, but I think it captures
a fundamental truth of Silicon Valley in 2014, yes. I suspect that if you had
that degree and even a _remotely_ plausible sounding business idea, you could
walk into an investor meeting alone and walk out with seed money. You probably
couldn't _literally_ walk into the meeting with a coconut shell bra and
perform improvised bird calls, but the point is that such a person could half-
ass things to a much greater degree than someone without such a degree could.

~~~
mcguire
Does it depend on if _you_ perform the bird calls or you have a web
application for performing them?

~~~
twic
As a serious aside, i don't know about apps for _making_ bird calls, but i
have met birdwatchers who were very excited about the prospect of an app which
_identifies_ bird calls. Like:

[http://grow.cals.wisc.edu/environment/smart-
birding](http://grow.cals.wisc.edu/environment/smart-birding)

Or:

[http://www.isoperla.co.uk/BirdSongIdiPhone.html](http://www.isoperla.co.uk/BirdSongIdiPhone.html)

------
7Figures2Commas
> He’d be taking a 40 percent pay cut to join them, but he would have his hard
> problem and would get to run his own data-science team. Nick and Chris had
> allotted an equity pool that was larger than average, and they were making
> Tevye a generous offer—in a highly theoretical sense. San Francisco was full
> of people walking around with their pockets stuffed with 1.2 percent of
> nothing...Tevye signed up. He asked to begin on January 27, roughly two
> weeks before Nick and Chris’ money was set to run out.

This is precisely why "What's your runway?" is such an important question to
ask before you accept a job offer from a startup.

~~~
vinceguidry
> This is precisely why "What's your runway?" is such an important question to
> ask before you accept a job offer from a startup.

Let's say you did ask the question and got an as-honest-as-you-can-expect
answer. (two months, but we're soon to close a million-dollar round) How does
that really help you make your decision? You could look at them and try to
judge whether they might make their round, but you're probably better off in
Vegas.

If I've read the article right, runway doesn't mean what it used to mean
anymore. You can keep raising small amounts of money for a good while before
investors will give up on you, and even if the company ends up folding, you're
still working and getting experience and making connections.

~~~
7Figures2Commas
> Let's say you did ask the question and got an as-honest-as-you-can-expect
> answer. (two months, but we're soon to close a million-dollar round) How
> does that really help you make your decision? You could look at them and try
> to judge whether they might make their round, but you're probably better off
> in Vegas.

How _doesn 't_ this help you make a decision? Given the number of
opportunities out there today, including opportunities outside of
Startupville, there's no reason an experienced or talented candidate has to
gamble on a startup that might not be able to make payroll if a funding round
doesn't close in the next _n_ weeks or months.

By the way: there's no such thing as an "as-honest-as-you-can-expect" answer.
There's an honest answer and there's a dishonest answer. A founder, executive
or hiring manager at a startup should be able to look you in the eye and tell
you how much runway the company has based on its current cash position, cash
flow and burn rate. Anything less, including an answer that distorts what
"runway" means (hint: funding that you expect to raise but haven't yet raised
doesn't count), is a huge red flag that you ignore at your own peril.

~~~
vinceguidry
> Given the number of opportunities out there today, including opportunities
> outside of Startupville, there's no reason an experienced or talented
> candidate has to gamble on a startup that might not be able to make payroll
> if a funding round doesn't close in the next n weeks or months.

You're absolutely right. There's no compelling reason to work in
Startupsville. If you're there, then you're already being fairly irrational.
Knowing the (current) runway isn't going to make it any less so.

> A founder, executive or hiring manager at a startup should be able to look
> you in the eye and tell you how much runway the company has based on its
> current cash position, cash flow and burn rate.

Is this actually true, or a pie-in-the-sky wishful thinking thing? The article
seems to paint the latter picture. I've been in situations where
overconfidence and unrealistic optimism were the norm rather than the
exception. Like auto sales.

You'll fall out pretty quick if you can't get with the program and insist on
being a wet blanket. You have to get good at reading between the lines because
nobody talks straight. Opportunities are there, but mostly only for the
morally loose.

~~~
7Figures2Commas
> You're absolutely right. There's no compelling reason to work in
> Startupsville. If you're there, then you're already being fairly irrational.
> Knowing the (current) runway isn't going to make it any less so.

I think you took my comment too far. Working at a startup isn't for everyone,
and there are plenty of great opportunities outside of the startup world, but
not _every_ startup is a sinking ship that's hiring new employees when it only
has two weeks of cash left.

> Is this actually true, or a pie-in-the-sky wishful thinking thing? The
> article seems to paint the latter picture. I've been in situations where
> overconfidence and unrealistic optimism were the norm rather than the
> exception. Like auto sales.

 _You_ decide what's important to you. If understanding the financial state of
a company that's going to employ you is important, you have every right to ask
questions. This is especially reasonable at a startup, where most employees
are granted stock options. If a company offers you an ownership stake, why
shouldn't it treat you like an owner?

You should turn your auto sales analogy around because you're looking at it
the wrong way. If a used car salesman is trying to sell you a car and won't
let you take a look under the hood, what are you going to do? Buy the car, or
move on? The latter of course. So why would you join a startup if the
"salesman" evades questions about what's under the hood of the business?

Just because there are a lot of people who are too naive or timid to ask
questions doesn't mean that you should follow their lead. The latest boom has
attracted a fair number of shysters to the Bay Area, but there are still
plenty of honest people here who will level with you without hesitation. These
are the people you want to work for and/or with.

~~~
vinceguidry
> Working at a startup isn't for everyone, and there are plenty of great
> opportunities outside of the startup world, but not every startup is a
> sinking ship that's hiring new employees when it only has two weeks of cash
> left.

The ones with significant upside potential are. If a "startup job" is really
just a normal job with normal job security and a normal paycheck, then you're
never going to get the chance to strike it rich. It's just a slightly-better-
than-average job.

> You should turn your auto sales analogy around because you're looking at it
> the wrong way.

No I think you read me the wrong way. I'm talking about you going into auto
sales as a salesman, not you trying to buy a car. That's far closer to what
you're doing by joining a garden-variety Silicon Valley startup.

~~~
7Figures2Commas
> The ones with significant upside potential are. If a "startup job" is really
> just a normal job with normal job security and a normal paycheck, then
> you're never going to get the chance to strike it rich. It's just a
> slightly-better-than-average job.

Statistically few startups offer significant upside potential to rank and file
employees. Period. It's not just because most of them will never have a
liquidity event, or a big enough liquidity event, but because employees tend
to receive so little equity and their equity is the most vulnerable.

If you look at some of the biggest startup exits in the past several years
that produced the best outcomes for a large number of rank and file employees
(Facebook, Twitter, etc.), you're going to find few if any that required those
employees to take their chances on a sinking ship. Trust me: employee #500 at
Facebook or Twitter, who received competitive salary and benefits, has done
far, far better than 99% of the first 10 employees at 99% of all Silicon
Valley startups.

The notion that joining a startup that's always a few weeks away from running
out of cash is the only way to get "upside potential" is pure myth. It's
simply not true. In fact, if you are motivated to "strike it rich", working at
a startup as an employee is a horrible way to go about it. Well over half of
the millionaires in this country are self-employed. You're statistically far
more likely to get rich working for yourself/owning a business than working
for a startup that gives you basis points in equity, or a percent or two if
you're really "lucky."

> No I think you read me the wrong way. I'm talking about you going into auto
> sales as a salesman, not you trying to buy a car. That's far closer to what
> you're doing by joining a garden-variety Silicon Valley startup.

I don't know what point you're trying to make, but my point still stands: if
you're contemplating a business transaction, whether it's buying a car or
joining a company, you have every right to ask questions. And if you don't
feel comfortable with the answers you receive (or don't receive), you proceed
with said transaction at your own peril.

------
mikeleeorg
I like this piece because it doesn't glamorize the startup life as much as
other articles tend to. It's a lot more blood, sweat, and tears than anything
else. And I rather miss long-form essays too. I didn't mind the length at all.

------
_pmf_
> "New York didn’t care about Chicago, but Chicago was where the hogs were
> being slaughtered. Now New York doesn’t care about San Francisco, but today
> the hogs are being slaughtered in San Francisco.” What Turner meant is that
> these are the charnel grounds of the new economy, and that there isn’t
> anything all that new about the new economy.

Who writes this kind of over-dramatizing bullshit? Nobody forces these people
to follow their grandiose visions. They could just do useful work like the
rest of us, which isn't quite as romantic, but is doing the world as a whole
better than another failing "product" (which is the moniker for a useless
website that people in 1999 would have put together in 2 weekends without
extorting $20000 of VC money).

~~~
rushabh
The author is using cynicism to make a point across.

> They could just do useful work like the rest of us, which isn't quite as
> romantic, but is doing the world as a whole better than another failing
> "product"

seems like "bullshit"

------
robomartin
Brutal reality.

I remember a moment many years ago when I looked over at the bookshelf behind
my desk and my eyes landed on a book titled "Doing Hard Time" (it's about real
time embedded systems).

It was somewhere around 3:00AM. I had been in that room, coding, since 8 or 9
in the morning of the prior day. I had been doing 18 hour days, seven days a
week, for the last year and a half. If I was awake I was in this little 10 x
20 ft room coding away.

For some reason I saw that book and my first thought was that I now knew what
being imprisoned might feel like. Sad realization.

The story got much better after that low point as the product was completed
and schedules became sane (but never 9 to 5).

I have to say I would not change any part of that experience. The highs and
the lows were amazing. Learning, pushing yourself to the limit and back.
Finding out what you are made of. Remarkable.

That said, had it not ended well the story might have been very different.

------
md224
I wonder if the "?hn" at the end of the URL was added to get around repost
prevention† or a favor for the people watching analytics at Wired?

† Original submission:
[https://news.ycombinator.com/item?id=7628952](https://news.ycombinator.com/item?id=7628952)

~~~
avree
Why would they need a special URL? Pretty much every 'analytics package' since
'98 has showed referring URL.

~~~
dangrossman
There is no referrer in their logs for any visit from this page. Referrer
headers are not sent across HTTPS->HTTP transitions; this is a secure page,
and the link to Wired is not.

------
ZanyProgrammer
"Martino and I had made plans to meet at a coffee shop on the main drag in
Mountain View, but when he got there he found it too full of nerds on laptops,
so he called an audible in favor of the bar across the street, where he could
watch the game."

Lemme guess, Red Rock?

~~~
brandnewlow
Has to be! I always liked the one up on the corner right by the train station
a bit better though.

 _Looks out window to dingy Soma Streets. Misses Mountain View_

~~~
ZanyProgrammer
I used to like Red Rock, till I discovered Hacker Dojo just down the street at
its former location.

------
bra-ket
Excellent piece and must-read for all wannabe entrepreneurs

------
ghiculescu
> The partner didn’t want me in the meeting, so I told Nick and Chris I was
> going to drink my body weight in Odwalla.

I wonder what impact (if any) having a journalist tailing them had on their
meetings. Interesting read either way.

~~~
unreal37
"We'll be featured in Wired in 3 months!" It probably helped them.

------
jmzbond
This strikes a chord that's been humming for awhile. People flock to start-ups
expecting wonderful lifestyle, changing the world, yada yada yada. But then
they fall prey to the same societal pressures that they sought to escape from
in the first place.In the end they're still climbing the ladder, just instead
of the end point being CEO, their end point is IPO. There's not a huge
difference.

I wonder if it's possible to bring "slow" principles (as in slow food) to the
world of start-ups? There's nothing wrong with fast and lean, but the
interpretation of it has been perverted to a great extent I think.

Personally as a founder I aspire to stay bootstrapped and migrate to
financially sustainable to scale. Even if that means $20K for 10 years, that's
still enough money to live in SF if you know how, and I don't want to subject
myself to pressures from any number of investors demanding returns. I want to
focus on the social vision that I want to achieve, not monetization. Yes I'm
starting from a more idealist perspective, but hey, I expect some of that to
be worn away with time, hopefully by starting from a greater base, I'll still
keep some of it by the end!

~~~
mooreds
There are people working on 'slow investing', but they are primarily focused
on local food rather than tech (though there is some overlap):
[https://slowmoney.org/](https://slowmoney.org/)

~~~
jmzbond
Thanks for sharing!

------
Myrmornis
Well written and pretty funny in places. Reminded me a bit of David Foster-
Wallace; I guess that was the intention. The bit about the Indian ex-doctor
and his girlfriend was funny.

~~~
thom
Interesting. I read the whole thing thinking it was a Douglas Coupland
extract.

------
devindotcom
Having given some parts a good read and skipped over others, I am not
confident the story was worth telling. Every drop in the ocean has its own
story, sure, but why do I want to hear about these guys? It's not really
aspirational, it's not really original, it's not really thrilling. I feel like
it adds false dramatic weight to a bunch of dudes in one of the richest places
in the world, trying to strike it richer. Their worst case scenario is many
people's best case. I know that's a fallacy along the lines of "someone always
has it worse than you" but I don't really understand why this particular story
was told. Maybe I'm just not the target audience. But who is?

~~~
klochner
The point is that it's _not_ aspirational, it's _not_ original. It's
intentionally mundane. His point is that the life of an average start-up
founder is kind of crappy with no sexy outcome ("no-exit"), working as a
deluded serf on behalf of VC aristocracy (attending miley cyrus parties in
vegas).

It reminds me of stories about the American middle class - not tragic, not
great, a lot of hard work without much payoff. I think that's his intention.

~~~
devindotcom
Certainly there is a great body of literature that occurs within mundane
circumstances. But in this case I felt like the story itself was mundane -
banal, really. Well - there's no disputing taste.

~~~
pekk
If the story were glamorous or exciting, it would be missing the point.
Wouldn't it?

------
asdfologist
"Just as we got back to the city, a report came over the wire that Nest had
been acquired by Google for $3.2 billion in cash. Nest had been backed by
Google Ventures, their biggest win so far."

What does this mean? Isn't Google Ventures a part of Google?

~~~
notduncansmith
Technically, yes - however, they stay in very separate camps. Google Ventures
is the venture capital investment arm of Google Inc., but as explained by
Kevin Rose [1], it's a separate company. Google has no visibility into what
GV-backed companies are working on: think of Google as an LP of Google
Ventures.

[1]
[http://www.youtube.com/watch?v=ikoQLBuIYl0#t=1920](http://www.youtube.com/watch?v=ikoQLBuIYl0#t=1920)
(excellent interview with Kevin Rose on This Week In Startups)

~~~
dataisfun
fwiw, in traditional GP/LP relationships, the LPs know what's going on with
the companies (annual meeting, etc.)

------
drpgq
So Hell isn't other people, it's being a startup founder?

~~~
bqe
I too loved the No Exit (the play) reference this article made.
Entrepreneurship as being stuck in hell.

------
riggins
I read the article. After letting it marinate, I concluded that I completely
disagree with the author. Here's the crux of the argument.

 _One night I escaped the hacker house to go out with a group of founders from
various startups ... At 10:30 the waitress came over to take our orders for a
second round. I ordered another whiskey, but everybody else looked at their
phones with muted anxiety. At 11 pm the founders rose in pairs to leave, as if
they had an exam in the morning. One founder (his company was literally an app
that optimized app stores for other apps), who’d ordered a water and had taken
off neither his backpack nor his jacket, apologized on behalf of everybody for
leaving so early._

vs.

 _By contrast, on a weekend afternoon I went over to find my young cousin—a
talented and good-humored UX designer for Google—with his friends in Alamo
Square, where they were winding down a barbecue in the January sun._

IMO, the author has outsmarted himself trying to find a way to 'upend'
conventional wisdom.

I just don't think its bad for smart, motivated people to sacrifice bar crawls
and bbqs in the hope of accomplishing something important. That doesn't sound
like a problem to me ... that sounds like maturity.

~~~
taybin
But they weren't accomplishing something important. They had pivoted away from
their earlier, exciting product and were essentially an underpaid R&D team.

------
drb311
Felix Salmon's review and analysis based on the book is more informative than
the book itself, read it:

[http://blogs.reuters.com/felix-salmon/2014/04/21/the-most-
ex...](http://blogs.reuters.com/felix-salmon/2014/04/21/the-most-expensive-
lottery-ticket-in-the-world/)

------
gtirloni
Throughout the article, the founders mention "making room" or hoping to "have
room" for some investor. I mean, wouldn't you have infinite room for
investors? What's limiting how much they can take? As it's obvious, I've never
done at fund raising, so can someone explain (or point to a reference) what's
the deal?

~~~
iwasphone
Investors arrive at an amount based on their estimate of the company's value
and the share of equity they receive in return for their investment. If the
founders then get commitments from additional investors, the company would
have to attain a much larger value at exit time (i.e., IPO or purchase) for
any of the investors to get a reasonable return. When done with consent it's
called overcommitting. When done without consent, it's called fraud.

Disclaimer: IANAI

------
bruceb
It seems Tevye Krynski, their MIT engineer, while still working there is also
doing his own thing: [https://angel.co/tevye-krynski](https://angel.co/tevye-
krynski)

Talent hard to get and hard to keep maybe.

~~~
lpolovets
Where do you see that? His LinkedIn profile seems to suggest that he is only
working on boomtrain.

~~~
bruceb
On the link I listed.

------
argonaut
Adding to tptacek, some other things I dislike about the article:

1\. Trying to use ZenPayroll as an example of a vapid startup company. That's
one of the worst examples to use to try and back up the general sneering
undertone of condescension towards startups.

2\. All the random, vapid innuendo that's used in an attempt to frame certain
aspects of Silicon Valley as essentially stupid. Like mentioning that the GV
partner "apparently" went to a Miley Cyrus party. The weird descriptions of an
unrepresentative part of SV: the people at the hacker house (I am willing to
bet that there is a disproportionate concentration of "wantrapreneurs"). The
picking apart of random quotes (the haughty picking apart of SF locales as if
the author was a _true_ SF native). Millions of other random observations that
are in reality completely inconsequential.

~~~
trevelyan
But the author isn't smearing ZenPayroll. He's pointing out that even if the
company is world-changing, the employee has zero basis for making that
judgment and is buying into the mythos for other reasons.

The comments about that investor show the same obliviousness from a different
angle -- the guy was too busy partying with random celebrities to know what
companies Google Ventures was even invested in.

~~~
argonaut
> the guy was too busy partying with random celebrities to know what companies
> Google Ventures was even invested in.

Where was it shown that was the case? That's just your interpretation. In
fact, that's just your interpretation of the author's interpretation of the
author's friend's interpretation. You list that out and the ridiculousness of
the article becomes evident. In fact, I'm willing to bet that was the author's
goal. To make you think negatively of this particular VC by inserting random
innuendos.

I'd certainly agree that the engineer does not know anything about payroll.
And that doesn't matter. He's there to build out technology. Presumably the
people who started the company are experts in payroll systems. If the author
had met a wantrapreneur who had never worked a day in his/her life and wanted
to start a payroll company, that would be the absurd situation the author is
clearly looking for.

~~~
trevelyan
> Where was it shown that was the case?

The investment fell through when Google Ventures claimed it had a conflicting
investment. So the most charitable reading is that the investor was clueless,
since if he was aware of the conflict-of-interest from the start that would
imply he was simply trolling the founders.

~~~
argonaut
The ironic thing is that it's considered common knowledge that VCs won't
actually tell you the truth about why they're turning you down (because they
don't want to burn bridges - they try to reject you without actually saying
they don't like you). So it says more about the naivete of the author if he is
taking the VC's stated reason for rejection at face value than it says about
the VC himself.

And no, that's not _actually_ the most charitable reading. The most charitable
reading is that the investor actually did not know about the competitor. What
you stated is like saying "A guy tripped over a rock. The most charitable
reading is that he's clumsy," when in fact the most charitable reading is that
the guy didn't see the rock.

~~~
trevelyan
So... the most charitable reading is exactly the one I made above, when I
suggested the investor was simply ignorant of the competition ("the guy was
too busy partying with random celebrities to know what companies Google
Ventures was even invested in")?

Of course it is possible he just led them on. I don't personally think that as
likely, but given that the underlying thesis of the essay is that the
funding/business cycle in Silicon Valley encourages delusional thinking among
the young and naive, I don't see how the possibility detracts from the point
of the essay....

~~~
argonaut
My disagreement with your point is that you use the word _clueless_ , when
that is unwarranted.

I revise my point. The most charitable reading is that the investor did not
like the company, and gave the founders a polite rejection.

~~~
trevelyan
Polite rejection? None of the other dozens of investors who rejected them
managed this:

"In the car Chris pounded on the dash. Google Ventures was in! Google Ventures
was in! They’d soft-committed to at least $100,000, maybe even $200,000. The
partner had really gotten it. He’d totally agreed with their upmarket
strategy, unlike the investors who wanted them to focus on a no-cost-to-deploy
self-serve product. All he wanted was a revised operational plan and a clear
path to a Series A—a path that was a lot clearer when you had Google Ventures
on your cap table. The final thing he wanted was for Nick to send their deck
over to a guy he trusted on their market space, at a boutique firm in LA."

"Google Ventures’ coinvestor said he was keen to invest but had been
instructed by the GV partner in Mountain View to hold off; the GV partner,
when they finally heard from him, said he was waiting for a full meeting with
his partnership."

"When Chris and I returned to the house, they got the bad news that they’d
started to expect: Google Ventures was out. Chris seemed less resigned than he
often was, a little angrier and a little more uncomprehending. He wanted to
know why they’d given such an enthusiastic commit only to retreat. Apparently,
Nick said, the full partner meeting had revealed that they’d already invested
in companies in the personalization space."

Whatever words you wish to choose to make Google Ventures look good, there is
nothing wrong with the essayist treating this as an example of how the
funding/business environment plays on the naivite of many young founders.

~~~
argonaut
How is that atypical?

Investor says he is interested, needs more info. Investor says he needs to go
to meeting. Investor has meeting. Final decision is that the deal is off.

How is that any different from any other business decision? The emotional
reactions of the founders have nothing to do with the fact that this is a very
cookie cutter and not in anyway abusive business back-and-forth. No different
from the kind of back and forth you might have in negotiating between
different job offers / juggling interviews that coincide.

God forbid if you're an _enterprise company_ and you're trying to sell to
other companies.

------
mcguire
" _You can read an extended version of this piece by downloading it from the
WIRED app or as a Kindle ebook._ "

Holy crap, there's more?

------
pasbesoin
So, Wired has an "hn" query string qualifier? (See the OP URL.)

------
LordHumungous
Lol. The kids once again learn there's nothing new under the sun.

------
imperialdrive
that was loooong... I'm using TLDR for the first time, thank you

~~~
wololo_
there's an extended version if you have a kindle

------
yixizhang
oh gosh it's too long. who can post a brief version here? if it's a story,
what's the end?

~~~
joshu
two guys do vague personalization startup. they're very anxious and unhappy.
have trouble getting investors. then some sorta commit. then venture firm
sorta commits. they are briefly elated, then anxious and unhappy. then some
others sorta commit a bit more. then venture firm backs out. then some others
invest anyway. they remain anxious and unhappy.

(i've helped a lot of startups in my time; the story sounds vaguely correct.
certainly i've seen the "we're in, we're out" dance plenty of times.)

~~~
pan69
Disclaimer; I have no experience with investors what so ever.

To avoid the "we're in, we're out" scenario would it be possible to ask
investors to sign a commitment agreement when they agree they're in?

E.g. an investor says they're in for $100k. You then ask them to sign a
commitment agreement that states when they change their mind they owe you 10%
of the proposed investment, or something like that.

Would this weed out the wanna be investors and guys who are tip toeing around
so they can stop wasting your time?

~~~
brc
You seem to think investors are some sort of ATM waiting for the right pin
rather than humans with their own set of decisions, problems and multiple
priorities.

Think of it like dating. You'll get a lot fewer dates if you ask someone to
commit to a series of four dates as a condition of accepting the first.

It's how it is done. That's it.

~~~
pan69
> You seem to think investors are some sort of ATM

No. I don't seem to think that, at all.

Let me explain it again, just for you.

A common problem for startups seems to be dealing with investors who say
they're in and a week later they're out and then later they're in again and
then out, etc.

As a start up you'd like "commitment" from an investor because if an investor
claims they're in and then they're out, it would be immensely frustrating
right? It means you can't commit to hiring that great developer or rent that
office space you so desperately need or pay yourself some salary for a change.

You might have met with an investor a few times and at some point they "say"
they are very interested and they'd like to invest $100k in your idea. If you
then explain to them that you'd like them to sign a commitment agreement to
see how serious they actually are. If they sign it they can still change their
minds, it will just cost them x% of the proposed investment. If they are not
willing to sign it might just show that they're not actually interested after
all, they just like to keep you around just in case something else falls
through.

It's just business right?

~~~
mark-r
You're forgetting who has the power in this relationship. It's the people with
the money. Remember the Golden Rule? "He who has the money makes the rules".

