
The terrifying rise of the political entrepreneur - chwolfe
http://www.washingtonpost.com/blogs/innovations/wp/2013/05/23/the-terrifying-rise-of-the-political-entrepreneur/
======
rayiner
The cognitive dissonance in Silicon Valley is amusing. You think VC-istan was
ever not political? Where do you think VC's come from? They don't grow on
trees. They grow in McKinsey and Morgan Stanley, where they learn to deftly
navigate corporate politics at the highest levels. Thats not the only thing
they learn, of course, but it is a fundamental pillar of the training. Silicon
Valley is owned by Wall Street (what do you think it means for VC's to "raise
funds?") and favors those who can play that game.

Not that I think this is a bad thing mind you. It just is. It's like dating-
it's futile to complain about the rules. They're just the rules. You're trying
to convert capital into a successful business, so you gotta play by the rules
of the people who have the capital. Which is true for pretty much everyone.
Being in Silicon Valley doesn't insulate you from the reality that exists
everywhere else.

~~~
pg
Actually the trend among VCs lately is to hire people with operating
experience as partners: Alfred Lin, Chris Dixon, Keith Rabois.

~~~
atdrummond
This has been replicated in traditional private equity as well, especially
when the IPO market softened significantly during the financial crisis.

------
basseq
The sweeping generalizations and alleged industry-crossing trends in this
article undermine a very basic truth: that a small minority of people are
successful by kissing ass rather than kicking it.

The author has set up an imaginary "nobility" (including himself, presumably)
of people who's intentions are—by his definition—"pure". You're either an
entrepreneur or a "corporate stooge". There is no middle ground. There is no
one in a Fortune 500 company who is responsible for delivering results,
apparently. (Unless we're defining "entrepreneurs" as "anyone who is not a
corporate stooge," which seems like a stretch.)

Moreover, there's apparently no one who can both play the "political game" and
deliver results. As if the mere presence of the former taints the well, so to
speak.

I think the fact of the matter is the politics—relationships, perception,
track record—do matter and should matter. If you think you can build a good
product and people will beat a path to your door, you're horribly naive. As a
VC faced with two equal products, would you rather back someone who's already
built a product and had an exit, or someone who's doing this for the first
time? The former is certainly lower risk...

------
pg
This would be accurate if time were going backwards. The world it describes is
how things were in the 90s.

For the last two decades, at least, the power of hackers/makers relative to
MBAs/smooth talkers has consistently increased, and that trend shows no sign
of slowing down.

~~~
amarghose
> hackers/makers relative to MBAs/smooth talkers

I think the article is more referring to Hackers/Makers that are also smooth
talkers. Obviously an MBA/Business guy with no technical experience/knowledge
is not going to be able to pull off any sort of political entrepreneurship in
VC-istan.

~~~
tptacek
I stopped trying to parse this comment just before it gave me an aneurysm as I
tried to resolve what "VC-istan" might refer to and how non-tech MBAs had no
influence there. VC's fund tons of companies headed by operators with no
technical experience (look at some 2012 portfolios to see this). It is eas-
_ier_ to get external funding if you're a tech with no company operating
experience, but it still not eas- _y_ to do that. So it's probably not
"obvious" that MBA/business types have no influence wherever "VC-istan" is.
Which is I think a good reason not to start calling it "VC-istan".

~~~
MisterWebz
The word "VC-istan" has been used a lot in this thread and even elsewhere, I
don't understand why you put so much emphasis on not understanding what it
means.

~~~
tptacek
For example: because the commenter upthread doesn't appear to know what it
means, since they think that MBAs have no influence there. Because it doesn't
mean anything; it's a slippery term, meant to diffract understanding rather
than focus it.

------
wasd
I really don't like this article. I'm not saying that the author is right or
wrong, but what is the author trying to accomplish? They aren't helping change
the ecosystem or bring new conversations to the table.

I feel like this feeds to pettiness and bitterness toward fellow entrepreneurs
that you don't feel "deserve" it. Who cares what they raised? Who cares who
they sold to?

If you're doing what matters to you, it shouldn't matter.

~~~
dasil003
It definitely reads as envy or sour grapes.

One thing I always have in the back of my mind is to work hard to avoid hating
anyone because they're good at what they do, and it's hard work because the
human psyche is tremendously good at finding justifications and pulling the
blinders over oneself. Tearing someone else down is the childish and easy way
to build yourself up, but it's only in your own head, it doesn't actually make
you any better and it doesn't impress anyone around you.

Hate should be reserved for people who really do bad things, and even then
we're probably better if we can avoid the hate entirely.

~~~
michaelochurch
_One thing I always have in the back of my mind is to work hard to avoid
hating anyone because they're good at what they do_

Stop right there. None of us hate people who are good at what they do. When we
find someone who's better, we seek that person out and try to learn as much as
we can. I'd believe this to be especially true on HN, where there's an above-
normal proportion of top-5% programmers, many of whom rarely get that
opportunity to learn from someone of truly superior skill.

The problem with political players is that, while they suck at what they do,
they're great at hacking evaluation processes and making themselves look
superior. That hurts everyone (except them) because their shitty decisions and
ideas result in a widespread proliferation of crap.

~~~
dasil003
Sure, sometimes. But if your company is not doing so hot and you see some
ridiculous acquisition and think to yourself how the fuck did that happen,
it's easy to jump to the conclusion that it's political bullshit when in fact
you don't really know the whole story. You don't know what the tech is or what
the real numbers are or what the purpose of the acquisition was. I think it's
very easy to jump to a conclusion on an emotional basis, and our belief in our
objectivity is what makes this all the more treacherous.

------
tbrownaw
I don't get it.

Convincing people to give you large sums of money has _always_ been based on
gaining their confidence. And people being what they are, that confidence has
always been based more on how you present yourself than on any objective
logical measures.

~~~
bitanarch
What if I tell you that, there're a bunch of people who do nothing but present
themselves? And, when they're co-founding a company with you, they still do
nothing but present themselves (not your company)?

------
DoubleMalt
As Cory Doctorow aptly stated: every good eco system has parasites. I'm sure
these types exist, but they are an inevitable side effect of the properties
that make the eco system successful.

~~~
jacques_chester
There's a good case to be made that parasites make ecosystems, not the other
way around (the "Red Queen" hypothesis).

------
NoPiece
_Now, I’ve decided to refrain from naming names, since any specific mentions
would almost certainly induce a wave of denials and distract from identifying
and, hopefully, ending the underlying trend._

You've identified a "terrifying" trend, but you don't want share any names or
substantiation because it would distract from the important discussion you
think we need to have. That's really shoddy journalism.

------
johnrob
Even if there do exist 'political' entrepreneurs, they don't come at the
expense of normal ones. Get users, make sales, and you will succeed.

~~~
mindcrime
_Get users, make sales, and you will succeed._

That's the way I try to look at it. Nobody locally (RTP, NC area) seems to pay
much attention to us or give us any credit, where when I look at what we're
doing I can't help but think "What? Are you people crazy? Do you realize how
fricking awesome this stuff is?" But then I have to acknowledge that I'm
(very) biased, and that our focus should be on identifying, connecting with,
and having conversations with, our future customers. Getting press mentions,
getting invited to events, accepted into accelerators / incubators, etc., all
those things ultimately play second fiddle to customers.

IF the day comes when we have paying customers and are growing, then the
accolades and attention will come. Or not. In the end, it doesn't really
matter. If we build a profitable, growing, successful business, it doesn't
_really_ matter if we get any accolades or not. Although it does pain my
"inner Tony Stark" to say that, as I really want to have a big "Fogbeam Expo"
one day. :-)

Net-net, I just try to remember "we haven't proven anything yet".

------
venomsnake
Well ... I think it is much simpler than that - startups are in a buyer's
market. We have oversupply of startups concentrated in few relatively narrow
classes of problems. So the most connected people win.

Which is paradoxical because the uncharted areas today are bigger than ever -
but there are not much ships sailing there. Maybe the "solve problems that you
have" mantra is becoming too influential. So we have two tracks - one of
people with common problems and the tech skills to solve them and the other -
much bigger - people that have real problems but lack the skills to solve the
problems.

But we got success stories like Raspberry Pi - when people tried to solve a
problem they didn't have but created something awesome in the process.

And just today Google bought a flying wind turbine startup - and it does not
look like aqui-hire.

------
dangrover
I've gotten hung up on this before, but after two years away from the Valley,
I realized a lot of this stuff is small potatoes.

We've all seen companies that have been involved in multi-million dollar
transactions on pure hot air and politics alone. These can seem discouraging
to people who want to build actual businesses, and deals like Tumblr and
Instagram are in another league entirely.

But, for most of them, you really have to look at the actual magnitude of
these things (on a financial level) before you decide to be indignant about
them.

As a thought experiment, if you take the amounts of money involved in typical
fundings and even a lot of exits, and compare it to amounts of money involved
in things _outside_ the startup ecosystem, it can be thought-provoking, even
if you're comparing apples to oranges.

For instance:

\- The project budgets of large consultancies. (e.g. I worked on a routine
project at a consultancy once where the budget was $12M.)

\- Smaller government agencies and civil engineering works (e.g. new Central
Subway on 4th St is around $900M [how much politics do you think is involved
in _that_?])

\- Real estate listings

\- The amounts invested in even smaller hedge funds/mutual funds. (I think Zed
Shaw had a piece on this)

\- The profits of bigger SV companies that actually are profitable (Google,
Apple, etc). Or, the budget of some given department in such a company.

\- Real acquisitions outside of tech (see the WSJ on an average day for
figures that can make your head spin).

I know these things are obvious, but it really needs to be stated sometimes.
It's hard to rationalize big numbers unless you really think about it. And you
can get tunnel vision living in the Valley.

$5M here and there is chump change in the grand scheme of things in the world
that venture capitalists and large enterprises inhabit. There is bound to be a
certain amount of noise you see observing these transactions, and definitely
politics. Fun to watch and comment about, but not _really_ important.

While these aren't grave injustices, I guess I would concede that when taken
wrong, it does have some chilling effects for people like the OP and myself.
The current business climate does create some awkward and unnecessary dilemmas
for people in the uncanny valley between being an entrepreneur and an
employee. There are plenty of smart people who, in a perfect world, might go
for starting a fairly medium-risk/medium-return sort of business. But with all
the "smart money" on crazy startups impacting everyone's salaries, the rents,
and the news cycles, it changes things. If you do go ahead with it, you might
be tempted optimize your business at least partially for a potential
acquisition and spend more on generating hype than on the fundamentals. Or you
might get such a compelling offer from one crazy, poorly-proven but well-
funded and well-connected startup that you forgo your perfectly viable plan
entirely.

So, the odd politically-motivated acquisition or funding shouldn't make you
feel bad, but the cumulative effects can be suffocating for sure!

~~~
michaelochurch
You said you left the Valley. Where'd you go? How do you like it?

I'm in New York. In 2005-7, it just seemed obvious that if you were young and
wanted to have a career, you moved to the Valley or New York. However, I don't
think it's that way anymore (if it ever was).

I'm trying to figure out where the future is, because the Bay Area's been
parasitized by NIMBY and acq-hires and lost its vitality, and New York VC-
istan's pretty damn uninspiring. Austin and Seattle seem like strong
candidates.

~~~
api
I'd personally pick Austin if I were looking for an already established major
tech hub that is not one of the coasts. It's got a fun atmosphere too, lots of
music and good night life.

I would also look at Atlanta, Boulder, Pittsburgh, Philadelphia, Chicago, and
Detroit. The latter is a really interesting contrarian pick: ultra-cheap real
estate, neat history, and an interesting subculture of hacker/maker types.

<http://www.omnicorpdetroit.com>

Its dangerous reputation is mostly just reputation, but don't leave valuables
in your car. Vehicle smash-and-grab crime is very high.

~~~
aswanson
I'd advise to stay the fuck away from philly. There is no startup energy in
this area.

~~~
tmcneal
As another data point, I've found Philly to have a lively and close-knit
startup culture, albeit much smaller than NYC and SV. Gabe Weinberg (founder
of DuckDuckGo) keeps an on-going list of links related to the Philly startup
scene: <http://foundedinphilly.com>

I'd be curious to hear what ways you think Philly can improve.

~~~
aswanson
Cool, I'm familiar with Gabe and salute his efforts. The city badly needs
him/them. I was born in the city and went to college there so I hope it can
become greater than what it is. The main thing, imho, that needs to happen, is
to get the word out amongst college-aged people in the area and the attraction
of more venture funding. The general attitude of the people there is what pg
refers to in one of his essay's as the 'default'; graduate and work in a large
corporation. This formula is not working anymore and the startup attitude
needs to affect Philly and the rest of the country proportionally to the new
state of affairs.

------
pshin45
It's both surprising and alarming to me how many VCs cite "emotion" (rather
than logic) as a main if not primary factor in their decision to fund a
startup or not. I'd venture (no pun intended) to say that this is the root
cause of much of the "politics" and cronyism described by the OP, and I don't
think YC is immune to this either.

Sure, we can talk all day about "human nature" and how "those are the rules of
the game", but there's gotta be a better way for investors to make funding
decisions than "trusting your gut" or "I have a good feeling about this team."

Yes, VC has changed and evolved over the years thanks in part to new
institutions like YC, but the overall VC landscape still reminds me way too
much of that scene from the based-on-the-book film "Moneyball" where a bunch
of old baseball scouts are sitting around a table discussing who to recruit
for next season, and they keep recommending players based on fluff and BS like
how good a guy looks swinging the bat (vs. actual hitting stats), how
confident he looks, how good he he looks with his shirt off, etc.

This all leads me to believe that, while things are getting better, there's
still a long ways to go before Silicon Valley and michaelochurch's so-called
"VC-istan" can be considered anything close to a true meritocracy.

~~~
hga
The problem I see with your complaint is that any early venture funding is a
bet on people ("I have a good feeling about this team") and there's no
escaping that.

The real Moneyball was based on using better metrics to choose players ... in
a rigorously constrained game. Starting a business of the sort we're talking
about is entirely different, and I see little in the way of opportunities to
apply logic to the choosing people question.

~~~
pshin45
I agree that baseball is easily the most "rigorously constrained game" there
is, but I don't think that's reason to dismiss the use of more/better metrics
in assessing startup founders and teams.

The same argument you make was once used to dismiss the value of metrics in
other more free-flowing and less-constrained sports like basketball, but
analytics has become a staple of the sport ever since. [1] And since then,
advanced metrics have even found their way into Mixed Martial Arts (MMA), of
all things. [2]

Sure, starting a company is obviously very different from sports and building
a sports team, but I don't think it's THAT different. Sports is essentially a
simulation of real life, and I think the move to using advanced metrics in
startups is inevitable. If you think about it, even startups are a highly
constrained and simplified (i.e. smaller-scale, less people, more uniform
"path", etc.) version of running a big business. I see no real reason, besides
general skepticism, why metrics cannot be used to improve the startup
fundraising process.

[1] <http://en.wikipedia.org/wiki/APBRmetrics>

[2] <http://www.sloansportsconference.com/?p=8966>

------
lettergram
If anyone read the Fountainhead you can call those groups Keating's and
Toohey's

------
Aqueous
Everything is political, because everyone else is political, except for me -
I'm not political.

The winners of the political game are the same individuals who reinforce the
political game, and the people who complain about the politics are inevitably
the ones who can't muster the energy for fake affection, enthusiasm, flattery,
obsequiousness and therefore lose the political game.

As soon as something has become a culture in itself it is already too late -
it is and will forever be political, til the very beginning of the next big
culture shift, which will also inevitably become political.

It's self-selecting, and it's been going on since the beginning of history.

The only answer is to not give a shit. To not complain about politics, or if
you happen to be a winner of politics, to be self aware enough not to then
turn around and reinforce the game that you just won at.

------
tudorconstantin
The OP is presenting this as if the objective of every startup is to get
fundings or to get acquired. It's not.

The objective should be to help a big number of users with something and make
profit.

Funding should be just a tool to help you achieve that if you can't bootstrap
your business. If there are VCs who fall for tricky presentations, they'll
soon realize that it is not that fun to lose money investing in startups with
no future.

------
orangethirty
The rise? Has anyone not paid attention to history? Entrepreneurs have always
directly influenced policy.

------
skreech
If there are two camps, these would rather be 'those who want to build a
business' (sending invoices, paying customers, etc) and 'those who want to
make a big flip' (with major financial rewards)

Since VCs (and indirectly LPs) are in the business of growing money, they will
follow the money.

------
jezclaremurugan
Its not as scary as it first appears as VCs have a huge incentive to correct
this while in the corporate world, the incentive to correct it is quite less.

------
michaelochurch
I feel like the douche-pocalypse described by OP has already happened. It's
not a future threat. It's how most people have to live. The Apple founders
would be unable to get funding these days. They wouldn't even get a meeting.

VCs have set themselves up as executives (maybe more like record industry
shot-callers than steel-company management) of the first postmodern
corporation. If you don't take their terms, they can't exactly fire you, so
they fund your competition. Tech press is a weird sort of HR organization, and
so-called "startup CEOs" are merely product managers within this weird meta-
corporation that is just as badly stacked against software talent as a 1970s
steel company.

It's having pernicious effects on the software industry, which is now a hotbed
of mediocrity utterly opposed to what it used to be.

I think what killed software entrepreneurialism for good was the rise in
housing prices, coupled with the student debt epidemic and the cost of health
insurance. Unless independently wealthy, no one can actually afford to
"bootstrap" in these locations, so true entrepreneurial activity has been
replaced by VC-istan careerism.

I don't know where the future is, but it's not in Silicon Valley now-- no
place where middle-class houses cost $1.2 million is anywhere near the
future-- and it's not in New York, and it may not be in the U.S. at all.

On a side note, I wish people would stop calling the VC ecosystem in the Bay
Area, "Silicon Valley". That's why I use VC-istan. They're different things.
Silicon Valley has a 70-year history and it hasn't always been VC-istan. VC-
istan is just how it died.

~~~
tptacek
I've been doing startups since the mid 1990s†. There is no reasonable argument
that says that it is harder for tech people to get funding now than it was in
the 1990s. It is much, much easier to get funding in 2013 than it was in 1999
(which was the last time I got funding):

* There are more investors doing deals now than there were then

* The deal size needed to start any given company is lower and investors are playing along with that instead of holding out for deals they can shove 8MM into

* More technical people with no previous operational experience are getting funded than got funded in 1999 --- you can just look around to see this; bubble companies still needed grey hair and/or Ivy MBAs to get off the ground

* Companies have better pre-A-round options (particularly, syndicated convertible note funding) than they did in the 1999s, when "angel investor" meant "best friend's rich uncle gives you $200,000"

* There are more people with operational experience in software companies staffing VC firms

In 1999, if you were a software developer with a good idea, a working
prototype, and just a little bit of traction, but no experienced operators and
no inside track, you had no realistic chance of getting off the ground with
external funding of any sort.

Your whole argument stems from a flawed observation and so, I think, falls
apart when the observation is shown to be incorrect.

I do not like venture fund financing either, but the hyperbole you bring to
these arguments does my own dissatisfaction with the model a disservice by
presenting an easily dismissible caricature instead of an argument.

† _From 1995: 1. Bootstrapped ISP with mid-double digits FTEs, 2. Angel-funded
product company that exited successfully, 3. Venture funded product company
that failed, 4. Venture funded product company that eventually exited
successfully, 5. Matasano; I had key/sr/mteam roles at all of them and founded
2._

~~~
lifeisstillgood
I would suggest the two of you are describing different parts of the elephant.

I was deeply struck by Venkatesh Rao's arguments [#] that entrpreneurlism now
is simply a new form of hiring than genuine disruption. Michaels comment that
VCs are the execs in some new corporate format has the ring of truth.

However, it certainly seems there is more capital, more widely available, and
more fairly accessible both in the US and elsewhere. This means that a vastly
increased number of entrpreneurs will be able to take flight and not all of
them will be lacking the leverage of insight into tidal forces that Michael is
alluding to.

Anyway I need sleep, but it seems to me that there is an elephant in the dark,
it is the shape of Western workforce in the future - and we are all trying to
describe its shape.

[#]
[http://www.forbes.com/sites/venkateshrao/2012/09/03/entrepre...](http://www.forbes.com/sites/venkateshrao/2012/09/03/entrepreneurs-
are-the-new-labor-part-i/)

~~~
tptacek
The notion that entrepreneurship is simply a different form of hiring is a
popular notion that bears no relationship to reality. Operating a company is
nothing at all like having a job. Operating a company that is cash flow
positive after paying market salary is an extraordinarily privileged position
relative to any reasonable (ie, not a first baseman for the Yankees)
candidate/employer relationship in the market.

The thing that makes people believe that entrepreneurship is merely a hiring
challenge is that most companies fail, and in this market, tech talent is so
scarce that a failed startup team can still generate a premium. This is called
"a safety net", and it is a good thing. You should be extremely wary of the
kinds of people who argue that safety nets are a bad thing for tech startup
people. Companies don't do their best work when they're dangling their
development team's feet over the prospect of having no income and no health
insurance if they fail.

The fact that most new businesses fail is not a new thing. Most new businesses
in all sectors fail. That's why the rewards for financing a successful one are
so high: that capital has been put at extreme risk.

~~~
lifeisstillgood
I completely agree that a safety net allows you to concentrate on good _long-
term_ work and is invaluable.

But I also glimpse a new way of organising work. New ways of bringing together
teams and rebuilding old networks, flexible remote working making this
possible in ways not seen before. Add into the mix totally new market-types
opening up (Indian micro-products where you need to think and capture value at
fractions of a rupee at a time will demand insights that no-one walking the
streets of SV will ever grasp)

I doubt that new entrepreneurialism is going to be a better sort of linkedIn
for HR departments - but I do think that the (tech) world of work I will
retire from will be radically different to now - and there are advantages in
knowing which way the elephant is pointing.

