
A Redditor about the problem with today's Silicon Valley startup community - ryanio
http://www.reddit.com/r/startups/comments/x7wah/dae_just_totally_ignore_the_startup_community_and/c5k7534
======
tptacek
Three thoughts:

First, this comment on Reddit isn't fundamentally better or more informed than
any of dozens of comments that have expressed the exact same thing on HN. I'm
not complaining, so much as again remarking about how "A Reddit's comment
about $X" has become such a powerful signal of quality.

Second: there's a grain of truth† to the "bad decisions by VCs" or "working
for VCs", but he's overplaying it in this comment. There's two countervailing
forces here: (a) VCs don't care as much about which "flavor" their portfolio
companies are producing than they do about the economics: there are indeed
plenty of solid businesses you can grow that aren't VC-compatible. But you
can't fault the VCs for that: when you took their money, you promised not to
go down the slow path. And (b) when companies are doing well, VCs tend to get
out of the way. It's when you're not doing well that the board's opinion
starts to matter.

Third: The numbers he's using here set off alarm bells for me. He calls
1-10MM/yr companies "lifestyle" companies and "100MM+/yr" companies VC-style
companies, and implies 10-100MM/yr businesses are in a no-mans-land. Uh, no?
Companies doing 20-30-40MM/yr in revenue will probably have investors beating
down their doors. I don't believe anyone is shunning companies doing 8 figure
revenues.

† _The first VC-funded company I worked at/cofounded was derailed by a crazy,
VC-instigated decision to build out a CDN to go head-to-head with Akamai. But
even then, our lack of traction is what set the scene for that dumb decision._

~~~
kalininalex
"But even then, our lack of traction is what set the scene for that dumb
decision."

But that's exactly what may be the problem with VCs. Sometimes you'd have to
go through a dozen of ideas before you find one works. If you're frugal enough
and can keep the company afloat for a few years, you're likely to succeed in
the end.

But VCs may push the company to burn all cash in the next 4 months pursuing
the idea #2. And if it doesn't work - you're down and out.

Very few businesses have the very first idea paying off handsomely. This may
make VC's capital a very high-risk proposition: you either hit the jackpot
with your first idea or you end up with nothing.

~~~
tptacek
No, you're mixing up a chicken/egg thing here. It's not the problem with VCs
that, if you're frugal, you can make an early round last until you find the
right idea. You can't have that early round money without promising a certain
kind of return to the VCs. It's your fault (or, mine, in this case) that VC
money has been put at risk.

You can't moralize about VC's "pushing the company to burn all cash". It's the
VC's money you're talking about The VCs invest with the expectation that
you're going to go for broke. That's the model. Most startups fail, even the
carefully run ones. The 1-2 successes need to pay back the failures and then
some.

------
dglassan
I have similar feelings to this guy. I've lived in the bay area my entire
life, although I'm only 25 so I was young during the dot com bubble.

My feelings are that Zuckerberg made it "cool" to start a company again.
People had such a bad taste after the dot com bust and starting a company was
viewed as very risky from around 2000 to 2005. Then Zuckerberg came in with
this amazing success story and now everyone wants to start a company again.

Sometimes it bothers me that people throw around the word "startup" so
casually now. There's kids that are "doing a startup" but the only thing
they're building is a gmail plugin or "a better to-do list that will change
the world". We don't need any more of this crap. It seems like some people
just want the founder title so they can broadcast to their LinkedIn network
and impress people.

~~~
dustincoates
>It seems like some people just want the founder title so they can broadcast
to their LinkedIn network and impress people.

Reminds me of this quote from Ronnie Coleman: "Everybody wants to be a
bodybuilder, but nobody wants to lift no heavy-ass weights."

~~~
thenomad
And a quote from Peter De Vries - "I love being a writer, but I hate the
paperwork."

~~~
bps4484
There are so many variants to this quote I think it's impossible to tell where
it originated.

"Everybody wants to go to heaven, but nobody wants to die." - Unkown (at least
to me)

"Everybody wants to be Seinfeld, but nobody wants to be Jerry Seinfeld" -
Chris Rock

------
ThJ
I'm surprised. Not everyone here is blindly worshiping the big startup god. I
see so many posts here about new websites that do mildly useful things, but
where's the revenue stream?

I'm the maker of an art community (ArtGrounds) and a multi-user painting
program (Sketcher), and I know how hard it is to make money on ads. Even when
I had thousands of daily visitors (the site is seeing a slow decline), I was
still making pocket change. And even then, it was nigh impossible to get
people interested in renting their own private Sketcher rooms.

Part of it is probably that I don't understand marketing, but the thing is
that, in most cases, you must have a _very_ compelling product that's
available nowhere else (at least at that quality level) in order to sell it.
And there must be demand.

Contrary to popular belief, you can't really create demand artificially. All
you can do is tap into people's itches, and scratch them. "I wish I could stay
in touch with all my friends" becomes Facebook. "It's so impractical to have
to tell everyone where I'm going in case they need to call me" becomes the
cellphone.

There's more to it than that of course, but looking at all these trendy
startups, it seems that they don't even care about the basics much of the
time. The products just seem awfully superficial and simple.

------
alex1
It's pretty disappointing to see this at the top of HN. Some of the comments
here do have some merit but I feel there's a disproportionate amount of hating
and anger. There was a comment made by pg a couple days ago that I think
definitely belongs here so I'm going to paste it:

 _I think they're not so much dense as bitter. There's a subset of HN readers
who regard startups as a whole as a sort of con game, and are angry that the
participants get so much attention. There may not be that many of them, but
their anger makes them disproportionately active as commenters and voters._
[1]

[1] <http://news.ycombinator.com/item?id=4293786>

~~~
thaumaturgy
I clicked the link hoping to read something substantive about an actual
problem in SV. Instead, so far it's looking a lot like a group of people at a
party getting together and complaining, "this party is lame."

I kinda hope this submission gets killed, honestly.

~~~
colkassad
These posts are good once in a while to keep sycophancy and group-think in
check.

------
xfax
I'm in Chicago and I see this trend here as well.

What's worse is that VCs and Angels in Chicago are perhaps, to an extent, more
clueless about building technology businesses. Sure, money here is not as
plentiful but I still see frivolous 'apps' being touted as businesses and
getting accepted into incubators.

Perhaps it is the whole VC model that is to blame. By definition, VCs require
companies to 'exit' through either acquisitions or IPOs. Their incentives are
not aligned with building strong businesses that can thrive for years on end,
but rather businesses that might 'seem' attractive in the next 3-5 years so as
to attract potential acquirers. Only if a business shows unprecedented levels
of growth do they let it do it's thing and thrive (Facebook, Google etc.).

Since 'social', 'mobile' and 'big data' are the buzz words these days, VCs are
pouring money into these ridiculous and frivolous ideas in hopes of an
acquisition. It's only fun while it lasts and I see a world of hurt coming
their way.

------
loudin
This article seems mixed to me.

If you're building a start-up now, you have two options the way I see it. 1)
Build a sustainable business that charges some form of money. 2) Build a
killer feature that attracts users and allows you to get bought by a larger
company.

Right now, the larger companies are flush with money. Corporate revenues are
outrageously high, particularly in the tech sector. So, the second option is
just winning out right now because that's where the money is.

If this were to change and there was less investment from the existing players
in tech, you'd see more sustainable businesses.

The complaint that the tech industry is not making any good tech is akin to
people's gripes that the movie industry doesn't make good movies. For tech,
the money right now is in features. For movies, the money right now is in
mindless blockbusters. They're both businesses and like any good business, the
players on the field optimize their strategy according to where the money is.

------
veyron
To understand why swing-for-the-fences mentality prevails, you have to
understand the VC model.

People raise funds and generally shoot for +10x exits. So, for a particular
vintage, a VC fund of 10M aims to grow to 100M. They are squeezed for time
(many funds are for 10-14 years, some shorter, some longer) and can't
necessarily sit there and let companies bubble.

If you are presented with such a large hurdle, the easiest way to do it is
swing for the fences and see if one gains traction. Generally, the one that
gains traction will multiply your money far enough to cover for the other
mistakes you made.

------
PaulHoule
i'm far away from it all, but from what I see the "build a feature for
Facebook" business plan is now passe in the valley.

Look at how Pintrest comes from Iowa. I can think of more than one company in
L.A. that wants to be the "next facebook" The exciting area in social
networking is getting new groups of people involved in new activities and also
bringing social media closer to other media. The tech skills in SV matter less
than they used to and it's really an issue of marketing now... The unique
perspectives that people bring from other parts of the world will be key.

People in the valley and SF seem to be more interested in infrastructure and
SAAS plays, as well as transaction-oriented communities like AirBnB and stuff
where you pay $X a month for a subscription. You can certainly find outrageous
examples, but the better angels and VCs are (for the most part) making good
decisions.

------
alecco
This is now banned from HN front page, after being nº 1 for a while.

I might not agree with OP but this is more censorship of dissent. Very poor
community management.

~~~
vertr
Lame. 166 points, third in rank on the front page, and shoved off. I guess the
truth hurts?

------
BallinBige
What ever happen to building a legitimate business. Everyone is so worried
about getting published in TechCrunch, Pando and Alley Insider. They pump and
dump startups everyday. Most unethical thing around

------
ChuckMcM
I wonder if he miscontrues the motive. Sure every VC wants to fund the next
Google, Facebook, or even Instagram because like anyone rational they would
like to get an insane return on their money.

And some of them will listen until you clearly aren't such a business and then
tune you out.

But how is that any different from a developer who wants to be a kernel
engineer and won't listen to any job offers for doing database development or
network programming Etc? Sure it could be just as rewarding, and they could
learn just as much. But at the end of the day, somewhere in their brain, they
have this bit set that their self image is tied up with being a "kernel
developer" not "the guy who built a mySQL killer."

The cautionary tale is to try to look at things that you internally value
rather than things you think you _should_ value.

A short anecdote; When I got my first stock in Sun Microsystems as part of the
employee purchase program it just sat there. My advisor suggested, as most do,
that I diversify a bit (We were talking something like 150 shares so it wasn't
a big position :-). Anyway, they explained that investing in stocks that
suddenly doubled, tripled, or quintupled in price was thrilling and sexy, but
ultimately unpredictable. Whereas investing in stocks that moved up 5 - 15%
and then selling them and investing in something else that moved up a few
percent. Was like a ratchet. You took $1,000 and each month you tried to add 3
- 5% to it. That grew your investment slowly but surely. Not as sexy but a
better long term strategy.

EDIT: To be more clear, the strategy my advisor uses is to make a number of
small investments shooting for growth in each of them. That doesn't always pan
out but having a number of bets in the pool gives a better over all return
than a single big bet (which is what I was trying to communicate), getting 80%
return on something is great, but 80% return on 1% of the total portfolio
means it contributes .8% to the overall gain.

~~~
to3m
Hmm, at 3%/mo, your opinions of what count as "slow but sure" are a good deal
less slow than mine!

So... um... what did you say your adviser's name was again?

~~~
ChuckMcM
This is what all money managers do, and it isn't that every position ratchets
up that month, or does so as much as you would like. Depending on the size of
your portfolio you might have hundreds or thousands of different positions
which are each their own little bet that this stock at this time is going to
make this move. When you combine all of those various moves over time you can
plot your rate of return on a global scale. Money markets or other mutual
funds to the same thing only its not as visible, it rounds out to a number
that appears once a month on your balance statement.

------
anmol
This post completely ignores VC-startup fit, fund size, investment strategy
and other factors.

There are many different kinds of (institutional) VCs. A firm with a $100MM
active fund invest very differently than A16Z with a > $1 B available for
investment. The ideal ownership stake within the portfolio company, comfort
level with higher valuations, investment allocated across multiple rounds for
a portfolio company all are a function of fund-size and investment strategy.

As the active fund size increases (e.g. $500MM or $1B), the fund is biased
towards making big investments and hugs wins are needed for LP returns. When
fundraising for your startup, its critical to understand if these dynamics are
going to be a cause of conflict between your investors and you. Just because a
VC firm invested in Facebook, doesn't mean their dynamics make sense for your
startup.

------
xfax
On an unrelated point, this is one of the reasons why it bothers me when
someone suggests that everyone should learn how to code.

Not that there is inherently anything wrong about learning to think like a
programmer and problem-solve; the problem is that people equate learning to
code to learning use the RoR/Django or some iOS framework. This is a direct
result of all the dumb money being poured into stupid ideas - it leads
everyone to believe that their time is best spent learning the tools to give
shape to their photo-sharing app.

------
bocmaxima
This reminds me of something Paul Budnitz (kidrobot founder and former SF
resident) wrote after visiting SF recently:

 _Internet millionaires driving around on cell phones drain the city’s
sparkle. In the old days people who made tools built factory towns on the
Ohio. It was honest work but not glamorous. Today the toolmakers work in
software and they have been elevated in the culture, especially here. But
there is a distinction between making an app and making art. A city of
toolmakers imagining themselves as artists is barbaric, heartless, empty. You
feel it in the crowd eating dinner at the many expensive restaurants. People
speak in sound bites and are both assertive and lost._

[http://paulbudnitz.com/post/26436899116/san-francisco-is-
odd...](http://paulbudnitz.com/post/26436899116/san-francisco-is-odd-it-feels-
like-it-doesnt)

~~~
spitx
He seems like one of these folks every generation produces who are wistful for
things gone by. Plus the sentiment isn't without its plugs, albeit subtle.
"The new bike lanes are half-built then they disappear. Cars choke the city
and cover buildings with soot." Nice self-serving platitudes from a bicycle
seller.

~~~
Adrock
Maybe he's selling bikes because that's what he believes, instead of the other
way around.

------
mangoman
I think the reason the word "startup" is thrown around so much isn't only
because its fashionable. "Startup" has come to encompass a whole bunch of
different notions (project, feature, app etc), and the only thing that is
consistent with everyone's own definition of the word is user-facing.

User-facing is not a business.

------
malachismith
There are as many kinds of VCs as there are entrepreneurs. Some VCs are
untrustworthy and some are even dumb (as stated here). Just like some
entrepreneurs are ignorant and some are event dumb (as illustrated here). But
there are fantastic VCs out there as well. I'm on my fifth startup and I've
been lucky enough to have worked with a number of truly fantastic VCs. FWIW...
the clear give away that someone is talking shit when they talk about how VCs
suck is when they say things like "maybe VC Fund X is an exception." A
knowledgable entrepreneur knows that what matters is NOT the fund - but rather
the partner. And there are some smart partners out there.

------
danielrhodes
I think the major complaint this guy has is that there is no funding for small
businesses, and he is correct. VCs are interested in high growth businesses
where one success makes their fund. Given that banks aren't giving out loans
to internet startups and VCs/angels are the only source of capital, this can
affect the kinds of businesses that are started.

------
delinquentme
I like this part: "And so you have a whole generation of people building
startups who have been taught to make bullshit."

------
guscost
Good companies still stand out. And the founders of good companies don't
usually intend to start cargo-cults.

------
nirvana
There's more:
[http://www.reddit.com/r/startups/comments/x7wah/dae_just_tot...](http://www.reddit.com/r/startups/comments/x7wah/dae_just_totally_ignore_the_startup_community_and/c5kf806)
[http://www.reddit.com/r/startups/comments/x7wah/dae_just_tot...](http://www.reddit.com/r/startups/comments/x7wah/dae_just_totally_ignore_the_startup_community_and/c5kflmf)

------
vtry
Looks like this article is censored?

------
josh2600
Eyeballs != $$$

------
izak30
This is nonsense. Hard to read all the way through and get any point out of.
Reads like an angry chatterbot

~~~
ojbyrne
And yet quite a few people (including me) here agree with it. Perhaps your
perspective is from within the cargo cult.

