
Startup snake oil: scamming early stage entrepreneurs - jmacd
http://pandodaily.com/2013/11/04/startup-snake-oil-scamming-early-stage-entrepreneurs/
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DanielBMarkham
A little too much vitriol and angst for my taste, but it's an important
subject.

My position is simple: there are lots of folks in the startup ecosystem that
are trying to help me in various ways. Many of them charge money. Good for
them. Folks gotta eat.

Having said that, from my side (startup founder), the situation is _very_
precarious. As entrepreneurs we are constantly swamped with pitches for
various things to make our businesses successful. I know I've spent thousands
of dollars on stuff that didn't do what I thought it would do. In fact, I've
become quite bitter about all of it. When I think of all the money being spent
by folks who are trying to buy success through tools instead of customer
interaction? Makes me sad and angry.

But I think trying to name and shame is absolutely the wrong way to go about
this. Most of these startup ecosystem folks mean well, and most of them have
products that are well worth the money -- for folks who need the products. I
think the real problem as entrepreneurs is that we are unable to recognize for
ourselves whether we need something or not; so we buy too much. If we're too
ignorant to know what to spend our money on, can't well blame others for
selling us stuff.

So the answer here is educating each other, not going on some witch hunt for
aggressive spammers (which is a separate problem). Let's continue to meet and
share information on startups (which is why I'm here) and these other problems
will work themselves out.

~~~
jonnathanson
_" I think trying to name and shame is absolutely the wrong way to go about
this. Most of these startup ecosystem folks mean well, and most of them have
products that are well worth the money -- for folks who need the products."_

Completely agree. I'd love to see more stories that leave out the personal
drama and, instead, run some analysis. There are a lot of these companies out
there, offering similar services. What's the ROI on spending money with them?
Which ones are better than others? How do they rank against each other?

To your point:

 _" I think the real problem as entrepreneurs is that we are unable to
recognize for ourselves whether we need something or not; so we buy too much.
If we're too ignorant to know what to spend our money on, can't well blame
others for selling us stuff."_

We can't blame others for selling us this stuff, but we can and should share
our experiences. It's completely legitimate to share a bad experience (or a
good experience). There is a lot of opacity in this space, and transparency is
going to help ease it.

I am completely with you, though: I could do without the public outing of
names and email addresses. And I hate smear campaigns, even when they appear
to be warranted. A lot of people make stupid mistakes when they're young and
dumb; few people deserve to have those mistakes chase them across the internet
for the rest of their lives. (As will probably be the case with the immature
BD guy named in the article. If even half of what was said about him is true,
he deserves to be fired, and his former employer should issue an apology to
Ms. Fichtner. But does he really deserve a life sentence?)

In general, I wish tech blogs would focus more on tech and less on people.
Leave gossip to the gossip blogs. It's hard to tell where informative
journalism ends and personal vendetta begins in pieces like these. So I've
trained myself to gloss over them. That's unfortunate, because underneath the
thicket of naming-and-shaming, there's often some wisdom or advice to be
found.

~~~
localhost3000
PandoDaily is a gossip blog that just happens to cover tech.

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larrik
Okay, so they charge to attend a conference. Maybe the money isn't worth it. I
don't see any mention of people having actually gone there, nor if the
conference is actually a good thing.

Not recognizing the VCs from an east coast conference is hardly an automatic
fail, in my mind. There's no shortage of financial companies here, after all.

A "scam" would mean that the people paying don't get what they were promised.
This article doesn't claim that at all. It's just a bunch of people who think
the price is too high.

YMV might be terrible, but this article is hardly convincing.

~~~
tptacek
Charging un-funded startups to attend a conference to matchmake them with VC's
is unproductive and unethical.

If there's a problem with this article, it's that it takes hundreds of words
trying to unspool drama from such a simple point.

~~~
larrys
"Charging un-funded startups to attend a conference to matchmake them with
VC's is unproductive and unethical."

100% don't agree. [1]

Unproductive for the startup? Making contacts and getting some exposure and
having discussions (and most importantly making mistakes) is unproductive? How
so?

Charging? As the retort from the principal of the firm said what are they
supposed to do do this for free?

And exactly what is unethical? Taking advantage of young people who don't know
the difference between what you (or others here) might consider a "legit"
opportunity (hey like spending half their life trying to get into the YC or VC
lottery to begin with) and this?

[1] When I graduated from college on my own dime I paid money to fly to (get
this) a "word processing conference" in order to make contacts and establish
myself in what (I thought) would be the new business I was starting (computer
supplies). Later when starting other businesses I flew to other places to go
to expos, shows, whatever I needed to do. I used my own money to do that (that
I had earned).

~~~
tptacek
What's a well-known startup that was funded as a result of having paid to meet
investors?

If you can't name one, the unproductiveness argument is straightforward, and
the ethical argument follows from it.

The reality is that this simply isn't how venture funding works. Founders
don't pay to meet investors; they exercise their own networks to get intros.
Paying to expand your network in some obvious was is unhelpful; all it does is
send a signal that you don't have a real network.

~~~
larrys
"What's a well-known startup that was funded as a result of having paid to
meet investors?"

The answer to that question isn't known to me.

Of course if I was the one that was producing the event, and someone asked
that question, it would be valid. [1] That is if we could get beyond a
definition and why it matters if the startup was "well known".

"The reality is that this simply isn't how venture funding works."

Half of what people are doing today (1/2 is arbitrary to make a point) are
things that go against "how" something currently works.

"all it does is send a signal that you don't have a real network."

But who does it send a signal to? You mean it paints you with a big fat "I'm a
newbie and I don't know how things work label?".

To be clear I haven't analyzed the value provided by paying this company money
and can't say that I would recommend it (or not). But I don't think it's clear
that there isn't any value and I am fairly certain that it isn't a scam either
[2] that there could be people getting value from it.

[1] That said there are many situations in business where the effort and/or
money paid doesn't result in a direct benefit like funding or something (and
this is important) that is easily measured.

[2] Like those real estate seminars which I would say are a scam but I think
they have entertainment value for some people. And maybe after you attend one
you learn a valuable life lesson for the money spent.

~~~
tptacek
It's not "known" to me, but I would be willing to bet significantly on the
answer.

There are things that people don't do because nobody's thought to do it, or
because nobody's been willing to accept the risk. But there are also things
nobody does because they self-evidently won't work, and paying for
introductions to VCs is probably one of those things.

The signals it sends is worse than "I'm new"; it's "I was unable to generate
interest from investors on my own".

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dgmistry
On December 19th 2012 I responded to an invite to a YSV event with the
following:

I have a few questions:

How many startups that have been funded as a direct result of this and prior
events hosted by New England Venture Summit? What is the ratio to startups
presenting and startups getting funded? Why do the investors not bear the cost
of startup entry fees? Is there the option to waive the fee? What is your
vetting process to ensure the quality of startups?

Here was the response I received from Kineret Weiss, note the sample of
success cases and a reluctance to track the only metrics that matter for an
organization like this - how effective are your conferences:

Hi Dinyar – Thanks for your interest. We evaluate each company based on the
components of the summary outline (management team, business model, market
potential, financials, etc.) which is needed to apply.

As far as stats, we don’t have the manpower or ability to track that
information, but we do know of several companies (such as Mojiva, Peminic,
UTest, etc) that have received funding as a direct result of our programs.

At the same time your question and outlook is flawed and I’ll tell you why.

Say I take your company today and sit you in front of the three most active
VCs in your space. After the meetings they each get up telling you that they
appreciate you coming by but that it’s not a fit for them at this time.
According to your data request, we would be offering you no value but the fact
is we placed you in front of the three most active VCs in your space.

Additionally, there is always a good mix of returning and new investors in
attendance, pointing to the fact that investors see great value in the high
level of startups that present at our conferences. You can view the video
highlights at the end of this email to see several top VCs (who I’m sure
you’ll recognize) who have found our summits to be of great value.

I have included further details below about the venture summit and the
opportunity to be showcased including pricing, benefits, testimonials and a
link to the conference website etc.

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caruana
I think the offense with YSV is that they are preying on the vulnerable. When
a start-up is running out of cash and / or facing extinction they become
desperate for money.

I would even go so far to say that money is rarely the real issue. Start-ups
need to create the formula - insert $1 here, exit $2 there. Building a start-
up is a lot of work and there are no quick and easy answers at any point,
money may seem like the answer but in reality it can cause more problems then
it solves.

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jsun
A lot of these conferences have the same underlying value prop. Finovate for
instance does the same thing - it costs something like 9k or 10k to present!
But Finovate is useful, because the content is better curated, they attract
more influential players from the space.

It sounds like YSV does a much poorer job executing, which makes it a poor
value, but not sure that makes it a scam

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icecreampain
Part of me hates the spammers that do this, creating nothing of real value for
anyone but their own wallets, but another part of me, the grown-up, cynical
part, figures that what they're doing is smart as hell: they're selling
shovels.

Startups come and go in the thousands nowadays. What could possibly be smarter
than sucking them ALL dry, instead of trying to be a profitless, slave-to-the-
VC startup themselves?

~~~
xacaxulu
Agreed. That could be a similar argument for the crop of 'Learn To Code/Hack
in X Months' schools popping up all over the place. Lot's of shovels being
sold for sure.

