> The Valley is not a world run by 20-somethings bringing about the future, it is a world run by the same people who run the real world - the financiers.
It's surprising to me that anyone would think otherwise. Weighted for risk, the winning play in Silicon Valley is not to take a Thiel fellowship and go found a startup. It's to do what Thiel did--take a pair of prestigious Stanford degrees into the finance sector. It's the VC's that are the ones reliably cashing their paychecks.
(This is not a moral judgment about whether this status quo is right or wrong. I'm long past the point where I see the status quo as anything more than something that "is.")
"It's surprising to me that anyone would think otherwise."
Not really if you think about it. Many experiences from the outside seem like one thing until you go through them yourselves.
You might think Starbucks is all about coffee "why would anyone pay $4.00 for a ..." but if you are a frequent Starbucks customer you then realize it's about a sugar fix, community (if you spend time there and get to know the regulars), habit and a host of other things you might not realize at the outset.
New people are introduced to new things all the time with a fresh slate.
I would find it quite surprising for any 17 year old or even a 50 year old who hasn't paid attention closely to know what the real game is (in anything).
I remember as a young child the shock I had finding out that there were dishonest policemen or other authority figures who committed crimes.
People get a good chuckle at newbies for sure (laughing nervously because they were all newbies at one point).
As somebody who has gone through a startup that was pre-VC and post-VC, I assure you we didn't take investment to get written about or be cool. We took investment because to grow your company beyond the first few people you need to pay people money. Sometimes certain ideas or opportunities you might want to invest in cost money. And that is what the VCs provide you, money. Sure, we could bootstrap and generate the money ourselves, but a) it requires short-term trade offs and b) its much slower. And slower is a problem because time is a really limited resource. Opportunity cost for all your employees, time for competitors to spring up and try to beat you, etc.
VCs are a tool. They allow people like me to have upside while at the same time make a salary. They allow me to instill confidence in potential candidates that our business is safe and if they take the job here, the company will still exist in 5 years. Look, Techcrunch is not an accurate picture of the valley, I'm not going to dispute that with you. But VCs are not evil people or a scam. They are a tool that for the right startup, at the right timing, can be hugely beneficial. It is pretty stupid that the best way to get written about is to raise funding, but then again getting written about is so inconsequential to success you can just ignore it. However having resources to grow and accelerate can be very consequential to success, and you need to make sure not to confuse the two.
I don't think his argument is that VC's are evil. I think he's just realizing that VC's run the show in Silicon Valley, in the same way those who hold the capital run the show in every industry. VC's decide what the industry looks like, because VC-funded startups have a major competitive advantage over bootstraped ones. This is true in nearly every industry, by the way. F500 CEO's spend enormous amounts of time obsessing over Wall Street analyst reports. There is a reason it takes a CEO like Jobs and a company like Apple to ignore them.
This isn't good or bad, it is just the nature of the world.
I actually think Jobs's main accomplishment was to prevent Apple from developing an Effort Thermocline (the line at which jobs get easier, rather than harder, with increasing rank). What I've heard about him is that he was actually a very nice guy to low-level employees, but brutal with executives (the opposite of the normal company where shit rolls downhill).
VC-istan has managed to put the Effort Thermocline between companies, which is rather ingenious. Crossing the Thermocline also involves a total change of job description (from "entrepreneur", by which I mean glorified Product Manager who serves as middle-management within the VC-istan ecosystem, to investor/executive).
It is pretty stupid that the best way to get written about is to raise funding, but then again getting written about is so inconsequential to success you can just ignore it.
Disagree. VC-istan is built on disposable companies, celebrity effects, and social climbing. Getting "Techcrunched" does a lot for your career as an individual (you've arrived, and no matter what happens you're a Real Person in VC-istan, and you're two-and-a-half handshakes away from joining Those Who Have Completed An Exit even if your idea sucks) even though you're right that it's completely irrelevant to the success of the company itself.
VC-istan fails to solve the actual problem, which is that almost none of the work the 21st-century needs can be forced into existence via subordination or traditional do-as-I-say management, leaving 90+ percent of corporations uninspiring and obsolete. VC-istan theoretically liberates a few people from subordinacy by generating new MegaCorps, but no one seems interested in solving the underlying problem for the many.
Your skepticism is understandable, yet I feel as if you are missing the core message here. The message here is not about my own journey - my narrative is a trope for the culture of Silicon Valley. Whether or not I succeed in my venture is irrelevant to the main point - entrepreneurship is not about raising money or acquiring fame; it is about building a business.
As much as I appreciate constructive criticism, your implication that I am suffering from the Dunning-Kruger effect is unwelcome. You know nothing of my talents nor my mind-state and to infer that the small glimpse of my life I have provided is representative of my being is naive.
I'm going to try to be nice and give you some advice: don't write like that. Constructing these overwrought sentences with the dashes and the semicolons and the vocabulary and whatnot just makes you look like an insecure sophomore trying to cover up inexperience with excessive verbiage. Which is probably accurate, but oh well. The purpose of writing isn't to make you look smart, it's to communicate your thoughts clearly and convincingly, and writing to show off all your fancy college-boy book lernin' is just going to antagonize your audience. You're still in school, my advice is to take a writing course and listen to what they say.
'Over' is already an adverb. If you want to modify a word with 'over', combine the two words or use a hyphen, as in 'over-concise'. Although 'overly' is now common usage, it is still looked down upon by the literati.
There is nothing wrong with using dashes, but if you do, use the correct dash. The em dash is U+2014. If you cannot type an em dash, the custom is to use two en dashes.
If you care, try switching many of these sentences from passive to active voice. It helps to tighten up your writing. Sometimes it helps for dramatic effect, but excessive use of passive voice slows down your writing. Also, watch your redundancies and overuse of certain words.
>Constructing these overwrought sentences with the dashes and the semicolons and the vocabulary and whatnot just makes you look like an insecure sophomore trying to cover up inexperience with excessive verbiage.
You're uncomfortable with how somebody speaks, so you call them insecure. Classic.
By the way, there was nothing sophisticated about the content or construction of the parent post. And if there was, maybe you should consider carrying the burden of trying to understand it instead of dragging us down to your idea of how people ought to communicate.
So the "businesses" you looked at when you were 17 and 18, did you actually do any development on them? Or by "not going anywhere", do you mean you never crossed the first hurdles (financing, media exposure, etc)? I'm fascinated by the idea that you can build million dollar ideas while dealing with the demands of school and (presumably) a social life.
I wonder if having a third business by age 20 leads to ADD-driven Entrepreneurship. Not to knock your age, but you can't ignore the truth that your longest "project" has probably lasted a semester. The full experience of high school, which surely feels like an eternity (I know it did to me at that age, as it represented 20% of my life span!), is less time than it took for some of the most successful businesses to attain profitability.
So what's your timespan for success? I guess I question the ability to even have the perspective to drive not only product development, but the business development it takes to bring a company to profitability at your level of life experience.
I did some development work on the first idea but didn't get funding or media attention before a founder breakup. For the second idea I was even worse - I decided not to even attempt to build the project unless I got YC. This sounds ridiculous, but this story is so incredibly common. I talk to my peers and I read posts about people who completely abandon their projects the moment they fail to get into YC or [name incubator]. As if these fellas are legitimate gate holders.
I am admittedly fickle when it comes to startup ideas, but I must make it clear that these were not my only projects - they were the projects that I modeled my understanding of entrepreneurship on. I was the Director of Technology at Modify Watches [1] for two years and helped grow that business with the team to a pretty healthy size. I also created a coupon site that was generating about a thousands bucks a month semi-automatically which I ran for two years. These just weren't Silicon Valley opportunities... I wasn't at the helm.
My timespan for success is completely dependent on which level of success I'm looking at. With my current business, I consider the fact that I wrote software which generated revenue within an hour of turning it on to be a pretty huge success. In terms of how long I expect it to take to make the Big Bucks, I am completely realistic that this doesn't happen overnight. I plan to be in this company for the long haul.
Although I do not have the life experience of an older gentlemen, I would posit that my experience is light-years ahead of people who are my age. [1] I've literally been running companies or been deeply involved in them almost non-stop since I was 13 years old. I have real, executional experience and textbook knowledge from my Berkeley education. Not to mention, this company is not a company of one... Anywhere my team and I need help, I'm exciting to bring on somebody who does have the life experience.
I really appreciate your perspective. I love a bit a constructive criticism / interrogation... It helps with introspection!
"I read posts about people who completely abandon their projects the moment they fail to get into YC or [name incubator]. As if these fellas are legitimate gate holders."
Shows you the brainwashing going on in the community just like any community actually. [1] But they are gate holders for that dream. Look people try to get into good colleges also. But they don't abandon going to college if they don't get accepted to "A" schools.
"I would posit that my experience is light-years ahead of people who are my age."
Anecdotally, I agree after reading your post.
[1] Wedding singers, wedding photographers probably feel the same way. Entertainment and creative pyramid simply doesn't give much respect to people who don't volunteer for suicide missions. Taking the bullet is viewed as being honorable, not stupid.
> I talk to my peers and I read posts about people who completely abandon their projects the moment they fail to get into YC or [name incubator].
Yeesh. As someone who's currently bootstrapping a lifestyle business, this point of view seems downright toxic to me. If you really believe in your company (and its product-market fit), then giving away equity (and control!) should be an absolute last resort, not something to be sought out. Better to work on your business as a side-project for months of alternating consulting gigs and destitution.
"then giving away equity (and control!) should be an absolute last resort"
You are focusing on the down side and not the upside of taking money.
As well as the upside to having to not give up any control or equity vs. the downside to trying to do it without that money. And totally underestimating what you can do with a shit load of money vs. what you can't do.
Note that I said "lifestyle business", not "startup." I can't think of anything outweighing the downside of losing the ability to have my business as an extension of my own life, perfectly meshing into my own desires. If I had fuck-you money[1], all I'd do with it is... start this business.
I hope to still be running it in 40 years--and imagining someone having the power to force me to do something I don't want to do with my own company, even after I've put in 40 years of effort into it... well. This is why I would recommend just taking on loans/debt first: when your company grows, you'll pay off debts (and when your company fails bankruptcy/liquidation will still make them go away), but equity is a loan that gets harder and harder to pay out the bigger your company gets.
Of course, this is all assuming you're taking investment from someone whose utility function doesn't match your own (usually in that you care more about the business, and they care more about the money.) I would gladly put in with some people--but those are cofounders, not investors.
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[1] But really, I don't think I need fuck-you money--I've planned the business in stages (pre-set pivots), where each stage targets a market of appropriate size and entrenchment to fund the next stage (tackle B2B when small, B2C when huge, basically.) In effect, I'm just planning to be my own investor. :)
That's fine. Please keep in mind though that investors are only one of a group of many people that you have to bogu for ("bend over, grease up"). There are also customers (major and minor), employees, partners (if any) landlords, spouses, kids etc. Agree that not having investors is certainly one less to deal with though.
Even on the issues of "customers" that can be granular. Do you have a bunch of small customers who don't know about each other? Or a bunch of small customers that do know about each other (and can create a problem for you if you don't beat to their drum?). Do you have the type of business (not you but anyone reading this) that has a concentration of business with 3 large customers and if any of them left you'd have a big problem? Do you have someone who owes you money, won't pay (a big sum of money) and you have sleepless nights?
"and when your company fails bankruptcy/liquidation will still make them go away"
I come from a time and place where failure like that was viewed differently. It would not be as easy for me to do that and not have it bother me. That said it's not a bad mindset if it doesn't have the same impact on you (you're lucky it's really hard to un-ring that bell).
Man, now I feel really bad for exploiting all those 20 year old Stanford and Berkeley kids by handing them millions of dollars to see if they can get their ideas to work.
You're not handing them money jackass, you're loaning it to them, and you're being very well paid for it - ROI waaay above market rate, if you realize that market rate means the junk bond rate.
"Handing" it to them would be if you didn't get equity or anything else in return.
Don't read TechCrunch. It's a cesspit of hype and sensationalism. Any plan which involves "get on the front page of TechCrunch" is a horrible plan, IMO.
I still occasionally look at TechCrunch, mostly because it's a good test site for browsers (because it's really memory-hungry). And every time I get sucked into reading an article, I inevitably end up feeling dirty. It's similar to how I feel after reading the covers of the gossip magazines when I'm waiting in line at the supermarket.
Yes, taking VC money is a double-edged sword; that's basically the long and the short of it. However, it's a great thing that investors will line up to throw millions at a nascent tech start-up, especially if you want to spend your life building big companies.
VCs obviously have a lot of power and influence in the Valley because many businesses need a big chunk of start-up capital and they have it, and they own fractions of many companies and sit on boards. The fact that they are influential isn't a reason not to associate with them.
Bootstrapping your business and paying your engineers' salaries out of your revenue rather than investment is admirable. I'd like to try it sometime.
The main thing to recognize is that when you take money from investors, you are claiming the business is a good business. Successful fund-raising is not derisking, it is you explaining the risk and why you will succeed.
It goes without saying on HN that not playing the VC-driven-startup game is the tougher road of the two options. That being said I have the utmost admiration and respect for those who are working hard to give us a more role models to follow in this mold.
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Btw completely off topic, but the red square on white background design immediately evoked images of Campbell soup in me, at which point I realized the magnitude and importance of their branding and visual identity.
> It goes without saying on HN that not playing the VC-driven-startup game is the tougher road of the two options.
Tougher how? There's no way I could start a company if I was resigned to the fact that I'd have to be selling myself to financiers constantly. To me, running off my own cash is easier and saner.
A VC fundable startup is one in which you KNOW you can turn $1 into $20. Once you figure out how to do this, you will want as much money as possible to make that happen as many times as you can. That's when VC's are needed. You take VC money for growth, not for ideation or market validation. Before you find your business model you should stick to bootstrapping, angel investing and just keep iterating until you figure it all out.
Some of the comments here a bit disconcerting. This is just a critique of the mentality that many aspiring entrepreneurs unknowingly engage in. It's not really an indictment of venture cap.
Also, discussing what nobody wants to hear and pointing out our deeply rooted assumptions is definitely a good thing. Sad that some people seem to get so defensive about such things.
I'm not going to join the douche-pile of people attacking the OP because of his age. I admire his courage.
OP is literally sophomoric. He's beginning to realize that "tech" (meaning VC-istan) isn't a meritocracy, and this is a really hard realization. This is that stage where you hate something but don't know why you hate it, and every time you speak out against something, people tear you down because you haven't figured out exactly what is wrong with it (much less how to fix it). You might complain about "politics" without having new insight into what makes various environments political.
I hate VC-istan and I have good reasons for it. I don't hate VCs-- not individually, and not conceptually. I don't hate every VC-funded company, of course; there are good ones, I'd probably raise VC (as horrible as it is) if I were in that space. I just hate the ecosystem and its anti-technical, 17th-century reputation economy that is ripe for extortion. (The reason multiple liquidation preferences, participating preferred, and entrepreneur payment of VC legal fees exist is professional extortion via social proof; the VC knows he can pick up a phone and rape your shit for breakfast.) I hate that it encourages people to build horrible companies that destroy young peoples' careers. It's ridiculous how a bad implementation of something very old (patronage) can be dressed up as innovative and new.
OP isn't there yet on his knowledge of the why, so his knowledge seems superficial. He'll get there, and he probably understands more than he can articulate right now.
It's surprising to me that anyone would think otherwise. Weighted for risk, the winning play in Silicon Valley is not to take a Thiel fellowship and go found a startup. It's to do what Thiel did--take a pair of prestigious Stanford degrees into the finance sector. It's the VC's that are the ones reliably cashing their paychecks.
(This is not a moral judgment about whether this status quo is right or wrong. I'm long past the point where I see the status quo as anything more than something that "is.")