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No Exit (wired.com)
445 points by rohin on Apr 25, 2014 | hide | past | web | favorite | 171 comments



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.


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.


Author's description of startup reality is certainly plausible, however I believe author's view is too grim. Startup is where ideas that nobody are willing to try otherwise are implemented. Theoretically bigger corporations with far greater resources can do it, but we all know that's not how it happens. From the corporate viewpoint it may be "low-overhead, low-risk R&D", but as a society we all (arguably) benefit from it -- monetary incentive helps it for sure.


yep. no inverted pyramid here. it's straight up buried lead.

i kept skimming just to get to the moral of the story. it was good writing to be sure, but i feel like it could have given a little more tidbits to the reader


I wonder who the "5 corporate giants" are. Facebook, Apple, Google. Who are the rest? Amazon? eBay? Yahoo? Microsoft? Intel?


Based on their number of acquisitions, I'd guess Yahoo and Microsoft.


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.


> 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 could not agree more. There are certainly exceptions, but they should be that, not the standard/norm. Aside from the high risk from a business perspective, you're putting other people's financial situation in jeopardy, not to mention you have an obligation to investors to return their money, thus you are working for them despite what equity % they have.

My hard-line for my start-up was that I must be able to pay salary from site revenue, and before I could bring anyone on I had to make sure it could support at least 1 person's living expenses (me) because I do not want to risk other's situations/lives on a promise or a "trust me" or a "by the way I need money" sort of deal.

It's certainly a slower process but I'm learning a lot along the way in the area's (non-technical) I'm not as familiar with. I guess the other thing is I'd prefer to be able to travel while I work and I don't feel that'd be possible if I were taking VC-money. Either way, it's a fun game, to work on your idea and bring it to fruition.


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.


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.


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.


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.


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.


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.)


If you want to be cast, you want to be in LA or NYC. If you want to PA, it may be advantageous to be in the shooting city, but local PAs will still be lower on the totem than the PAs from the production company, until they prove themselves.


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!)


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


I'm pretty sure they're considered naive in SV too.


I guess everyone is lacking that bit of information that separates them from the real comptrollers


Best description to date.


A key part of living in big cities is the optionality. Because some of these cities are so dense with engineers , investors etc that the probability of something positive happening to you is far higher than other cities. for e.g. the odds of getting a meeting with investors or getting feedback on a key product direction will be higher in dense cities such as SF.

Of course the tradeoff of that is the costs are higher. Very rarely do you find an arbitrage situation where the optionality of something positive happening to you is higher AND the cost of living is lower


Berlin: One of the cheapest capitals in Europe, reasonably vibrant IT scene. Apartments inside the city can be had for as little as 300€ if you hunt long enough, although 600-700€ is becoming the new standard. Restaurants are cheap too: 5€ for lunch, 7-9€ for dinner. Lots of space, little traffic, the best public transport network in Europe, tons of lakes and green spaces.


Do you, yourself, live there and maybe can answer some questions?

- Is it 500EUR per week or per month? What apt and in what place (good, bad) you live on this kind of money?

- What happens if you don't know German (are willing to lean, but have no lang. skills whatsoever)

- What is medium (after tax) income for programmers there per month?


Yes, I live here. All prices are per month. If you want to live inside the S-Bahn ring, you will find it difficult nowadays to pay less than 600-700€ a month for a two-bedroom apartment. The low end of €300 is probably only realistic for one-bedroom apartments outside the ring or maybe a two-bedroom apartment in the high-rise buildings in the suburbs.

You can live in Berlin without knowing much German, but services and bureaucracy will be a bit painful. It's not like Scandinavia, where people feel insulted if you ask them if they speak English. Many Germans, even educated ones, are not really confortable speaking English. It's not that they're not willing, many of them actually can't speak it or speak it badly. Of course, everything is easier with younger people.

Average gross salaries for developers range from 45,000€ a year for juniors to 60,000€ for seniors. Expect to earn around 60% to 70% of that after taxes, social security and health insurance.


Really? I find that most Berliners speak wonderful English.


> Is it 500EUR per week or per month?

I LOL'd at this - only someone in the SF bubble could mistake EUR 500 for a weekly rent.

My one-bedroom apartment in Germany is around EUR 350 per month.


Not at all! I lived in Atlanta for a while just before the 1996 Olympics. I was paying somewhere in the $300-500 (~200-300 Euros) per month range for a 1 bedroom. It was one of the cheapest big cities in the states.

I moved to Chicago that summer and couldn't find a livable space for less than $800/mo. That was almost 20 years ago. Today I live in Los Angeles, and you could not find anything livable here for EUR 500 ($700US) per month. You could easily find something for $700US/week, though. I'm sure New York is as bad as San Fran and worse than Chicago, too. I'm not saying our rents aren't outrageous, just that it's not specific to some SF bubble. Just about any large city in the US is going to be costly to find decent living.


I think a better choice for startups and tech-minded people would be Amsterdam. I'm currently living in Amsterdam on around 900~eur/month, a room can cost between 300 and 500 eur/month plus you need health insurance and food.

There are a lot of tech opportunities here, plenty of startup and also big companies. VC is getting bigger here as well so it's a thriving hub if you want to found your own startup.

Plus, the Netherlands are awesome :)


My friend from Netherlands told me that you work in Hague, live in Rotterdam and party in Amsterdam. :)

I went there and lived for some time, whole time weather was pretty dark and cold - is it typical situation or I was just unlucky?


I've been living here since last August, so I'm probably not the best judge for the weather, especially since I'm Italian and I'm used to quite a different weather.

This year, from what I've heard, has been warmer than usual (pretty much no snow in winter). It is very windy all over the year but we've been getting really warm and nice days since the middle of March and it's only going to get better. Winter is dark and cold, but I'd say this is true for any place you go to in central-northern Europe (and even Italy or Spain as well).


7-9 eurobucks for dinner? What kind of dinner are we talking about here?


Is this new though? Any major city has seen young people doing exactly that with dreams of making it big. So we used to associate this more with artists, actors and alike.

Now in certain places we can add tech start-up founders to the list. And unlike the aforementioned, these are generally people who can get a well paid job if they wanted to.

It's part of being young and ambitious, and I don't see much difference between young founders begging for funding and actors going on auditions.


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.


Yes, this. Why is this all-or-nothing approach romanticised? There are untold thousands of bootstrapped companies slowly building their product without taking on any (or very little) outside funding and earning a decent living. It may not have the prospects of a huge payoff, but then again, you may have better chances of winning the lottery than winning a huge payoff.


I agree that the chances of a reasonable level of success are much greater if you are bootstrapping a business rather than going for VC. I put some of my own thoughts on this at: http://successfulsoftware.net/2013/11/06/lifestyle-programmi...


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?


His place is rent controlled and or he has roommates.


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


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.


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.


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?


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


This probably applies to people's careers in general. How many people end up with their dream job?


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!


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?


I'd say it's mostly:

- Landlords and real estate developers (who are making a killing in the current bubble)

- B2B companies targeting startups

- Professional services (lawyers, etc.)

Chris Dixon has written about selling pickaxes in a gold rush: http://cdixon.org/2011/02/05/selling-pickaxes-during-a-gold-...


During the California gold rush, the hardware sellers made tons of money, but during the Dawson gold rush, everybody knew the guy selling pickaxes made money. What happened was everybody tried to sell pickaxes, and the people selling luxuries, like eggs and fancy dresses made the money[1].

[1] http://en.wikipedia.org/wiki/Klondike_Gold_Rush#Logistics


I through about this the other day. Not really who sells the tool, but who profits from all those failed startups. Maybe part of the answer are all tech/founders conferences, workshops, meetups etc. They are not tools in strict sense, but they are business around whole thing.


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!


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


Venture capitalists sell the founders capital and do pretty well. Same with lawyers selling them legal advice. And landlords selling them office space and housing.


About 15 years ago I was part of a start-up and internally we kept on going over that story and trying to be those same tool-sellers. But there wasn't any real execution on that.


again, I probably wouldn't take my tech game plan from what worked for gold mining in 1849.

And we know who's getting really, really rich ... and its not 'people selling tools'. Its Google, Apple, Facebook, AirBnB, Dropbox, Stripe, MongoHQ, Heroku, Parse ... i.e. successful tech companies. Its not an unknown.


Parse, Heroku, Stripe, and Mongo are all selling tools. Arguably Apple as well (how many developers are using something OTHER than an Apple laptop?), although most of their revenue comes from mass market consumer products not sold specifically to developers.


Property owners.


Realtors & hosting companies.


I don't think this analogy holds up to cursory scrutiny.

Tech is responsible for huge wealth creation. If the Forbes 400 was around in 1849, you wouldn't have seen any gold miners occupying the top spots.

Its as apt as saying people going to Wall Street to make money is like the gold rush. The only similarity is its the same physical location.


he missed california but hit it rich in the montana gold rush and became one of the fifty richest americans ever:

http://en.wikipedia.org/wiki/William_A._Clark


It's funny you say that - I've been wondering lately whether the current culture in Silicon Valley is a result of heritage (whether genetic or cultural) from those who moved to the area during the gold rush.


Interesting thought. Where I come from (The Netherlands) we pride ourselves on our 'Dutch East India Company-mentality', a spirit of trade, perseverance and guts. Aside from the slave trade-thingy, of course.


No, we're from a Protestant culture. We work hard or we feel guilty.


Funny, I'm dutch too.

Yes, as long as we stay humble. :)


That's a bit hyperbolic since being a software engineer is skill with very high demand globally, and people in SV tend to be paid higher than anywhere else. Sure you have your ramen bootstrappers, and equity dreamers, but even when you fail in those scenarios you usually come out with invaluable experience.


"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 Womanization of entrepreneurship, if you will.


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


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?


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.


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


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

Or:

http://www.isoperla.co.uk/BirdSongIdiPhone.html


The article doesn't get much better, but there may be a kernel of truth to the rug store angle. There's a profile of the rug store owner/prolific angel investor at http://www.forbes.com/sites/victoriabarret/2012/03/21/silico... .


The rug store that rented space to Google and Paypal early on took equity. They later spun up a venture arm.


What makes you think that sentence you quote was supposed to be credible? It's clearly hyperbole.


Is it even remotely true?


Talented technical teams can raise money fairly easily (presuming a somewhat plausible business idea), so yes, it is remotely true.


I would change that to:

Well credentialed and talented technical teams.

That degree from Stanford or M.I.T. just opens an incredible number of doors when it comes to fundraising.


This article is so insanely true, the problem is people who wish that it wasn't so.

Think of the number of startups that basically walked into huge series A but literally have nothing under them!

There's a caste system at play, so how are YOU going to escape it?


Bruce Sterling has been telling this for years, especially in good conference talks.


> 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.


> 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.


> 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.


> 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.


> 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.


> 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.


> 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.


If I've read the article right, runway doesn't mean what it used to mean anymore.

Have you done the math on how small 2 weeks of funding really is? That should be your follow up question. $50K in the bank? with a $100K line of credit? or $8K in the bank and a vw golf as a backstop?

The two examples are worlds apart.


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.


> "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).


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"


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.


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


Almost certainly repost prevention... I tried to add this article yesterday and was upvote 4 on the previous link. It just didn't get the random boost it needed to make it to the front page.


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


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.


Note that the HTTP RFC mandates that browsers should not send referers when doing HTTPS -> HTTP, so this may not be the case here.

But, yeah, this was probably to work around the duplicate detector.


"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?


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


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


Excellent piece and must-read for all wannabe entrepreneurs


> 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.


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


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!


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/


Thanks for sharing!


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.


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


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?


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.


Exactly. A classic "We were promised gold streets, but we got suburbia" kind of story. A few points are definitely exaggerated, but as the author admits, he had fallen for their story, and wanted them to succeed.


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.


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


I'm still in the middle of reading, but I think many people (especially outside of the Bay area) have a certain perception on what the life of a startup founder is like. And the point of the story is to presumably give a real-life view of things that may be different from the popular perception. In other words, maybe you were not really the intended audience.


There's an incredibly important climax:

"[T]he 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 story is a sober, measured portrait of the purpose of the SF millstone. It's told through the weight of the exhausted angst in two entrepreneurs, but its a message to the masses dreaming of a glamor that masks the new face of corporate R&D. While not novel, the important lessons and insights need to be told more than once, and this is a well-written telling.


Once again, I'm struck by the sheer weight of cynicism here. Having worked at companies big and small, startups and behemoths, and now having founded my own startup, the feeling of autonomy, owning your own destiny, is very very real. That is not to say that many startups don't go down in flames and cause pain to founders and employees. But the implication that all founders are naive fools being somehow scammed into this lifestyle is patently false (and offensive to me, but I don't expect anybody to care about that part)


The article's audience, I would contend, is not founders or 1st engineers but is the collection of folks that idealize the start-up industry without understanding the economies of it.

That you feel insulted by the thesis suggests you're squarely in the former set.


Agree--This story needs a TLDR;

{insert here}


No Exit is a Sartre play. I'm only halfway through the article so I can't speak authoritatively to why the title was chosen. My money says this is a pun, combining the the notion of the "exit" of a startup while implying that they feel stuck in a very specific manner similar to the characters of the play. FYI this is a very facile reading of the play, and Sartre is my least favorite existentialist.

I'm not an expert on him but if you want to chat about his main squeeze and intellectual better, de Beauvoir, I'll have more to say.

http://en.wikipedia.org/wiki/No_Exit


Definitely Sartre reference, These guys going through the misery of start up life has a 'myth of Sisyphus' feel to it, especially when Martino suggests that the best thing that could happen is that they miss their round of funding and are able to quit.


An interesting hypothesis. Thank you. Near the end they discuss how "its easy to get enough money to get in over your head, but its hard to get enough money to keep afloat". That would seem in-line with the broader reading of some kind of existential limbo-land as being (at least one of) the themes. The narrative seems oddly intractable, otherwise. Perhaps 'no exit: the new normal' is more the spirit of the piece.


Probably also a reference to American Psycho, where "No Exit" is the last part of the novel - itself a reference to Satre. Psycho, of course, was a critique of the money culture of 80s New York.


"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?


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 (excellent interview with Kevin Rose on This Week In Startups)


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


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


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


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.


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


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...


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?


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


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

Talent hard to get and hard to keep maybe.


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


On the link I listed.


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.


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.


> 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.


> 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.


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.


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....


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.


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.


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.


I think you're reading too much into the Miley Cyrus thing. It was just a strange anecdote that added character to the partner.


My point is that the entire article is filled with this collection of very strange anecdotes.


I'm not part of SV culture, so I didn't read it the way you did. I did find it funny that the guy, on his first ever job, was so excited to disrupt payroll. There's an irony there. Or the guy who's going to make doctors obsolete.


If you have ever worked with payroll, nobody should have to explain why payroll needs to be disrupted.


I would thank you for not disrupting my payroll. Please.


Sure, it's much harder than it needs to be but is "disrupt" really the right word for what needs to happen to payroll? I'd probably reserve that for major market shifts (disruptions...) rather than desperately needed improvements to usability.


I think that was the author's point too. Payroll needs improvement. But ultimately money gets transferred from one bank account to another. The model is not going to change.


"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?


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


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


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


there's an extended version if you have a kindle


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


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.)


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?


YC's answer to this is "If you verbally commit to an investment with a YC company they will memorialize it instantly with an SMS or email, which they will ask you to confirm substantially instantly. If you renege on a deal committed to by this protocol, you will be entered into a list of Unserious People. You very much don't want to be Unserious People to all future deals associated with YC companies."

That's for actual commitments. Investors historically have a very diverse vocabulary of ways to phrase "No" (for example, any sentence which begins with "I will invest if" means "No, but I like option value, particularly when it is free.") and entrepreneurs historically have a reality distortion field where they hear "No" and think "I didn't hear Never so that's practically a Yes!"


So in this case (and others, I suppose) YC acts as a union.


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.


> 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?


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".


"Ah, you want a commitment? Great. I'll tell all the other VCs too. Oh, and by the way—we're all out now. Bye!"


Yes and no. In dating, it's usually not a great idea to tell the person you want to date that you have dates planned with other people as well.


That would probably just lead to "Nos" instead of "contingent Yeses" (which really are pretty good if you think about it). It's not like these investors are backing out.


A "no" is significantly better than a "contingent yes", because it lets you move in and focus your time and energy on getting a real yes.


But a "contingent yes" is a "yes". Totally disagree that a "no" is better.


It's often not, though. That's what this whole thread is about. Usually when investors waffle it's because they aren't going to commit anyway; they may think that they should and at one level want to, but their fear gets the best of them.


Maybe we're not talking about the same thing. A "contingent yes" is completely different from a "maybe". The rug guys were the "contingent yes", Google Ventures was the "maybe".

Suggesting "A "no" is significantly better than a "contingent yes"" is bizarre.


Would you want to turn down a potential $100k so quickly?


It's not about turning down a potential 100k. It's about the commitment of the investor, i.e. to avoid the tip toeing. A potential 100k investment is not a 100k investment.


"we might be in. who else is in?" is not committment, it's lemmings.




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