The Upside of a Downturn in Silicon Valley
nytimes.com
nytimes.com
These days when I discover a new startup, I basically assume they're riding investment money for personal income until proven otherwise. The amount of frivolous startups right now is ridiculously high.
I also think this shows the idiocy of the idea that capitalism rewards productivity and efficiency. The majority of these startups are doing stuff that nobody uses now, probably nobody will use in 5 years, and that flat out won't exist in 10. But that's not stopping lots of people from going out and making their fortunes doing this. Meanwhile we can't raise the minimum wage when in fact at least the bag guy at my grocery store is providing a real service that people benefit from.
The speed at which startups are created and subsequently acquired is so fast now that, as a user, I have no faith any more in signing up for the "next big thing" and giving them my data. The site will shut down in a few months anyway…
It's supposed to be an alternate way of working if we follow pg. You're making it seem like it's a scam when it's a different paradigm of working that happens to have the optionality of massive growth potential.
There's nothing frivolous about it as long as it's legitimate and can accomplish what it's setting out to do.
In many cases, it is a scam. Ponzi schemes could also be rebranded as a different paradigm of working. And if you get out at the right time, a Ponzi scheme also has the opportunity of massive growth potential.
99% of startups aren't actually doing anything. They're just putting shiny interfaces on vapor.
> There's nothing frivolous about it as long as it's legitimate and can accomplish what it's setting out to do.
It's not legitimate, because it's not setting out to do anything except make money. Most startups aren't producing anything. I'd use the phrases "lipstick on pigs" or "turd polishing", except pigs and turds are actually useful. Most startups actually produce things worse than pigs or turds: they produce nothing of any value. And of the startups which are actually solving real problems, many startups actually are are solving problems for people I don't care for, and are actually actively harmful.
Yes, you can make money and be "successful" as a startup, but to quote Randall Munroe, "I never trust anyone who's more excited about success than about doing the thing they want to be successful at."
I'll give you one thing: people's intention when they start a startup isn't usually to openly steal people's money; they usually at least fool themselves into thinking they will be providing some real utility. But that doesn't make much difference to people whose retirements will take a hit when the tech bubble bursts.
Those companies make up nearly the entire technology industry across the US on a number of companies basis.
Start-ups (both big and small) are the minority and so are Googles/Facebooks.
I don't get that attitude, to be honest. If you were making chicken sandwiches, would you buy discount chicken to cut costs until you "made it"? Would you hire under-qualified or substandard cooks?
OK. You'll "offer" equity to take up the slack. So you're basically requiring your employees to be investors in the company. What is the realistic ROI for the difference in their incomes compared to the market rates? If it doesn't realistically add up to at least 10% APY, isn't the whole setup a bit dishonest?
Well, maybe you're different. You're a guaranteed unicorn, so 0.1% of the company is a huge pile of money. I hope you're right. If you even get a modest buyout after that kind of deal, you're walking away with a nice chunk of change and your employees end up in a big net negative, financially.
So props to the founders who run the math after sub-billion dollar buyouts (most of them) and at least make up the difference to the investors (employees) they over-promised and under-delivered to.
"You don't understand. My pet-messaging flea collar slash social network would never get made if we didn't structure things this way!"
You're probably right. I guess that would be a shame. It still sounds like either a flawed or dishonest business model to me.
Too much engineering effort has been wasted on overhyped ideas/technologies. This is true for both the consumer and b2b/high-tech sectors. Everybody is focused on growth and nobody is willing to invest time to refactor their increasingly complex systems/achitectures (no one cares about running costs) - So instead, we just cram all this inefficient mess inside Docker containers, hook up hundreds of expensive and unecessary external services to it and then we legitimize this huge pile of expensive junk by calling it a microservices architecture!
... And then a startup will hire a team of 100 engineers to maintain something which should otherwise only require 10 engineers.
The market had a correction! This is the end!
People realized China's numbers were not totally accurate! This is the end!
Housing prices in the Bay Area have reached ridiculous levels (again)! This is the end!
Everyone seems to want us to hit another downturn to be proven right. My fear is that once the media engine revs up, it can in fact create a self-fulfilling prophecy.
Just to note: Facebook just had 1 billion unique users in 1 day (2015). The year 2000 only had 350+ million INTERNET USERS.
It doesn't help that we are reminded by our predecessor's to watch out for the impending doom (something that might not have been expected). In the scheme of things, the context of where technology/internet was at the time was completely different to now.
The point according to OP is that the start-up scene has become soft and flabby, and lean times, whenever they arrive and for whatever reason, will toughen it up - and for those who can survive the initial chill winds, lower costs of labour, real estate etc will provide a boost.
Angels who want to hand you half million seem to be everywhere. $100+ million seems to be all over the place because there are so few companies to invest in.
God help you if you want $2-$10 million because the VC community sure won't.
And then they wonder why there are so few $100+ million companies to fund.
Only in pure software where your fixed hosting costs and salary are your only expense. And, really, only in "social" things that you are going to flip to Yahooglezonsoft and can be made by flogging a half-dozen early 20-somethings for 6-9 months.
If you have actual hardware, your costs haven't come down much. They're mostly dominated by non-recurring expenses until you start shipping.
IoT (Internet of Things) has been a case study in this. Everybody wants to be the software backend that they can run for peanuts and extract rent indefinitely. There are a zillion companies all trying to do this and all failing because "Waaaaaah! Nobody wants to build that icky hardware stuff for us for free."
Yeah, well, hardware requires that you have a customer, that wants something, that will make him money. And hardware requires that you build a board and debug it.
So, yeah, go figure. Hardware requires some people who actually A) have some experience and know what they're doing and B) actually expect to get paid for that knowledge.
Gee what a surprise.
"Nevermind. We like flogging young 20-somethings better."
Wait, what? You've never actually seen anything directly from Shenzhen sold in the US and the hardware Kickstarters all seem to fail dramatically?
Next time try to convince someone who didn't have to give out about $20K to various Chinese suppliers at CES 2015 for samples, retainers, prototypes, etc. They might actually believe you.