Venture capital is a hell of a drug
techcrunch.com
techcrunch.com
This is hugely destructive for the founder in question. If you don't have vc baking and you don't sell to a big name? Looking for a job after running a business with a gross of a few hundred thousand a year is just not the same as looking for a job after working for one of the big valley companies. I mean I exaggerate and say that employers treat me like I was unemployed, and it is not that bad, but compared to working for large companies with reputations for hiring good people, running an unfunded, ramen profitable company looks pretty bad on your resume.
I would argue that vc mitigates a lot of these risks. First, you have a name, a reputation to put on your reputation. Second, the bit about get big or get dead? In many cases, that is as good for the founder as for the vc. You are way less likely to end up starting your career over when the thing fails, both because of the reputation factor and because either you got big (which is good for the career even if the company gets dead before you can cash out) or you got dead fairly quickly, and have less time to explain away.
Someone with business experience, who can prioritize effectively with an eye to the big picture, is way more valuable than someone who figured out the n log n solution to the stupid whiteboard question in 20 minutes. We're not working 20 minute days, here.
And really, the business skills you need to run a small business that doesn't really do sales do not have a lot of overlap with the business skills that large companies want or need in their technical workforce.
Small business owners, presumably, have both of those lessons pretty well internalized, in addition to a certain "just get it frickin done" attitude towards things that need to be done.
The super-advanced algo-writing skills that we in the industry screen for, conversely, come up as a real-world requirement far less commonly, and you can poll the whole office for opinions when they do, because everyone's excited to see an actual nifty problem.
I do think that experience of managing people has made me a better employee, even if maybe I'm not ready to really be a manager again yet. I've got a lot more empathy for the boss than I did before starting this. I've been a bad boss, and I know what leads to those bad boss behaviors, and it's not maliciousness. Managing people is just hard.
And there is a bigger picture that you don't see as an employee. I now can accept that when the boss asks me to do something a stupid way, if the boss still tells me to do it that way after I explain why I think it's stupid, well, sometimes there are other issues outside the boss' control that make the stupid way the only way.
If anything, running my own company has made me way better at 'staying in the box' when necessary. Or, at least, it has convinced me that there are times that I ought to stay in the box.
Jessica Livingston, in a recent interview with Sam Altman [0], said that she believes determination is the #1 trait for startup founder success (over intelligence etc). I don't think it's a stretch to say the same applies to very early employees.
It took me a long time to understand this, too. It might be true that you're e.g. a good designer, but you're being hired as an engineer, so they want you to focus specifically on engineering. Why? Because that's the domain in which you offer the greatest marginal returns to the company. There's a virtually limitless amount of engineering to be done, and a limited number of hours in the day. Priorities.
You could be a self-taught product design genius, but if you're hired as 3rd software engineer from the left, your company expects you to sit there and code away. They aren't going to listen to your design thoughts. You could be the ex-founder of a billion dollar startup, but once you take $ROLE_X in $COMPANY_Y, your broad set of skills will not be appreciated. You're going to be judged by how well you do $ROLE_X only.
I'm not talking about moonlighting doing the design or PM work, I'm talking about bringing an understanding of the business to your engineering work.
And yes, you don't want to go complete cowboy, major decisions should be run up the chain, but you do need to know what and why the major decisions are.
Also, a few hundred k/year in gross can get you a lot of very expensive ramen. That's probably more than most devs make at FB or Twitter.
Perhaps it is valid to call me out for complaining about a salary that is pretty normal for most us households, but I suppose I don't really know how to respond.
I mentioned gross rather than net or my own take home because it speaks to the size of the company, which is important, I think, in the context of getting the next job.
And what happened with your business? Were you left with no connections, relationships, and reputation of results to leverage to your next "thing" (I.e. new career path, consulting gigs, resume material)?
Even if your startup / bootstrapped / micro-enterprise failed, you got tired of it, or the market shifted, you don't get to a few hundred K in revenue in a solo/micro operation without having some results, reputation, and relationships to stand on when you walk away. At least not in any situation I can think of.
I don't know you, but I'm wondering if this is more about your perception being off about what's making this next step (i.e. interviews and selling yourself) challenging for you. If it is off, maybe you're overlooking something else that is really the root cause of it, preventing you from addressing it or even asking the right questions of yourself or the community.
Sure, but that's the thing, reputation and relationships might get you an interview, but it won't get you a individual contributor job at a top-tier company. Why do I fail those interviews? Maybe I am not technically good enough. Maybe, as a friend says, "They can tell" - they can see that I am depressed. Maybe it's a little bit of both.
My point is that you can show up to interviews at second or third tier companies (or contract gigs at first tier companies) and pretty much say "hey man, I've got hands, I can figure it out" and they hire you. And contacts and experience selling works great for that. But my experience has been that there is a ceiling on how far that takes you.
Contacts are important but they are not everything.
I'm actually fairly certain that a reasonable portion of my problem is that nobody cares about the problems I was working on, or rather, that the sysadmin role has shrunk a lot, and that's where my focus is. I need to redirect effort into SWE skills. (The path forward for me is probably SRE jobs, but the part of that I'm missing is the SWE stuff.)
That's another problem with working for a company you are majority shareholder of; the temptation is to do what you are good at and hire people who are better than you to do the things you aren't good at. When the industry moves, and the thing you are good at are no longer really in demand? well, you have a retraining problem, one you probably wouldn't have had if you had been working as an individual contributor during that time.
>I don't know you, but I'm wondering if this is more about your perception being off about what's making this next step (i.e. interviews and selling yourself) challenging for you. If it is off, maybe you're overlooking something else that is really the root cause of it, preventing you from addressing it or even asking the right questions of yourself or the community.
eh, that's possible. You could argue that my biggest problem right now is mentality. I was defeated, I feel defeated. And now I'm back contracting, which pays way better than working for a small company, and better than any of the jobs my contacts offered me, but it doesn't feel like success for a bunch of reasons; The role itself looks like what I did when I was 17 (It pays a lot better than what I did when I was 17... but it's about the same work) and it is still 1/2 to 2/3rds total comp for direct hires at places like amazon and facebook.
That's the thing, if I want to work for startup wages, sure, I could get a lot of jobs. no problem. But that's not a step up from where I was before I started this company. Hell, if I wasn't depressed as fuck, I would probably have a shot at being a co-founder somewhere funded, which possibly could be a step up, but I am depressed and exhausted and so that's not really an option right now.
I mean, as others have pointed out, I have it okay now. bills are getting paid, etc, etc, and why should I be unhappy about my current situation? Lots of people would be happy to have my job. I feel bad for feeling bad about it, you know?
but... my point that running a business (vs. working as an ambitious individual contributor) doesn't move your career forward as working as an ambitious individual contributor would, or at least that it hasn't moved my career forward.
(And yes, I'm sorry for sounding so self-pitying and bitter. That's how I feel right now; it will pass. Either I will retrain and continue my upwards career path as an individual contributor, or I will become accustomed to, you know, that path not always leading upwards. Either way requires time.)
Re-reading this... I'm painting a pretty unsympathetic picture of myself. The fact that I've spent a lot of effort on non-technical things (that, turns out, I'm not so great at) rather than moving my technical skills forward almost certainly has a lot to do with me not being able to get technical jobs that are as good as I'd like. Shock! surprise! I mean, that seems pretty obvious, no? I took a risk. I thought I could become good at business. Turns out? it's harder than it looks, and progress in that field is way harder, for me, than progress as a technical individual contributor. Now, I'm complaining because that time away from the things I'm good at is now slowing down my career progress. I reached a little too hard for that brass ring, fell off and am now whining about my bloody nose.
I'm still arguing, though, that there are costs to your technical career to taking time to try to go into business.
To do that, you'll want to be able to talk about things you've achieved. Network with your community, give talks, etc. Get known as the person who can build things, or get customers, and you should be getting job offers.
If you're quietly working on your own thing and nobody knows or cares about you, then yeah you're going to struggle to get a job afterwards. But if you're known as a person who gets stuff done, you should be able to get a job at least at a venture-funded startup, I believe.
If you're an introvert like me, it might require some creativity to find compatible ways to do this, but so this.
Don't go to "networking events". Keep it as close to your natural habitat as possible.
This is about discipline (which was imposed by VC). If you see that you are not growing toward your goal (maybe to be have $500K/year salary or something like that), then you need to move on.
In short, zombies can walk but they are still dead.
Regarding "not looking good on paper" - that is probably because you are looking for wrong jobs: managers in big companies do want to hire people who ran their business before. It does not really matter if you are VC or not-VC funded: you are "trouble maker".
But from what I've seen, if you are primarily technical, large companies pay vastly more than smaller companies... so I guess I don't really see what that changes, other than the idea that if you are right, even being more successful would not have helped me.
On the other hand, many large companies will consider your entrepreneurship as a great plus if applying for leadership / management positions.
I can only speak for myself, but to me, getting individually rich is not the goal. Having a quick exit isn't the goal.
The goal is to make a huge company that shifts the way people behave in a way that I think will make them better off and "build a world I want to live in."
The reality is, for big moonshot things (AI, Nano, Genetics, AR), you can't bootstrap them with revenues - you need a shitload of high risk money to build, grow & scale. That's what Venture money is for.
If you get venture money, make some waves and flame out or acquihire before the unicorn exit and see it as a loss, then I don't really know what you were working for. Think about it like a PhD on steroids - if you do it right, no matter the long term outcome you are making a dent in the market.
Except those were all venture funded...and even though it's not hedge fund amounts, those aren't small sums. the whole point of the post was saying that Venture money puts you on a certain path. I claim it's necessary to get on that path. So I think this proves my point.
Oculus: Andreesen/Spark
Instagram: Andreesen/Sequoia
Twitch: Bessemer
Cruise: Quallcom/Spark
To counter notion that you need capital to get on a certain path, I'd note that Shutterstock, Wayfair, Lynda, Atlassian and others achieved multi-billion dollar exits with no VC in their formative period. In all cases, save Shutterstock, the companies raised late stage PE, but more as a way to cash out shareholders than fund development.
Many other things that promise to be huge moonshots end up being huge fizzles instead. Think about AI the first time around, VR the first time around, pen computing the first time around, flying cars, supersonic transports, and of course the literal moonshot, which got us to the moon 6 times and then we never went back.
I'm sure many smart people will disagree with me on this, but when I see lots of money invested in a moonshot, I usually think "That's an awful lot of people who are about to spend years of their lives chasing an image of what the future looks like rather than discovering what the actual future will look like."
It's hard for frontier technology projects (ML/AI, AR/VR, Genetics, Robotics etc...) to even get out of the lab without significant investment, as the personnel needed have so many lucrative options and they are generally done by older people with relatively high personal burn rates (kids, mortgage etc...).
chasing an image of what the future looks like rather than discovering what the actual future will look like
That doesn't make sense. By definition you have to blaze a trail in new technology/markets - you don't chase an image. The image you have is the the world you build - and hopefully people respond.
It's not a matter of "hopefully people respond", except for the initial first draft (which, if you're smart, you'll make as simple and minimal as possible). It's a matter of testing things out and then observing what people do respond to, then going down that path. Once you've validated the business model, you can take capital to bring it to more people, but taking capital itself does not help you identify that model any faster.
VR the first three or four times around. Fusion - the first 70 years it's been 20 years away. :)
As you say many (most?) things that changed the world either started very small, or were serendipitous (freak accident if you prefer). Even engineering led discoveries started with few, if any, applications.
Take the laser, originally thought it might be useful in spectography and radar. No one was conceiving of CDs, fibre optics, tattoo removal, barcode scanners and the numerous other uses.
The entirety of our industry is based on what followed from building a machine to crack German codes, and from trying to calculate artillery firing tables quicker. Right about the time the US was commissioning ENIAC, HM Gov was smashing up Colossus and burning blueprints, and we'd have to wait 30 years to hear of Tommy Flowers and Colossus.
I think it's safe to believe most of the truly ground breaking ideas will come from entirely unexpected people, places and fields, and that there's a lot more good ones tucked away behind increasingly hard to fund blue sky research.
We'll get some slick applications of AI, VR and data driven computing, and many of them will be marvelous (and many not), and a fortune will be spent. But the actual world changers are likely elsewhere. I hope at least some will be from the founders who've cashed out a Unicorn and are now using their funds to chase the undelivered dreams elsewhere (SpaceX etc). I just wish there were a few more so we can get there a bit quicker! :)
The massive funding is more often for things that might not be possible or are just not well thought out yet. Segway vs. 'hover boards.' Uber could have been a tiny little self funding company that grew organically. Burning though hundreds of millions of dollars in capital is a great way to look successful though.
To build competitive nets you need a way to acquire data (not cheap), label it (also not cheap), and train nets with people who know how to implement them (very much not cheap).
That's all before you have a product which is generating revenue to "boostrap" from. Even Geohot needed 3M from Andreesen to get comma.ai off the ground to gather and train data from a free app and try and turn it into a product (which isn't out yet).
I'm talking about $10M here, not $10B. You max out Angel money around $1-2M which would get you maybe a year with some MS/PhD Machine Learning Engineers. I know this from first hand experience. And yes, you really do need people with that level of background. I've never met a self trained ML expert who can rapidly build ANNs and gather the data efficiently (though I am sure a few exist).
Squirrel-Tracking Water Cannon guy is one example where someone use basically off the shelf components to hack something together. Finding the right sized niche is hard, but that's always been the core problem. How about showing what a new couch might look like in a room from a cellphone video. There are already several things that do most of the heavy lifting can you glue them together into an MVP? Is there already a product that does this? Can you get referrals from IKEA? etc.
I think you're totally on point about that what venture money was created for decades ago... but, is that how it is being deployed today? Particularly, I'm thinking of Vinod Khosla's thoughts when he criticized VCs for acting like investors in a company like Dollar Shave Club [0].
[0]: http://www.latimes.com/business/la-fi-tn-vc-funding-20160409...
The way I answer it is if you can say yes to the question "Has this new product/service overwhelmingly changed how people do X?" Still pretty variable.
I think Eric put together a strong piece that missed commentary from being published on Friday.
Granted, there's some dross in there, but like it or not, it's tech's paper of record.
https://techcrunch.com/2016/01/18/why-big-companies-keep-fai...
That was quite unintuitive to me on the surface, but the examples provided really drove it home.
Am I misunderstanding something, or is the author asserting that VCs regularly make the sunk cost fallacy?
If all of the winners in a fund get acquired too early (small wins instead of big wins) it could mean the fund is not actually successful because it's not enough to outweigh the losses.
Not necessarily, e.g. better to have a 25% chance of $250mm than a 100% chance of $50mm.