No One Fails Anymore – Everybody ‘Pivots’
mobile.nytimes.com
mobile.nytimes.com
Investors just sit there and assume that the right people will find them, but they don't. The right people are too busy working to be chasing down investors 24/7.
The first-timers who end up getting funded over and over again are usually the ones who network 24/7 and their only real talent is seducing investors who confuse their well-rehearsed talk for passion and intelligence.
You can optimize your time to find one customer (read investor) which will give you $1M or to find 10K customers which will give you $100 each. Pick your fight.
Here's why that matters: Most VCs will NEVER EVER SEE THE 20%.
Most VCs suck, and they don't have any good exits, or often any exits at all. So they know they'll never get the 20%.
Therefore, being rational optimizers, they try to suck that 2% dry by creating new funds (for their firm) and new funding rounds (for their investments). The investment is always just about to get big, we just need another round for more runway!
HN tends to focus on the like 5 VC firms that make money as opposed to the 995 that don't. All kinds of shady stuff happens to these investments on life support, like kicking back money to the VC, paying for "business" travel for the VC, yadda yadda. The founders have no incentive at all to talk about it, since they need to get money for the next idea and it's all a reputation thing.
As an entrepreneur, you should vet your investor as much as they vet you.
I've seen someone claim to be a General Partner in a VC Fund that had $50M in capital. They ran around offering to sign investment deals with companies that had terrible ideas.
Only later did it surface that the person was GP in a fund with no money. The agreements signed weren't worth the paper they were printed on.
Entrepreneurs taken by this person invested in things like legal fees to negotiate terms and lost all that cash.
Couple that with the fact that most Venture Funds don't give their LP's a return and venture funding is a terrible business to be in if you are smart.
More and more people are waking up to this.
I've seen people go from thinking they want to start a VC Fund to starting a business like a Venture Studio.
A Venture Studio typically forgoes the 2% management fee's for managing the fund and deploying capital.
However, the Venture Studio will usually own a dev shop or marketing agency that they do all the work through.
They make their money on the professional services side.
Not sure if this will be more successful but it's something I see increasingly common.
Can you share some examples you've run across? Thanks!
Those are two of them.
Email me hn (at) strapr dot com if you want to chat regarding details on how do a venture studio.
My guess is that the go down this route because of ego. After it bimbos they use the fact they were a GP in a VC fund to accelerate their career.
After all being a GP in a VC fund you must be good at raising money? Most leaders in business aren't exposed to scammers like this. They would most likely consider the fraudster for a more senior role.
Summary:
The Kauffman Foundation investment team analyzed our twenty-year history of venture investing experience in nearly 100 VC funds with some of the most notable and exclusive partnership “brands” and concluded that the Limited Partner (LP) investment model is broken ... Our research suggests that investors like us succumb time and again to narrative fallacies, a well-studied behavioral finance bias. We found in our own portfolio that:
- Only twenty of 100 venture funds generated returns that beat a public-market equivalent by more than 3 percent annually, and half of those began investing prior to 1995.
- The majority of funds—sixty-two out of 100—failed to exceed returns available from the public markets, after fees and carry were paid.
Pleased to see someone bring this up. I've seen those things and more happen in my time in the startup community.
"The right people are too busy working to be chasing down investors 24/7."
Over the years, we have done a lot on less money than most successful startups raise. We have revenues and now may not need to raise more. Not by choice - but because many investors look for things that honestly are just showy, and then wind up backing companies that fail.
Speaking from experience, I feel like there are a great many smaller-companies with successful, profitable products that are just fine with a 40hr/week team of 7 people clearing around a million USD/year in income. It's not too hard to find them but what incentive could possibly make it work out for at least more than the key stakeholders, say 2 or 3 in this company? I would never stay put in an aqui-hire and 6 weeks severance or whatever is a shit deal IMO.
Maybe we've reach peak cynicism and investors just can't find the smartest people to invest in because the smartest know better are shying away?
As an aside, It's funny how this phenomena seems to be observable in becoming President of the USA, I think. Too much of becoming president in the past ~60 years (I think back to Kennedy/Nixon debate) is based on a candidates EQ, persona, and even fundraising abilities, which effectively eliminates tons of highly-qualified potential candidates who may outright suck at those sort of things, but "count the beans" really nicely. I believe it was John Dickerson who went at length on this very topic somewhere in a his Whistlestop podcast.
https://www.bloomberg.com/news/articles/2016-12-16/new-york-... https://www.washingtonpost.com/news/morning-mix/wp/2017/06/3...
SiriusXM (27 years old) is financially the only music subscription service that is thriving in terms of printing cash. Not only did they not take it in the pants due to to the rise of the Internet, their fortunes have radically improved over the last 15 years and they've perpetually added to their subscriber base. While Pandora and Spotify bleed red ink by the barrel, Sirius earned $800m in the last four quarters (with $1.5b in operating income).
Fox and its various properties transitioned just fine and have had several record profit years in the last five years. The stock of Twenty-First Century Fox, Inc. has been hovering near all-time highs (its stock history going back to 1989) the last three years, and that's after spinning off the smaller Newscorp.
Disney has thrived big time in the Internet era. They're far larger than they used to be. Their market cap is five times larger than it was in 1995 (and that's with a modest 17 PE ratio).
CBS Corp's stock is near an all-time high (spun off in 2005) and their sales are as well.
Thomson Reuters is doing just fine in the Internet era. They didn't take it in the pants at all. They're a century old media company (156 years for Reuters, 83 for Thomson), whose stock is at all-time highs, and their operational condition is strong. They're presently worth 10x what the New York Times is.
A far more interesting discussion would have been about the rampant neurosis of above-average (nationally speaking) educated young people in tech that rate themselves as being better than they actually are, leading to a deathly fear of failure and accountability (leading to "pivoting"), perhaps (IMO) coming from the psychological reluctance to take a good hard look in the mirror and admit that they are not as good/better than others as they think they are.
The weight of expectations on the shoulders of talented young people, ginned up by years of ersatz "success" in getting good grades and getting into college and getting more good grades and maybe even getting some seed funding -- this is the real "invisible hand" of SV. I feel like people in my parents' generation were acculturated to be happy with a house, a steady job, a car in the driveway, and beer in the fridge. Our generation by contrast seems as if it is populated by people who will consider themselves a massive disappointment if they don't turn out to be the next Zuck.
I agree that expectations are a little unrealistic, particularly with anyone born after the early 90s, but also for many born after the late 70s.
However the quality of life, slack time, and slack resources for happiness that other generations did experience during periods of prosperity are measurably lacking today.
It is not unrealistic to feel unhappy about this; but what continues to amaze me is how ignorantly and emotionally many vote. Blatantly ignoring candidates who's platforms are arguably better able to deliver successful change in favor of candidates who sell them an easy bubble of illusions.
Platforms that delivered change not so.
I'm curious as to how you are so sure you can distinguish illusion.
But you're right that recognizing which platform will actually work is very hard.
And social science isn't as solid as that.
I would say there are more equivocal problems than unequivocal and society looks for a leader to make gut feeling decisions. The only discriminator is the success of previous gut feeling decisions or even "it went wrong but it sounded good".
However, as accurate as it is for the overly ambitious (an old saying I had about the social media part was that 'millionaires are overrepresented on the internet'), I feel it (and a lot of people online in general) are a bit confused about how many young people/generation Y folks/millenials/whatever else are super ambitious.
Because I don't think the large majority of young people are all as ambitious as the media likes to make out. I feel a large percentage of them are pretty content with a comfortable life in the suburbs with 2.5 kids and a dog. They're either happy with their decently well yet convenient job or would be quite happy to get one so long as it pays for a beer or two at the weekend.
What I do think is that the 'super ambitious' image is itself filtered by most writers working in a tech or media bubble. Of course they think younger generations are incredibly ambitious and not happy with anything less than being millionaires; they're working in industries where those who go into them have that mindset.
Just keep in mind there still are a decent amount of people who just want to have an enjoyable life with a steady paycheck rather than to gamble everything on the hopes of becoming the next Mark Zuckerberg.
Being young and wanting to be on your own and make something special the world has never seen, even with high risks involved and your family wanting you not to suffer, getting a safe job is as old as the wheel.
I had my family against me on my decision to create my companies because it was extremely painful at first. Then when things start running and you earn dozens of times what they do they change views.
What happens is that every young person believes she is the master of the Universe and the world starts with her. In some ways is true, your world starts when you are born.
You don't need creating a Facebook but something 3000 times smaller and probably will be way happier, first because it is on reach and second because you enjoy the ride every day, not living a miserable live until you are billionaire(it will never happen because miserable life will burn and destroy you over time).
I'm genuinely curious about your reasons for thinking so.
But that's still 10%.
I have literally gotten into fights with my Mom where she wants a GUARANTEE that if I make over x amount I will give her y amount. I just keep repeating, "This is all hypothetical, let's not discuss it" as she gets more and more upset about not locking me in.
Extraordinary.
I remember just staring at her for a moment, as my mother is a very sensible woman, and then just shaking my head and saying, "Mum, you realise that YouTube bleeds money don't you? It's not a real business. You can't pay for free video streaming with banner ads, that doesn't work as a business model".
There's definitely a lack of understanding in older generations of how wealth creation in tech works, and it's definitely due to the flood of irresponsible VC money sloshing around the Valley. Good luck trying to get investment to do a YouTube anywhere but California: even the most basic questions like "if nobody buys you, will you make money" would rule you out right away.
Yep, I know this one all too well. When I tried to get a Silicon Valley esque startup funded in London, I found that a lot of accelerators and investors were simply more interested in B2B service businesses where they could be sure of immediate revenue.
The only reason so many large platforms and businesses got started over in the valley is because the investors there are willing to take chances on a company or idea with no real proven business model on the assumption that it'll find one when it becomes popular enough.
Investors in other places will be a hell of lot more skeptical.
Everyone’s a critic, read between the lines man
[0]: https://en.wikipedia.org/wiki/Keeping_up_with_the_Joneses
I apologize if my line of questioning comes across as hostile, but I do take issue with the even the whiff of the concept that parents can do no wrong, both personally and conceptually. In contrast, I do think that children shouldn't be held responsible for the mistakes and misdeeds of their parents.
1) making it more difficult to identify the problem 2) affecting the path taken towards resolving the problem for the worse 3) making the person whose problem it now is to resolve the problem that they grew into less willing to do so.
I think that everyone should honestly own their successes and failures because, quite frankly, there is enough blame to go around, and not enough people willing to take ownership of the failures that they were responsible for.
- People (somewhat accurately) seeing elite college as the most surefire way to ensure membership in the high end of the earnings spectrum, and therefore organizing their kids' preteen/teenage lives around getting into college, molding kids' psyches into a process-driven, check-the-box orientation (i.e., do the following list of things to a specified standard and you will get into a great school and then everything will be OK)
- The role of social media / constantly sharing details of one's life with one's entire network, which, as the Wait but Why comic posted in this thread eloquently describes, is generally more unhealthy than healthy
And I have not seen too many steady jobs in high-tech.
The only option to get ahead is to either play the lottery or "do a startup" (pretty much like lottery)
The situation is very different today.
of course... why shouldn't President Trump be brought up in every article?
I also would have liked to see a more creative article.
Just do things, observe how they turn out, and then try to do them better. The reason "pivot" has spread throughout the lexicon is because it better describes reality today. What does "failure" even mean, that you ceased to exist when things didn't work out? No, of course not - when things don't work out, you're still here, you go and do something else, hopefully with the benefit of experience.
And similarly, what does it even mean to be "better than they actually are"? As if there's this national ranking scale of people from bad to good? The idea is nonsensical - people have different standards for what constitutes "good", and your only responsibility is to lead a life that you can feel good about by your standards.
"What does 'failure' even mean..." Really? Seriously? Failure means admitting and acknowledging that you were wrong, that you things didn't work out the way you expected them to, and taking responsibility for it, instead of treating it as just another tick in a line of never-ending experiences that you "learn" and "iterate" from. I'm not disparaging learning from mistakes, but a more subtle difference: that sometimes you just have to admit that you were totally off course and that the only thing you can learn the situation is that you should throw away everything you thought you knew and go back to square one. You say "pivot" better describes reality? That is the problem. In your worldview, it is acceptable to just change direction in the face of failure. No, sometimes you have to go backwards, and the inability of young people to admit this or understand this is the problem.
I don't even know where to begin with your second point. Suffice it to say that the world is not some cuddly place where everyone is a winner and everyone gets an award for participation. To think otherwise is to live in fantasy -- indeed, a fantasy world where you can always feel good about your life according to your standards.
I recognize that you probably think I'm an idiot or terribly misguided or just denying of reality. In my mind, you just haven't gotten it yet - I didn't always think like this, but I came to accept it after much effort, both because it makes me happier and because it's actually led to more success, by your definition, than believing that some people are just smarter and more capable than others. But that's okay - either you will or you won't come to accept it, and either way it doesn't really affect me, and that's the other half of my point: we each set our personal standards and have our own lens through which we see the world, and that's fine.
You're both describing the same concept -- taking a 'non-success', learning lessons from it, and then using those lessons to do better things in the future.
It's just one of you is OK with continuing to describe that situation with the term 'failure', with all the existing negative connotation baggage, while the other prefers to find a new word to describe it.
The advantage of this, from a purely utilitarian perspective, is that you don't feel the emotions of shame & disappointment that "failure" usually connotes. And so you can jump into the next idea more quickly, with an open-mind, and pursue it with the same thrill of discovery.
One of my favorite business stories is that of the Nintendo Playing Card Company of Kyoto, whose CEO came to the US to visit the US Playing Card Company. He realized that even if he captured the entire world market for playing cards (this is before MtG) he still wouldn't have a very big business, and set out to find something better.
You seem to think there's an element of guilt and extrinsic punishment that needs to be attached to not getting something right the first time. To use a trite analogy, should Edison have been wracked with guilt every time he failed to produce a lightbulb? People who can screw up and immediately pick themselves back up are going to make it farther than even most of the wunderkinds of this world.
The people who really fail, in a terminal sense, are those who constantly flagellate themselves for their mistakes, like you demand, until they're so beaten the refuse to keep trying.
Being persistent at something, and then course correcting on feedback is how any under dog ever does anything.
—Bob Ross
Also: check the guidelines link at the very bottom of the site (in tiny, nigh-unreadable type!): don't talk about votes, either up or down.
I'm a bit surprised so many people have the time and inclination to be upvote police.
—Winston Churchill
--G K Chesterton
I don't pick my friends based on their successful startup ventures, or if they're some 100x "rockstar" dev. Some of my best friends from high school are still finding their way in life in their 30s, and I for one don't give a sh*t how many times they have to "pivot" before they get to where they want to be.
To pivot is to fail, to recognise one's failure, to pick oneself up and try again in another direction. On a personal level it's admirable. On a business level I've no opinion as these pivots are all privately funded.
When the NYT is publishing these weird, poorly written and badly strung together political rants, is it any wonder they're "losing" in the age of new media?
YC tries to give startups so little money that they can't pivot. They fail fast and are flushed out of the ecosystem quickly. The alternative for a VC is an army of zombies - companies that can cover their expenses, but not pay back their investors. Zombies still need investor attention, and owning too many zombies can choke a VC firm.
Anyway, if you didnt sleep throughout your statistics classes, you know also that our perceptions of likelihood for plans to fail or succeed, our peception of luck- is also totally off.
So what actually is a good plan? A good plan, is not one particular chain of actions, and tree of scenarios growing out of that base-scenario - but a investment into a likelihood enhancing environment for a whole overlapping forrest of such scenario trees.
Take the idea of a book-shop for cooking recipes in medieval europe. That sounds like a great plan. Its what your family would support, and thus you would buy scribes and set out on this adventure.
Now take the plan of selling printing presses. Everyone of your son and daughters could march of, producing there own version of a book-shop. You do not invest into a single "plan" and your shuffeling of investments, into succeeding or away from dieing branches of the scenario, might look like cowardice, indecisivness and pivoting - but in reality, you are just aware of human limitations and overcome them.
For founders this is a dangerous way of thinking. Because at the larval stage, a company is that tribe, that family, in desperate need of the ilusion of one plan, one scenario, the ilusion of a chieftain knowing what tomorrows weather will bring. But keep that forrest in the backyard of your mind, and when nobody is watching - plant some seeds. There might grow a forrest.
You fail, that's why you pivot.
Hence the saying.
"Fail fast and pivot"
Pivoting just means you've taken some industry knowledge from your failed attempt at a product, and you are applying it to a new product or market fit by pivoting on your original idea. (at least in the context of start-ups / product development)
There's no pivoting without failure.
Also:
> Trump’s innovation is to have mined a deeper vein of cynicism, exhausting the weary tropes of polite political discourse. He is the ultimate pivoter, aimlessly following his own impulses as his administration is mired in daily absurdities.
WTF? Trump is the ultimate pivoter? Are you serious? This article is just ridiculous.
Someone needs to learn the definition of pivot.
Failure is not a badge of honor, or something to aspire to. It happens, and should be dealt with accordingly, and should not define a person or idea - but it shouldn't be glorified.
The entire point of the article was "Trump changes his mind a lot". Supports will call that adapting, detractors will call that failure. Does it matter how it's labeled?
I remember being a kid, and our family driving up I-15 in Idaho. We topped over this hill, and way down there in the distance, there was an overpass over the freeway. I remember wondering how my dad could aim the vehicle so well that he'd go under that overpass. Now, as an adult I know that he couldn't. He didn't try to aim that precisely; he just steered the whole way.
You can't (usually) aim your startup well enough at the beginning. That's OK. Steer. Sometimes the steering adjustments will be rather major. We call that "pivoting", but as far as I can tell it's pretty much the same thing, just on a bit larger scale.
I ran two startups one in the mid-1990s and one in 1999-2001, I gained experience as a President and later Vice-President to let my business partner get more experience as a President. I have degrees in computer and business areas as well and combine the two.
Thing is I failed because the first business did not have a credit card system and we took checks that later bounced. (You'll find people who do this on purpose to get free stuff from a small business because we can't afford lawyers to collect on them.) and also we sold computers and computer services trying to do databases and make software. Big Box stores ate our lunch with $300 PCs via Internet Rebates and ours was $700 but with better quality parts so the PC lasts longer. We tried the same thing with the second company and my business partner got sick with a heart attack (he survived) but the business suffered as a result and closed.
Yeah I failed twice, but I keep on trying to do better and I'm in the St. Louis MO area and cannot relocate, and of course not on the west coast where all of the action is apparently.
I got a friend who tried to offer computer services in the Branson MO area, most of them don't even use a computer out there, and entertainers go without work when out of season and apply for unemployment, etc. You have to time the seasons of Branson when the shows are popular and then save expenses when they are out of season. Plus most people there just buy from Wal-Mart for the computer needs.
Yeah, location really matters. He had to join his wife's Antique FLea Market store and close down his computer store and get into the Flipping business of driving to garage sales to buy stuff cheap for the flea market, etc.
In my area after the Ferguson riots (just a few miles from my house) the economy is still trying to recover.
I try not to get into politics, treat everyone as an individual and hope for the best. I've worked for FORTUNE 500 companies and mid-size to small companies as well.
Look at Steve Jobs' career. He failed many times. Apple ///, Apple Lisa, even the first Macintosh was a flop and he left Apple in 1985 to found Next. He would brag that he just asked people and they gave him what he asked, but trying to get Computer Stores to sell the Apple 1 computer made him get rejected a lot. It was only when some VC saw potential in the Apple 1 that he got money to make it go live and sell via mail order. Also Apple kept bleeding money until it bought Next and got Steve Jobs back, and while Next was a failure and mistake, merging it with Mac OS to make Mac OSX and later going from PowerPC to Intel chips worked. Without Steve Jobs failures, there would be no iPod or iTunes, and no iPhone and iPad. Sure Apple wasn't the first to invent the smart phone etc, but they made them easier to use and better than the competition like Blackberry and Windows CE phones.
Instead, culture does not forget or forgive, this is against compassion and empathy, and in a way hate based.
As a baby, we did not walk we crawled first, and in learning how to walk we kept falling down until we could control balance and put one foot in front of another. We forget stuff like that, and social anxiety is put on people who fail and make mistakes, and then nobody learns anything and people keep making the same mistakes and failure and try to hide them.
Does that make sense to anyone? In Steve Jobs failures, he found a way to make a success out of them. He only did so after he went back to school for a business degree after leaving Apple.