p.s., It's kind of a mystery to me how anyone thought Meetup would be the next big thing. It's hard to monetize.
Wikipedia is hard to monetize, but it's still a "big thing." Luckily, it's organised in a way that doesn't require S&P 500 revenue targets.
The economics of startups->dragons is such that it's near impossible for certain mass-market services exist even thought they are useful and economically viable.
The internet makes it possible to serve tens of millions on a modest budget. In theory, this enables a business to exist on a modest budget. In practice, serving tens of millions represents more-than-modest potential and that chance, even if quite small, is worth more than the business.
Say a service like meetup makes $20m revenue, expenses of $16m and is growing @ 10% pa. In theory, a nice business. Should be worth $50m-100m.
In reality though, a business like this is not just a business. It's a chance, however small, to be the next FB. At the least, it's a chance to be a FB acquisition. Even a minor threat to FB could easily be worth $1bn.
Chances of success don't have to be very high for the "risk the house" strategy to dominate. A 10% chance @ $10bn is worth $1bn. Systemically, that means a meetup is destined to be continuously bought or funded by investors taking that chance. It can never settle into a steady, viable state where it just does its job.
I agree with your argument that numerically, playing the odds make sense, but I don't see how this necessarily rules out the possibility of settling into a steady business if that's what the company's owner(s) want.
Especially with the backlash/burnout from VC demands, it seems to me like there would be plenty of business owners who would prefer the stabler "lifestyle business" over the moonshot because for emotional reasons, they prefer to leave potential money on the table in exchange for stability.
It just makes it rarer in the population, so to speak. Sure, people can make whatever choices they want and wants vary. However, people make the economic choices on average. If these are individual people making choices, then we get a distribution of choices.
Mostly these are companies though, collections of people making a common choice. Shareholders are not going to divide up their $1.5m dividend and chill when there's a $150m offer on the table. We barely even have the financial institutions to do that.
"Lifestyle Businesses" are also not always peaches and cream.
Say meetup is resold cheap because no-one can meet up irl anymore. You buy it and you are now the "Lifestyle CEO" of meetup. You have the inglorious & immediate task of downsizing all the VC/WeWork fat the company is carrying. Or, you could raise money and "grow into" your expenses. So, either you are raising money again and not a lifestyle company anymore or you are making deep cuts.
Walking back to a "lifestyle Businesses" from this position is not a choice that gets made often, unless there's no choice.
Finally, startups exist within startup business culture... meetup certainly. Giving up an growth is equivalent to failure. Successful companies grow fast, everyone gets promoted. Options convert. That's the culture.
Is there an opportunity for a new VC or hedge fund to come through and suck up already profitable businesses and ween technology companies off this "hockey stick growth" mentality?
A big factor here is that "going viral" is no longer a thing that happens organically. Anything that "goes viral" today simply had a good social / native marketing campaign. There is a lot less risk involved in the business model because the network effects have largely settled -- which means there is less upside for new businesses. The "hockey stick" effect doesn't really happen anymore.
There is plenty of room out there for $0.5-2B companies in the B2B space though. That's mostly where VC is focusing because those businesses leverage the business contacts of the VCs, so it works well with their "cash + connections" model.
For the purposes of this argument "next Twitter/Instagram/LinkedIn/etc" work too. WeWork bought meetup for $150m. They sold it for less. Facebook is worth thousands of times more.
My point is that considering the price of meetup, the odds of turning it into something worth 10x or 100X bigger create a risk/reward reality that is decisive. That's all.
Your bet on "$0.5-2B companies in the B2B space," works fine in this context.
That's the impression I got too, with so many good things bought by huge companies (e.g. Google) and then shut down.
I believe it might be possible to address this problem. E.g. suppose it is possible to:
1. host the service in a decentralized way such that it is spread between multiple independent hosting providers so that no single hosting company has influence over it. 2. users can pay directly for hosting. it might cost as little as $1 per year, and perhaps only for 'premium' features, but users do not want to pay then somebody else will be in control. 3. the development can be crowdfunded, e.g. say users will pay $2 per year, $1 goes to hosting, $1 goes to fund development.
My company have been working on the tech side of it, specifically we made a decentralized replicated relational database, which can also host business logic and queries; and we are now working on a infrastructure which manages hosting in a decentralized way, e.g. when users send funds to application's account, the system will automatically find a providers and pay them. So it all can function without an "owner".
I'm not sure about organizational side, though -- most quality services were made by passionate founders, it's not clear if that's going to work for a service owned by users.
More thoughts about it here: https://blog.chromia.com/towards-publicly-hosted-application...
Silicon Valley-style startups act like cancer, and venture capital is the carcinogen.
That said, I think we need to watch for this kind of demonisation... especially as we don't really have mature ideas on the alternative/solution to the current crop of monopolists.