Looking for Plan B - 'almost no one is seeking to create long-term value or build businesses'
gesterling.wordpress.com
gesterling.wordpress.com
But, everyone knows that inflation is really far greater than the official ~2.5%/year though. Depending on which methodology you accept, the actual number is closer to 10% and possibly as high as 15% (http://www.shadowstats.com/article/56 is a decent primer on some of the problems with the government stats).
Using a more accurate GDP deflator shows that we've actually been in a recession for a few years now.
And The Economist (http://www.economist.com/countries/USA/profile.cfm?folder=Pr...) estimates less than 1% net growth for the year.
Btw in my assessment we are in a recession.
An entrepreneur that plugs away creating a small ISV or a team that creates a small SAS site is rather boring, so you're not going to hear about it. That is unless you have a DHH who is willing to throw rocks at the establishment and gather some press that way. DHH writing "F*ck You" in a 72 point font in a Power Point presentation--that's good TV.
The guys over at Shoppify make a decent little SaS product, last I heard it was 4 guys working on RoR and were profitable from the first few months. When I watched a RoR presentation by them last year, they said they hosted 25,000 online stores. No one hears about them, however... why? It's just not good TV.
Personally, I think we've been in a recession for half a year at least. Just look at spending patterns... they're all down.
The venture capitalists are basically screwed because of the disappearance of the IPO market, and the increased importance of angel funding. Fred et all are just spinning things to make it seem like there is still a reason for their existence.
if there's no reason for our existence, we'll close shop. but right now, we are seeing more deal flow than ever which is certainly an indication that others see a reason for our existence even though you don't
There's just a lot more of us founders so it's natural that you'd see more deals even if you weren't also doing an excellent job of making a name for yourself through blogging and smart investments.
On the other hand, the costs dropped so low that I think you're finding a lot more people jumping in who are driven more by the romantic ideal of building a company rather than just to prove one idea before moving on to the next.
I say it's a romantic notion because of a recent thread that PG kicked off where he said that he couldn't imagine working on the same company forever because there were so many other interesting things to do. I think the romantics develop such an attachment to the company they're building that they couldn't imagine ever leaving it.
I'm a romantic.
For a number of overblown reasons, VC feels antithetical to building a company you want to stay at. There's the pejoratives (lifestyle business, would you rather be rich or a king?) that come from the VC backed startup culture. There's the need for an exit. And more importantly, I think people who think this way would much rather ask customers for money than investors. I think that comes down to preferring to focus on value rather than hype.
Of course there is the other question of how well that work is aligned with what consumers want. That's not easy to answer either, because consumers don't know what they want until they get to try it.
It may be that overall it is a good thing to have startup founders incubate ideas and basically throw their fledgling projects at some big corp that tries to sell it to as many consumers as possible. Big corps have less creative potential but a broader reach, so that may work. I'm not sure though.
Moreover, it's not aesthetic. For a while our model was 14th century Florence, now we're 20th century Hollywood, complete with our own starlets and gossip columnists but without an audience willing to buy show tickets.
It doesn't personally interest me, but there is nothing wrong with building a company whose primary value is as part of something bigger. It's like attacking a tractor company for not growing any food. If they can enable farmers to grow more food, then they've created value.
I agree with that, but currently many companies are sold without even having an notion how to earn money (other than "ads"), and those that do have some revenues get GM-sized evaluations.
I don't mean to attack anyone - it's markets and currently building to sell is a reasonable choice. At a certain scale it's even sustainable, but currently I think we're in a bubble: the tractor company's customers use the product to increase their revenues. Has Conde Nast increased its revenues after buying Reddit? Will Bebo bring $850m of value to AOL?
That said, I really think the attitude in Silicon Valley is very much around creating products and then getting out rather than creating long-term profitable companies; the latter is just a different deal and involves dealing with all the unglamorous, less fun stuff like figuring out how to grow past a few dozen people, figuring out how to manage multiple products, working on the same codebase for a long period of time over many iterations of a product, figuring out how to manage the transition of people in and out of the company, adapting to changing market conditions over long periods of time, and figuring out how to actually make money sustainably.
It's not just the VC side that's been spoiled and will have to adjust; the attitude among most entrepreneurs I run into in the valley is also very much the "build one product for 5 years and exit" mentality rather than the "build a company that makes good products and that can exist for a long time." So both sides need to adjust.
Where do we see this? MySQL by Sun. Flektor by Fox. WebEx by Cisco. Virtual Ubiquity/Buzzword by Adobe. Zimbra by Yahoo!.
Therefore, building a long-term business is not as important as building a lot of value for the market.
I mean, doesn't buying MySQL practically guarantee it will lose the very value it could bring to Sun (more agile process, highly motivated small company, close contact with the OSS dev & user community)?
One of the themes in "Burn Rate" is how, once corporations became aware of the Internet, they began purchasing anything they perceived "belongs" to the Internet and was for sale, hoping to somehow own some part of it. Perhaps, at some degree, a similar thing is happening with Open Source now?
(Edit: please don't get me wrong, I truly believe Open Source is one of the most important ideas of our time. I'm just skeptic a company can buy its way into it)
Like Microsoft becoming a platinum sponsor of Apache Software Foundation?
Not to say that I'm really fond of VC style funding however. I have seen VC's destroy perfectly good companies that could have otherwise sustain themselves by insisting they go for broke with huge growth rather than just concentrating on a profitable niche with moderate growth.