How much money we can raise for transparently idiotic startups?
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I truly wonder how much of the U.S. economy has slowed down because of all this wasted effort. Is it really a good idea for every company to try and reinvent what a company is? Every startup I've been spends a non-zero amount on just re-figuring out how to be organized, how to manage people and projects, and even just figuring out the logistics and tech needed to run a company. It's a lot of wasted effort, time, and money. My time at startups has been the least effective portions of my career. Real work actually moves quite slowly at startups, in my experience.
But we retain the solutions that work. A slime mold tries a bunch of useless paths in a maze before it finds the right one. Then it trims and reinforces. Most start-ups failing isn't a sure sign of wasted work.
You can save months of research by spending years of work and hundreds of thousands of people-hours building something that doesn't work.
And if you're a rich investor willing to bet on a lot of such things hoping to make it back on of the few that work, well, you just made that ratio even more lopsided.
One thing that has often surprised me about HN is how people routinely upvote and boast about how they faked a demo. Idk why we refuse to call that what it is: a lie. IDK if Jobs did it, it is still a lie. It's one thing to say that this is what we imagine a technology will be like, but to call it a demo and act like it is the actual tool and that its capabilities generalize to the tasks being shown is theater. Are tech bros just theater kids?
You're describing focus groups. They have a mixed history in product development.
Every product you interact with at the grocery store, every movie, most music, and most products in our modern life go through this process.
It's called user focused design.
If they buy, you're on the right track and are ready to scale up to a larger focus group.
This is called a startup though!
Get good feedback early & often
Focus groups are good for refining. They're absolutely terrible for new product development. If there is an OG playbook for start-ups defeating incumbents, it's in exploiting the committee-based designed process that large companies tend towards. (Owning a product decision is hard. Outsourcing it to a marketing consultant isn't.)
Where you and I probably agree is in the importance of finding the shortest path to a sale.
> It's called user focused design
You're quoting this guy [1]. He also did marketing consulting [2].
[1] https://en.wikipedia.org/wiki/Don_Norman#Nielsen_Norman_Grou...
It's not really that way anymore. The vision of a loan visionary coming up with a new product or invention like being hit by a lightning bolt and then getting rich by building a factory that builds it is just a fairy tale.
In reality it looks more like a series of focus groups. They may not be focus groups per se, but showing your idea to potential customers, getting feedback, refining and showing again is how it's done.
That's how startups that are successful do so.
Norman coined the term user focused design.
> may not be focus groups per se, but showing your idea to potential customers, getting feedback, refining and showing again is how it's done
Sure. I’d argue both focus groups and the lone visionary are myths. But in order to show an idea properly, you have to start thinking about building it. And to start thinking about building it properly, you have to start building it. For every Juicero there are teams iterating around a local optimum.
It pretty much is, yes. Not a sure sign, but SV startups are probably the least efficient way of finding solutions that work. That's not to say that solutions to meaningful problems aren't occasionally found, of course, but the odds are very slim and the amount of money and other resources burned per success is astounding.
On what metric? By any objective measure, barring the tail end of ZIRP, it’s been remarkably more efficient than many national projects.
The point is a VC ecosystem working properly should have a high failure rate. Lots of failures just tells you risk isn’t too low. To measure efficacy and efficiency you have to look at the output. And again, barring the pandemic vintages, it’s a pretty clear record of success.
I'm confused by your reference to "national projects" here. What are you comparing to?
It looks incredibly inefficient to me when I compare the billions blown on failed or worthless ventures to get a small number of valuable ones.
Ceph? (Inktank was founded in 2011 by Sage Weil and DreamHost, which then it raised 1M in 2012 from Mark Shuttleworth, then RedHat bought them for 175M in 2014. Seems like a nice startup stort, no? The project itself was started around 2004 by Weil at LLNL, and then he worked on it as part of his PhD still in 2007, then the work continued at DreamHost, probably because Weil is one of the co-founders of DreamHost.)
Deel, Rippling, Redwood Materials, Convoy, Airtable, Anduril, Cerebral, Checkr and Cerebras were all founded since 2014. Pick one. We're currently seeing an explosion in creativity around satellites, autonomous vehicles (on the road, indoors and airborne), generative AI and biotechnology.
Go back one more cycle and we have SpaceX, Tesla, Uber & Lyft, Moderna, Zoom, DoorDash and other giants that entered busy fields, survived the winnowing and basically created a new industry.
Their innovation was abstracting away the complexity of cross-border hiring. Their impact is meaningful to the degree employment is.
This is sort of like saying the iPod was a better Walkman. Yes, you could functionally do the same thing. But no, it wasn't as easy which meant it wasn't as frequently done. (And as a result of pressure from the upstarts, payroll across the board became smoother.)
> Just because they interact with employment doesn't mean they're as important as the whole concept
Nobody said that. I said "their impact is meaningful to the degree employment is." To the people whose roles exist on account of platforms like Deel, their existence is meaningful.
O: AH, no you didn't, you came here for an argument!
M: An argument isn't just contradiction.
O: Well! it CAN be!
M: No it can't!
M: An argument is a connected series of statements intended to establish a proposition.
O: No it isn't!
You then pivoted to the non sequitur that I “like Deel.” I pointed out that isn’t true, and never needed to be—this was never a discussion about which start-ups we want to put a sticker on. It’s a bit rich to complain about logical fallacies after throwing one out.
You haven't changed my mind but you may have changed others' and you did make me think. Let's have an even better discussion next time.
I took it to mean ignoring companies in sales & marketing or FIRE (finance, insurance, real estate), as well as focussing on the effects of a company's products and services versus their valuation.
Throw as many unrelated businesses that you can buy for pennies on the dollar into a basket. Claim it is now diversified. Decrease expenses by allowing all of your good employees to run for the hills screaming while not replacing them. Post one year of record profits by sacrificing quality in the name of quantity. Re-capitalize in order to generate a massive return. And then rinse and repeat on your next victims, I mean ventures.
That's how it works outside of the startup world too. Most restaurants, clothing stores, car repair shops, etc. go out of business after just a few years, while a few move on to become large chains and the like.
There are the two you mentioned: 1- small businesses that go out of business after a few years 2- ...ones that become big chains
But you are forgetting #3, the one that actually makes up the largest proportion of businesses: 3- people that quietly, successfully, run their businesses in a sustainable, family and community oriented manner (not financial growth focused but personal growth focused) and then retire quietly surrounded by loved ones.
I wasn't forgetting them, they just aren't relevant to a conversation about venture capital, at least to me. There are plenty of small bootstrapped startups out there, but their ROI isn't high enough to justify a gamble on the part of investors. Likewise with the businesses you're talking about.
Yes the make up most small businesses, but most small businesses aren't looking for private venture capital, and don't fall into the category of what OP was claiming is "pump n dump".
https://www.bls.gov/web/cewbd/table_f.txt
~42% of the workforce is employed at firms with 1000+ headcount.
The next biggest bucket is ~10% the 20-49 range. Then ~9.5% is the 100-249 bucket.
And the share of biggest ones is (likely unfortunately) growing.
Here are some other statistics about small businesses in the United States:
84.8% of businesses in rural areas are small businesses
43.2% of small businesses are owned by women
20% of employer businesses are owned by minorities
Small businesses account for about 96% of employer firms in high-patenting manufacturing industries
there is an unlabeled selection bias missing here, and in that bias we find everything
imho that sort of "aim for the exit" thinking strongly incentivizes pump-and-dump behaviour and I think the bandwagoning we see with every hot new tech is exactly what one would expect as a result.
Also:
1) IPO is one of those exit strategies. Tons of startups are aiming to become long lived independent companies.
2) M&A makes sense for lots of businesses, as you get to take advantage of better economies of scale as part of a larger org. Saying it's your exit plan doesn't make you a scammer.
get wealthy, and not really good 9-5 job wealthy. Properly wealthy.
E2E encrypted messaging that is accessible to people and works using data has been transformative.
Twitter has changed the landscape of communication.
Streaming music and video services have changed the way people consume media and shaped the way it’s created and broadcast.
Here's a list I grabbed of the highest market-cap companies: 1. Apple 2. Microsoft 3. NVIDIA 4. Alphabet (Google) 5. Amazon 6. Saudi Aramco 7. Meta Platforms (Facebook) 8. Berkshire Hathaway 9. TSMC 10. Tesla
Of this list, here are "startups" that raised VC money: 1. Apple 2. Microsoft 3. NVIDIA 4. Alphabet (Google) 5. Amazon 6. Meta Platforms (Facebook) 7. Tesla
So more than half of the top-10 biggest companies today were these kinds of startup "experiments".
And of course, these are just the biggest companies, and don't include many things I interact with on a day-to-day basis, which are incredibly valuable to me, e.g. Netflix, ChatGPT, YouTube (part of Alphabet but important enough to warrant mentioning), etc.
you can bootstrap
any other ideas?
main problem is that startup equity is not a good deal for anyone at all until after PMF
The reality is that a very tiny percentage of new companies get institutional financing at all (and the majority of those that do aren't technical and aren't startups in the sense that they aren't intended to be high growth at a high margin). The loud press that makes it sound otherwise is just survivorship bias.
It's the truth.
AR/VR was hardly a pump and dump. There are massive technical and creative challenges for both, but ... I fail to see how it was a pump and dump. (Unless you mean Faceberg and Moogle spending ridiculous amounts on it, probably because Neuromancer was pretty damn influential.)
Similarly self-driving cars clearly have value (~1.3M people die each year on the roads absolutely unnecessarily, as most of them could have been prevented ... 1.3M people die of TBC, which is again preventable)
If you think EV is a bubble I would like to offer you this nice prospectus of leisure activities on Venus. (Uh, one hyperbole, thanks HN!) That said EV seems the same kind of bubble as housing. The prices are high because of the demand. Battery prices (the biggest cost currently in EVs) keep going down. Demand is going up. Heatwaves are pretty good marketing "for" global warming.
I wonder how frequently startups and hype KILL technologies. A technology starts to show progress, everyone gets excited about that progress, tons of money gets dumped in, everyone rushes to put that technology into production, technology flops, funding for technology dries up. Meanwhile, a lot of people got very rich, so we repeat the cycle. But there was an important step missed here if we want a technology to actually succeed. Research.
The hype train only seems to gear up for technologies that are still in their infancies. This of course makes sense, because how else do you raise money? Chicken and the egg. But the problem here is that you're not using that money to solve the problems with the tech and get it to the point where it could then be effectively used in things, but instead rush to hamfist it into everything you can. Sometimes you gotta slow down first, and prep for the sprint. Google seems to be the worst at this, routinely killing projects that 5-10 years later are then sold as high status items. A company with that much capital doesn't need to rush to market, you can strategize and take your time.
The problem is that the details always matter and they can be a huge make it or break it for a technology. You can generate all the safe miles you want, but if you run through a red light anytime there's a child holding a green balloon a bit too high, you failed. You can build fancy games, but if you promise a holodeck and deliver a hollowdeck, people are reasonably upset. Hype is a double edged sword. You need some to get people on board, but too much and you overpromise. You can build crazy and legitimately helpful tools, but if you're (or others) are promising 10x what you can, then when they get their hands on it they have every right to be upset. Even if the thing is still useful to them and betters their lives. They are rightfully upset, but they'll unrightfully dismiss what you made. So the people who benefit from the hype cycles are the grifters. The ones willing to jump from one thing to the next. Which is why I'm always very confused why we prop up people who have "expertise" in all the last hype bubbles as if it is credentializing why they are experts in the new hype bubble. How does a giant and brilliant red flag get interpreted as green? Maybe we're not so different from self-driving cars after all.
This sounds fun. Thanks.
Likewise, the paint markers which I make use of are easily removed by rubbing alcohol.
May be hard to pay salaries with GPU credits.
https://justdario.com/2024/05/no-nvidia-is-only-one-piece-of...
But the comic beat me to it, I wish they were trying to be funny, but ...
Nice Comic BTW
super dystopian channels got setup on there like get a yo everytime a missle alert came in Israel
Ya think? I mean, whatever could parent be referring to? :-)
https://news.ycombinator.com/item?id=41037336 (or let your eyes go drift four lines above your own comment).
I have this theory that there's institutional money burning a hole in various institution's collective pockets. Those funds' managers are under pressure to invest a percentage in risky, high reward opportunities. So they have money that has to be invested. You would look pretty stupid if you missed out on investing in the next Facebook or Google.
So you get some valley VC firms managed by guys who went to MIT, UCB or Stanford in the 80s and made their cash founding 90s era startups.
Now these guys' college room-mates have kids in MIT, UCB and Stanford who are about to graduate. So they (the VC's old room mates) channel some dosh into the VC's funds. In return, the VC's fund startups started by their room-mate's kids.
For the parent, it's great. They avoid estate taxes and if there's a profit, they only pay capital gains rates.
The kids receive their pay in perfectly laundered equity which at the next liquidity event can be reified outside the IRS' jurisdiction, so they wind up paying 12% corporate tax in Panama instead of the on-shored 26% cap gains rate.
All that's really required is a greater fool to take the series A shares off your hands when you do a series B.
My take on SiliValley is it's turned into a tax avoidant generational wealth transfer system for the financier class.
Nice work if you can get it.
Academia supports the system with hype-filled pronouncements about how future tech (AI, RISC-V, Battery Tech, WISC, etc.) will completely revolutionize the world.
Analysts who should have been taught skepticism when corporate leaders imply their startup will have a market value in excess of western Europe's GDP, jump on board to avoid looking like idiots on the off chance the firms they cover do take off.
Tech investing isn't a scam, there are definitely corners that are producing solid tech. But they're few and far between and very often not involved in the VC economy.
That was very much the case before the Fed started raising interest rates.
The term "zero interest rate phenomenon" was created to describe it.
Now that rates are up, people sitting on piles of money can just put it to work in more traditional lending (e.g. buying bonds) instead of needing to look around for weird startups to put it in.
For investors in the art market, they will invest in some artists and not others, irrespective of how appealing the art is, as provenance is the signal for ROI.
For those unfamiliar, it's about guys who fraudulently resell the same shares in the profit of a Broadway production 25 times over, and then try to ensure that it's a failure so there won't be any profit to pay, but accidentally create a success and are ruined.
The AI in question is Adobe Illustrator but if it gets us in front of more dumb money to say it’s the other AI then I do not care.
Ironically however, if you were to do that well, it would show high intelligence and creativity, which would probably make it an actual good investment.
Thankfully the market took care of this idea and they only made 10 "houses" before going pop apparently.
I'm fascinated by how the most ethically dubious companies tend to take their names from Tolkien: Palantir, Anduril, Pippin...
But this is the great debate of our generation, I suppose. Are people capable of making choices or not?
I would have loved to have had this option in college. Glad my landlord saved me from humiliation! (And let us be honest, for every useful idiot who thinks they're helping the poor by constraining their options there are ten homeowners who don't want poor people in their neighbourhood.)
i have no problem with investment, but investing in an obviously stupid startup just cause they were launched by a friend's kids doesn't seem like a way to allocate capital that Adam Smith would appreciate.
The vast majority of investment is inside of public firms into themselves for ai.
VCs have actually broadly been sidelines as they both lack the capital to make major moves nor see small enough direct application to invest.
There are plenty of jokes to be made about AI, this is a dumb one.
FAANG spent $114bn on R&D in 2022 [1]. VC funded nearly 4x that amount [2]. There are valid complaints about the state of venture capital. Lack of money isn't one of them.
[1] https://www.calcbench.com/blog/post/676274365248274432/chart...
[2] https://www.wipo.int/global_innovation_index/en/gii-insights...
Select AI as focus area, choose your stage of choice, "Active."
Then look here: https://www.ycombinator.com/companies?batch=S24&batch=W24&ta...
Combine that with JumpCrisscross's comment, and your take seems passing strange.