Startup snake oil: scamming early stage entrepreneurs
pandodaily.com
pandodaily.com
My position is simple: there are lots of folks in the startup ecosystem that are trying to help me in various ways. Many of them charge money. Good for them. Folks gotta eat.
Having said that, from my side (startup founder), the situation is very precarious. As entrepreneurs we are constantly swamped with pitches for various things to make our businesses successful. I know I've spent thousands of dollars on stuff that didn't do what I thought it would do. In fact, I've become quite bitter about all of it. When I think of all the money being spent by folks who are trying to buy success through tools instead of customer interaction? Makes me sad and angry.
But I think trying to name and shame is absolutely the wrong way to go about this. Most of these startup ecosystem folks mean well, and most of them have products that are well worth the money -- for folks who need the products. I think the real problem as entrepreneurs is that we are unable to recognize for ourselves whether we need something or not; so we buy too much. If we're too ignorant to know what to spend our money on, can't well blame others for selling us stuff.
So the answer here is educating each other, not going on some witch hunt for aggressive spammers (which is a separate problem). Let's continue to meet and share information on startups (which is why I'm here) and these other problems will work themselves out.
Completely agree. I'd love to see more stories that leave out the personal drama and, instead, run some analysis. There are a lot of these companies out there, offering similar services. What's the ROI on spending money with them? Which ones are better than others? How do they rank against each other?
To your point:
"I think the real problem as entrepreneurs is that we are unable to recognize for ourselves whether we need something or not; so we buy too much. If we're too ignorant to know what to spend our money on, can't well blame others for selling us stuff."
We can't blame others for selling us this stuff, but we can and should share our experiences. It's completely legitimate to share a bad experience (or a good experience). There is a lot of opacity in this space, and transparency is going to help ease it.
I am completely with you, though: I could do without the public outing of names and email addresses. And I hate smear campaigns, even when they appear to be warranted. A lot of people make stupid mistakes when they're young and dumb; few people deserve to have those mistakes chase them across the internet for the rest of their lives. (As will probably be the case with the immature BD guy named in the article. If even half of what was said about him is true, he deserves to be fired, and his former employer should issue an apology to Ms. Fichtner. But does he really deserve a life sentence?)
In general, I wish tech blogs would focus more on tech and less on people. Leave gossip to the gossip blogs. It's hard to tell where informative journalism ends and personal vendetta begins in pieces like these. So I've trained myself to gloss over them. That's unfortunate, because underneath the thicket of naming-and-shaming, there's often some wisdom or advice to be found.
And in fact this is a skill that is extremely important to have as an entrepreneur, that is, a business person.
Actually I just took a look at the website showing the past event.
http://www.youngstartup.com/newyork2013/overview.php
It looks and quacks to me like a legit duck (from a quick look).
On the main website there are past events there are videos of people who look like investors and appear to be legit. Unless it's staged I personally don't see what they are doing as anywhere near a scam. (Once again from a quick check.)
The blog post otoh gave me a totally different perspective. But the retort from the YSV founder completely deflated that bias and made some good points.
This idea from people that expect all sorts of help for free and think that people who charge are somehow scams need to reexamine closely how business operates.
Not recognizing the VCs from an east coast conference is hardly an automatic fail, in my mind. There's no shortage of financial companies here, after all.
A "scam" would mean that the people paying don't get what they were promised. This article doesn't claim that at all. It's just a bunch of people who think the price is too high.
YMV might be terrible, but this article is hardly convincing.
If there's a problem with this article, it's that it takes hundreds of words trying to unspool drama from such a simple point.
100% don't agree. [1]
Unproductive for the startup? Making contacts and getting some exposure and having discussions (and most importantly making mistakes) is unproductive? How so?
Charging? As the retort from the principal of the firm said what are they supposed to do do this for free?
And exactly what is unethical? Taking advantage of young people who don't know the difference between what you (or others here) might consider a "legit" opportunity (hey like spending half their life trying to get into the YC or VC lottery to begin with) and this?
[1] When I graduated from college on my own dime I paid money to fly to (get this) a "word processing conference" in order to make contacts and establish myself in what (I thought) would be the new business I was starting (computer supplies). Later when starting other businesses I flew to other places to go to expos, shows, whatever I needed to do. I used my own money to do that (that I had earned).
If you can't name one, the unproductiveness argument is straightforward, and the ethical argument follows from it.
The reality is that this simply isn't how venture funding works. Founders don't pay to meet investors; they exercise their own networks to get intros. Paying to expand your network in some obvious was is unhelpful; all it does is send a signal that you don't have a real network.
The answer to that question isn't known to me.
Of course if I was the one that was producing the event, and someone asked that question, it would be valid. [1] That is if we could get beyond a definition and why it matters if the startup was "well known".
"The reality is that this simply isn't how venture funding works."
Half of what people are doing today (1/2 is arbitrary to make a point) are things that go against "how" something currently works.
"all it does is send a signal that you don't have a real network."
But who does it send a signal to? You mean it paints you with a big fat "I'm a newbie and I don't know how things work label?".
To be clear I haven't analyzed the value provided by paying this company money and can't say that I would recommend it (or not). But I don't think it's clear that there isn't any value and I am fairly certain that it isn't a scam either [2] that there could be people getting value from it.
[1] That said there are many situations in business where the effort and/or money paid doesn't result in a direct benefit like funding or something (and this is important) that is easily measured.
[2] Like those real estate seminars which I would say are a scam but I think they have entertainment value for some people. And maybe after you attend one you learn a valuable life lesson for the money spent.
There are things that people don't do because nobody's thought to do it, or because nobody's been willing to accept the risk. But there are also things nobody does because they self-evidently won't work, and paying for introductions to VCs is probably one of those things.
The signals it sends is worse than "I'm new"; it's "I was unable to generate interest from investors on my own".
I mean, I would never go for that conference, and it sounds like a bad deal to me. The article comes off like witch-hunting, though.
Paying to be in the "top 50" is pretty odd, but maybe they mean "the top 50 startups, based on them having enough cash to waste some on being called 'top 50'". Call me cynical, but that fits right in with my impression of east coast VC, which this company seems to be based in.
I wish Pando would have had one of their own writers take this on instead of some startup CEO.
Did you take a look at their website and see the videos of some of the events before making that statement?
Get Noticed -> Get Funded -> Grow Faster
That's not how it works.
I have a few questions:
How many startups that have been funded as a direct result of this and prior events hosted by New England Venture Summit? What is the ratio to startups presenting and startups getting funded? Why do the investors not bear the cost of startup entry fees? Is there the option to waive the fee? What is your vetting process to ensure the quality of startups?
Here was the response I received from Kineret Weiss, note the sample of success cases and a reluctance to track the only metrics that matter for an organization like this - how effective are your conferences:
Hi Dinyar – Thanks for your interest. We evaluate each company based on the components of the summary outline (management team, business model, market potential, financials, etc.) which is needed to apply.
As far as stats, we don’t have the manpower or ability to track that information, but we do know of several companies (such as Mojiva, Peminic, UTest, etc) that have received funding as a direct result of our programs.
At the same time your question and outlook is flawed and I’ll tell you why.
Say I take your company today and sit you in front of the three most active VCs in your space. After the meetings they each get up telling you that they appreciate you coming by but that it’s not a fit for them at this time. According to your data request, we would be offering you no value but the fact is we placed you in front of the three most active VCs in your space.
Additionally, there is always a good mix of returning and new investors in attendance, pointing to the fact that investors see great value in the high level of startups that present at our conferences. You can view the video highlights at the end of this email to see several top VCs (who I’m sure you’ll recognize) who have found our summits to be of great value.
I have included further details below about the venture summit and the opportunity to be showcased including pricing, benefits, testimonials and a link to the conference website etc.
I would even go so far to say that money is rarely the real issue. Start-ups need to create the formula - insert $1 here, exit $2 there. Building a start-up is a lot of work and there are no quick and easy answers at any point, money may seem like the answer but in reality it can cause more problems then it solves.
It sounds like YSV does a much poorer job executing, which makes it a poor value, but not sure that makes it a scam
Startups come and go in the thousands nowadays. What could possibly be smarter than sucking them ALL dry, instead of trying to be a profitless, slave-to-the-VC startup themselves?