One of my apparent side hobbies is reading startup advice books.
These books follow a predictable formula: know your customer, build cheaply, be a painkiller not a vitamin, raise VC, and grow as though your life depends on it. I’ve been in the startup world for a while and most of these books are pretty successful at describing what someone would do to play the game of startup we’ve seen for the last decade or so. They are all manuals for getting funding and then scaling, without much question about whether either one of those is the ideal path for a business.
I remember when I first got into tech and took a lot of this at face value. I wanted to play the game because I wanted to be a winner. I thought people who were successful at tech startups knew something, and that I needed to learn that thing. I learned a lot about building product, and those lessons have been incredibly valuable, no matter what kind of business you want to apply them to. I’ve learned from some very smart people.
But there are some things these books largely ignore or gloss over. For one thing, they will explain how VCs put money into lots of startups but only a few scale, and therefore VC investment is only for products that have huge markets and want to blitzscale. For one thing, this framing instantly leads all founders playing the game to try to win by ‘articulate solutions that are broad-based enough to be a big brand someday ‘go after big markets.’ Most startups should be doing the opposite, looking for niches and building a viable company. What’s more, getting VC funding is, by the accounts of nearly every founder I’ve met who has done it, somewhere between risky and business-killing. Ceding control of your company to VC means trying to extract as much value as quickly as possible, not to build a sustainable and profitable business.
Even if you wanted to play this game, good luck to 50% of the population. Of the companies funded by VCs last year, less than 2% were not men. Imagine the stats for being not male AND not white. Why even bother with the game in the first place?
With the waves of tech layoffs, it seems like perhaps at least a few people will question the very nature of the industry or I don’t know, corporate-centred capitalism. I’m very curious to see if what comes of that might look different or if it’s just going to be more people trying to follow the playbook.
Back when I got into tech, I heard the disparagement of what was known as “lifestyle companies,” which if you weren’t trying to scale and become a monopoly, you were by default. It’s kind of like regular business fundamentals are simply ignorable when you’re a ‘disruptor.’ And the IV of VC keeps that story alive.
I started reading Andrew Chen’s The Cold Start Problem recently. There are some interesting insights about network effects in the book, but I have to admit I get hot under the collar every time he explains how Uber did growth. You have to be willing to hustle, you have to do what works even if it doesn’t scale, so you can ruthlessly undercut the existing industry and find a way to incentivize people to exploit themselves on your behalf. THIS IS HOW YOU WIN!
But is it? What would happen if founders played a different game? Can we get out of winner-take-all if we just radically decide to do something different? Collaborate, for example?
Peter Thiel’s famous paean to monopoly thinking, “competition is for losers” will surely be an epitaph for this age of do-anything-to-win, whether it’s because we burn down the planet or because we learn we actually succeed more sustainably by cooperating- making competition for losers of a different sort.
I’m sure this would have sounded naive to my younger self, but it turns out that when you get on a path to having values and living in integrity, you don’t really give an eff whether people playing the game think you’re an all-star. You’d be surprised how many people actually win by building trust, connection, and products and businesses people care about instead.
I began this post a while back and it’s funny how possibly ‘radical’ or ‘realistic’ I have become since. In the interim time, big tech companies have laid off 200,000 people and SVB and other banks have failed. It’s becoming more apparent to me every day that even when a company isn’t in a VC-driven death spiral, tech is largely being built to reinforce systems of extraction that are a death spiral for the whole world, that tech is being built in a culture with all the hallmarks of white supremacy. It might not be crazy at all to reject the very basis of tech economics, in which foundations and pension funds must, through VC, waste so many resources by funding companies with a 9/10 failure rate, that the answer, even for most investors, is to find “something that can scale.” The game is not just rigged, it’s a battle royale.