A Redditor about the problem with today's Silicon Valley startup community

Three thoughts:<p>First, this comment on Reddit isn't fundamentally better or more informed than any of dozens of comments that have expressed the exact same thing on HN. I'm not complaining, so much as again remarking about how "A Reddit's comment about $X" has become such a powerful signal of quality.<p>Second: there's a grain of truth† to the "bad decisions by VCs" or "working for VCs", but he's overplaying it in this comment. There's two countervailing forces here: (a) VCs don't care as much about which "flavor" their portfolio companies are producing than they do about the economics: there are indeed plenty of solid businesses you can grow that aren't VC-compatible. But you can't fault the VCs for that: when you took their money, you promised not to go down the slow path. And (b) when companies are doing well, VCs tend to get out of the way. It's when you're not doing well that the board's opinion starts to matter.<p>Third: The numbers he's using here set off alarm bells for me. He calls 1-10MM/yr companies "lifestyle" companies and "100MM+/yr" companies VC-style companies, and implies 10-100MM/yr businesses are in a no-mans-land. Uh, no? Companies doing 20-30-40MM/yr in revenue will probably have investors beating down their doors. I don't believe anyone is shunning companies doing 8 figure revenues.<p>† <i>The first VC-funded company I worked at/cofounded was derailed by a crazy, VC-instigated decision to build out a CDN to go head-to-head with Akamai. But even then, our lack of traction is what set the scene for that dumb decision.</i>

I have similar feelings to this guy. I've lived in the bay area my entire life, although I'm only 25 so I was young during the dot com bubble.<p>My feelings are that Zuckerberg made it "cool" to start a company again. People had such a bad taste after the dot com bust and starting a company was viewed as very risky from around 2000 to 2005. Then Zuckerberg came in with this amazing success story and now everyone wants to start a company again.<p>Sometimes it bothers me that people throw around the word "startup" so casually now. There's kids that are "doing a startup" but the only thing they're building is a gmail plugin or "a better to-do list that will change the world". We don't need any more of this crap. It seems like some people just want the founder title so they can broadcast to their LinkedIn network and impress people.

I'm surprised. Not everyone here is blindly worshiping the big startup god. I see so many posts here about new websites that do mildly useful things, but where's the revenue stream?<p>I'm the maker of an art community (ArtGrounds) and a multi-user painting program (Sketcher), and I know how hard it is to make money on ads. Even when I had thousands of daily visitors (the site is seeing a slow decline), I was still making pocket change. And even then, it was nigh impossible to get people interested in renting their own private Sketcher rooms.<p>Part of it is probably that I don't understand marketing, but the thing is that, in most cases, you must have a <i>very</i> compelling product that's available nowhere else (at least at that quality level) in order to sell it. And there must be demand.<p>Contrary to popular belief, you can't really create demand artificially. All you can do is tap into people's itches, and scratch them. "I wish I could stay in touch with all my friends" becomes Facebook. "It's so impractical to have to tell everyone where I'm going in case they need to call me" becomes the cellphone.<p>There's more to it than that of course, but looking at all these trendy startups, it seems that they don't even care about the basics much of the time. The products just seem awfully superficial and simple.

It's pretty disappointing to see this at the top of HN. Some of the comments here do have some merit but I feel there's a disproportionate amount of hating and anger. There was a comment made by pg a couple days ago that I think definitely belongs here so I'm going to paste it:<p><i>I think they're not so much dense as bitter. There's a subset of HN readers who regard startups as a whole as a sort of con game, and are angry that the participants get so much attention. There may not be that many of them, but their anger makes them disproportionately active as commenters and voters.</i>[1]<p>[1] <a href="http://news.ycombinator.com/item?id=4293786" rel="nofollow">http://news.ycombinator.com/item?id=4293786</a>

I'm in Chicago and I see this trend here as well.<p>What's worse is that VCs and Angels in Chicago are perhaps, to an extent, more clueless about building technology businesses. Sure, money here is not as plentiful but I still see frivolous 'apps' being touted as businesses and getting accepted into incubators.<p>Perhaps it is the whole VC model that is to blame. By definition, VCs require companies to 'exit' through either acquisitions or IPOs. Their incentives are not aligned with building strong businesses that can thrive for years on end, but rather businesses that might 'seem' attractive in the next 3-5 years so as to attract potential acquirers. Only if a business shows unprecedented levels of growth do they let it do it's thing and thrive (Facebook, Google etc.).<p>Since 'social', 'mobile' and 'big data' are the buzz words these days, VCs are pouring money into these ridiculous and frivolous ideas in hopes of an acquisition. It's only fun while it lasts and I see a world of hurt coming their way.

This article seems mixed to me.<p>If you're building a start-up now, you have two options the way I see it. 1) Build a sustainable business that charges some form of money. 2) Build a killer feature that attracts users and allows you to get bought by a larger company.<p>Right now, the larger companies are flush with money. Corporate revenues are outrageously high, particularly in the tech sector. So, the second option is just winning out right now because that's where the money is.<p>If this were to change and there was less investment from the existing players in tech, you'd see more sustainable businesses.<p>The complaint that the tech industry is not making any good tech is akin to people's gripes that the movie industry doesn't make good movies. For tech, the money right now is in features. For movies, the money right now is in mindless blockbusters. They're both businesses and like any good business, the players on the field optimize their strategy according to where the money is.

To understand why swing-for-the-fences mentality prevails, you have to understand the VC model.<p>People raise funds and generally shoot for +10x exits. So, for a particular vintage, a VC fund of 10M aims to grow to 100M. They are squeezed for time (many funds are for 10-14 years, some shorter, some longer) and can't necessarily sit there and let companies bubble.<p>If you are presented with such a large hurdle, the easiest way to do it is swing for the fences and see if one gains traction. Generally, the one that gains traction will multiply your money far enough to cover for the other mistakes you made.

i'm far away from it all, but from what I see the "build a feature for Facebook" business plan is now passe in the valley.<p>Look at how Pintrest comes from Iowa. I can think of more than one company in L.A. that wants to be the "next facebook" The exciting area in social networking is getting new groups of people involved in new activities and also bringing social media closer to other media. The tech skills in SV matter less than they used to and it's really an issue of marketing now... The unique perspectives that people bring from other parts of the world will be key.<p>People in the valley and SF seem to be more interested in infrastructure and SAAS plays, as well as transaction-oriented communities like AirBnB and stuff where you pay $X a month for a subscription. You can certainly find outrageous examples, but the better angels and VCs are (for the most part) making good decisions.

This is now banned from HN front page, after being nº 1 for a while.<p>I might not agree with OP but this is more censorship of dissent. Very poor community management.

What ever happen to building a legitimate business. Everyone is so worried about getting published in TechCrunch, Pando and Alley Insider. They pump and dump startups everyday. Most unethical thing around

I wonder if he miscontrues the motive. Sure every VC wants to fund the next Google, Facebook, or even Instagram because like anyone rational they would like to get an insane return on their money.<p>And some of them will listen until you clearly aren't such a business and then tune you out.<p>But how is that any different from a developer who wants to be a kernel engineer and won't listen to any job offers for doing database development or network programming Etc? Sure it could be just as rewarding, and they could learn just as much. But at the end of the day, somewhere in their brain, they have this bit set that their self image is tied up with being a "kernel developer" not "the guy who built a mySQL killer."<p>The cautionary tale is to try to look at things that you internally value rather than things you think you <i>should</i> value.<p>A short anecdote; When I got my first stock in Sun Microsystems as part of the employee purchase program it just sat there. My advisor suggested, as most do, that I diversify a bit (We were talking something like 150 shares so it wasn't a big position :-). Anyway, they explained that investing in stocks that suddenly doubled, tripled, or quintupled in price was thrilling and sexy, but ultimately unpredictable. Whereas investing in stocks that moved up 5 - 15% and then selling them and investing in something else that moved up a few percent. Was like a ratchet. You took $1,000 and each month you tried to add 3 - 5% to it. That grew your investment slowly but surely. Not as sexy but a better long term strategy.<p>EDIT: To be more clear, the strategy my advisor uses is to make a number of small investments shooting for growth in each of them. That doesn't always pan out but having a number of bets in the pool gives a better over all return than a single big bet (which is what I was trying to communicate), getting 80% return on something is great, but 80% return on 1% of the total portfolio means it contributes .8% to the overall gain.

This post completely ignores VC-startup fit, fund size, investment strategy and other factors.<p>There are many different kinds of (institutional) VCs. A firm with a $100MM active fund invest very differently than A16Z with a &#62; $1 B available for investment. The ideal ownership stake within the portfolio company, comfort level with higher valuations, investment allocated across multiple rounds for a portfolio company all are a function of fund-size and investment strategy.<p>As the active fund size increases (e.g. $500MM or $1B), the fund is biased towards making big investments and hugs wins are needed for LP returns. When fundraising for your startup, its critical to understand if these dynamics are going to be a cause of conflict between your investors and you. Just because a VC firm invested in Facebook, doesn't mean their dynamics make sense for your startup.

On an unrelated point, this is one of the reasons why it bothers me when someone suggests that everyone should learn how to code.<p>Not that there is inherently anything wrong about learning to think like a programmer and problem-solve; the problem is that people equate learning to code to learning use the RoR/Django or some iOS framework. This is a direct result of all the dumb money being poured into stupid ideas - it leads everyone to believe that their time is best spent learning the tools to give shape to their photo-sharing app.

This reminds me of something Paul Budnitz (kidrobot founder and former SF resident) wrote after visiting SF recently:<p><i>Internet millionaires driving around on cell phones drain the city’s sparkle. In the old days people who made tools built factory towns on the Ohio. It was honest work but not glamorous. Today the toolmakers work in software and they have been elevated in the culture, especially here. But there is a distinction between making an app and making art. A city of toolmakers imagining themselves as artists is barbaric, heartless, empty. You feel it in the crowd eating dinner at the many expensive restaurants. People speak in sound bites and are both assertive and lost.</i><p><a href="http://paulbudnitz.com/post/26436899116/san-francisco-is-odd-it-feels-like-it-doesnt" rel="nofollow">http://paulbudnitz.com/post/26436899116/san-francisco-is-odd...</a>

I think the reason the word "startup" is thrown around so much isn't only because its fashionable. "Startup" has come to encompass a whole bunch of different notions (project, feature, app etc), and the only thing that is consistent with everyone's own definition of the word is user-facing.<p>User-facing is not a business.

There are as many kinds of VCs as there are entrepreneurs. Some VCs are untrustworthy and some are even dumb (as stated here). Just like some entrepreneurs are ignorant and some are event dumb (as illustrated here). But there are fantastic VCs out there as well. I'm on my fifth startup and I've been lucky enough to have worked with a number of truly fantastic VCs. FWIW... the clear give away that someone is talking shit when they talk about how VCs suck is when they say things like "maybe VC Fund X is an exception." A knowledgable entrepreneur knows that what matters is NOT the fund - but rather the partner. And there are some smart partners out there.

I think the major complaint this guy has is that there is no funding for small businesses, and he is correct. VCs are interested in high growth businesses where one success makes their fund. Given that banks aren't giving out loans to internet startups and VCs/angels are the only source of capital, this can affect the kinds of businesses that are started.

I like this part: "And so you have a whole generation of people building startups who have been taught to make bullshit."

Good companies still stand out. And the founders of good companies don't usually intend to start cargo-cults.

There's more: <a href="http://www.reddit.com/r/startups/comments/x7wah/dae_just_totally_ignore_the_startup_community_and/c5kf806" rel="nofollow">http://www.reddit.com/r/startups/comments/x7wah/dae_just_tot...</a> <a href="http://www.reddit.com/r/startups/comments/x7wah/dae_just_totally_ignore_the_startup_community_and/c5kflmf" rel="nofollow">http://www.reddit.com/r/startups/comments/x7wah/dae_just_tot...</a>

Looks like this article is censored?

Eyeballs != $$$

This is nonsense. Hard to read all the way through and get any point out of. Reads like an angry chatterbot