You can tell something has changed when you’re at a party in San Francisco and you tell people you’re launching a startup. The logical first question would be, “what is it?” or “what does it do?” But these days, the first question you often get is, “are you funded?” People aren’t curious about products or users or growth; they’re concerned about financing – an aspect of startups that should be secondary but is quickly rising to the forefront of everything. When did Silicon Valley become Wall Street?
Funding certainly gives people some measure of legitimacy – it says that a person or group of people have enough faith in your idea to put their wallets on the line. It also says that you have resources. This matters, but a lot of dumb ideas get funded, and a lot of good ones don’t (or don’t need to be). The real marker of a great startup and a visionary product is users – people who need or love the product, and use it. Hardly anyone asks how many users you have.
Today’s environment reminds me vaguely of the LBO days of Wall Street – taking control of a company, levering it up, and flipping it. Except today, instead of loading up an existing company with debt, cheap early stage capital is used to “lever up” a startup with smart people who then threaten existing players who then must buy them out. Some call them “talent acquisitions.” The mentality between the startup game of today and LBOs is the same, however – people talk about “flipping” companies as if they are creating real value, when often they aren’t.
Paul Graham has a fascinating essay about cities and the messages they send. His thesis on Silicon Valley was that it tells people to be more powerful. New York is obsessed with riches. He thought San Francisco broadcasts the message to live better, with a caveat that this could change if more startups move in from Silicon Valley. But he didn’t predict that both Silicon Valley and San Francisco could become New York – yet this seems to slowly be happening.
The growth of CodeAcademy and similar sites are a symptom of the Wall Street effect. Most talented coders of today learned to code because they saw a computer asked, “how does this thing work?” If you have enough of an innate interest, you will learn how to program – probably early on in life, and without much guidance. Many people who are trying CodeAcademy today are coming from finance or marketing backgrounds, and they’re learning to code because they think it will make them rich. There’s nothing wrong with this, but it’s certainly a different breed of people.
If you launch a website that starts to get any sort of traction, you will be guaranteed to receive emails from people looking for jobs. There are some great people out there looking for cool opportunities, but 90% of the time “they want to work for a startup.” Very few of them want to work for your startup specifically – it would be so refreshing to get an email from someone who actually cared about the product.
Another facet of the Wall Street effect is the tech blogs: what percentage of articles simply report funding deals? When was the last time you read an article about strategy or growth that wasn’t accompanied by a new round of financing or a celebrity investor? These blogs and news sites have tremendous power – they help direct the discussion for a worldwide community of technophiles. They’re overwhelmed with emails and pitches, yes, but why not take more risks in discussing and critiquing new ideas that have potential? VCs aren’t the only people who can think.
It all adds up. The Bay Area will never be New York – there is too much wine and sunshine to let that happen, but the emphasis on finance is growing, and this is a shame. Where is the Wikipedia of 2012? The website that makes no money but changes the world in some of the most profound ways possible? Where are the people who care about products and revolutions and not just exits? Why aren’t more people focused on creating open platforms rather than profiting off of private ones?
Maybe this is all just part of the latest tech boom (or bubble?). Do the idealistic guys a favor, though, and next time you’re at a party and someone talks about a startup, ask what it does before you ask how much money they’ve raised.