[HN Gopher] Pessimistic thoughts on startups (2020)
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Pessimistic thoughts on startups (2020)
Author : jimhi
Score : 46 points
Date : 2023-02-22 15:22 UTC (1 days ago)
(HTM) web link (mrsteinberg.com)
(TXT) w3m dump (mrsteinberg.com)
| winstonprivacy wrote:
| > Now a rich guy with no skills? He can afford to do whatever he
| wants, his time is worthless as this thought.
|
| I came in expecting click bait and was pleasantly surprised.
|
| This is brilliant.
| jimhi wrote:
| Fortunately, I blog for no real purpose than some nice
| conversations when they happen. So there is no one to impress
| or anything to sell here.
| loa_in_ wrote:
| Thankfully the author explicitly stated it's thoughts on
| startups... He can't be accused of trying to promote
| workaholic lifestyle.
| efficax wrote:
| > 5. Authors and the smartest people of our time aren't writing
| internet comments The internet, which we ALL read, including the
| smartest people of our time is written entirely by people with
| time to waste. Oh and marketers too. We have chosen to fill our
| head with their thoughts.
|
| Although I'm definitely not one of those, plenty of the smartest
| people out there are posters. Posting is universal.
| aldousd666 wrote:
| The author needs to rethink point number 4. Investors' time is
| valuable, whether you like the idea or not. They can spend it
| listening to your pitch, or someone else's pitch, but if you're
| looking for funding even a minute of their time is more valuable
| to you than... cooking yourself dinner.
| MichaelAza wrote:
| It is valuable in the sense that someone productive can extract
| value from it, i.e. secure funding for a company that may
| actually produce a product that makes someones life better.
| That is the same sort of value a natural resource like, say,
| wood has. It has no value in and of itself, unless imbued with
| the skillfull work of a productive person. An investor needn't
| add anything besides capital to the mix. Now, some investors do
| add expertise or other actual skills of value but that doesn't
| have anything to do with them being the source of capital, per
| se. You could argue that investors are proactive in choosing
| investments that have a good potential for ROI but that doesn't
| correlate to actual value for actual people, as all the very
| profitable but very stupid Web 3 and other fad investments
| show. Sometimes they aren't even profitable, but that's another
| matter. So yes, investors are as worthless as wool or wood or
| gold without the time and skill and labor of the worker who
| preforms the alchemy of transforming this worthless commodity
| into value.
| aldousd666 wrote:
| We can disagree on this point. I'd say you can have the best
| solution, best possible product, best idea, and best people
| building it, and if you have no capital, you're toast.
| MichaelAza wrote:
| In the same way that you could have the best chair design
| but without the resources, the wood or the steel or what
| have you, and without the proper tools to shape them, your
| idea is still just going to be an idea. Would you say that
| the wood in this scenario has value in and of itself,
| beyond the value the worker may imbue into it? How about
| the tools? We as a society have come to recognize the
| people who dole out access to resources as providing value,
| but they don't, neither in principle nor in reality. As I
| said in my earlier comment, the only value one might
| ascribe to them is only in picking the best ideas and they
| obviously don't do that. We obviously need a better way to
| fund creative ideas for the betterment of all.
| Nevermark wrote:
| Even if you need X, Y, and Z to make something valuable,
| it doesn't mean X and Y are valueless without Z.
|
| If you were the only person on the planet, then yes.
|
| But X and Y still have option value. You can sell them
| our service them to others.
|
| You can keep them, and continue looking for Z.
|
| But X and Y are not valueless. You are just trying to
| take them in a direction (needing Z) that isn't deploying
| that value (until you get Z).
| jimhi wrote:
| Coincidentally I tried to value talking to a rich person after
| this post and decided it was worth about the same as getting a
| paying customer for $10 per month -
| https://mrsteinberg.com/the-order-of-payment-you-want/
| fullshark wrote:
| Number 5 is huge, and I always think to this reddit post on the
| subject:
| https://www.reddit.com/r/slatestarcodex/comments/9rvroo/most...
| yakshaving_jgt wrote:
| Interesting. I disagree with #5 based on personal experience.
| Some of the best thinkers I know have at times been visible in
| the comments. In fact, meeting challenges to their reasoning is
| how they refine their thinking.
| SimonPStevens wrote:
| This is certainly true.
|
| However, consider that the 99% who don't contribute on Reddit,
| may be contributing elsewhere.
|
| I never post on Reddit, only browse. But I comment here.
|
| Maybe that's the case with most people. That the majority
| contribute somewhere, but just not all in the same place.
|
| This would invalidate the hypothesis that the internet is
| written by insane people. It's just that any one site only
| includes 1% of the people, evenly distributed across all the
| sites.
| the_only_law wrote:
| I feel like there's a level of irony to linking to a Reddit
| post given the subject.
| hbrn wrote:
| I did notice the same pattern: best people I worked with either
| don't write at all or write very little. Probably because,
| despite having better thoughts, smart people also have a much
| higher threshold for releasing their thoughts into the wild.
| And people who write a lot often tend to be talkers and not
| doers (there are exceptions of course, but they are incredibly
| rare).
|
| You'd think that the most truthful content is going to win the
| public. But the reality is that the most _viral_ content wins.
| A lot of software development "best practices" are popular not
| because they are producing value (their value is often
| negative), but because they make us feel good.
|
| Very similar to religions, it's not necessarily the most
| utilitarian religions that are dominating the world. It's the
| most viral ones.
| [deleted]
| hashtag-til wrote:
| What I find amazing is that it doesn't look like a superpower to
| see that some Startup makes no sense at all... and don't really
| bring any "revolution" to some market, and yet they seem to have
| no problem getting funding and to carry on with their non-sense.
|
| The most classical example I can think of is Juicero (remember
| that one?) - it's not rocket science to figure out it that as an
| investor, it's not very clever to put your money there.
|
| I wonder why VCs and stuff make these dumb decisions, that even
| without any sort of "market research" it's obvious it is pure BS,
| and yet there seems to be no shortage of idiotic ideas getting
| funding.
| infecto wrote:
| Money was cheap. I am sure there are many more reasons but in
| my opinion it all stems from how cheap money was. The great
| experiment is still unfolding and I am not entirely sure how
| much the VC -> Startup relationship will change.
| parmenidean wrote:
| Caveat: I'm the founder of a VC-backed startup, so my
| perspective is likely skewed.
|
| The VC mode of thinking becomes a lot clearer when you realize
| that their returns are completely driven by moonshots.
| Something like 1% of the portfolio will drive 56% of the
| returns. As a result:
|
| (1) It costs them nearly nothing if a startup goes to 0. Most
| of their portfolio will go to 0. (2) Conversely, it will cost
| them a ton if they miss a potential moonshot. Even if the idea
| sounds dumb on face, if there's a chance it becomes big, the VC
| needs to be in it in order to survive. (3) There's reputational
| risk at play for the individual VC investor. Every VC will have
| a low hit rate, so they're not worried about looking dumb
| losing money on some startup going to 0. What they are worried
| about is being known as the person who passed on the next
| Airbnb despite getting a look. (4) Later stage VC funding
| becomes an access game -- there's more capital than good ideas,
| and so these companies can have their pick of the litter. This
| means, as a VC, you need to prioritize being founder friendly
| and having a pre-existing relationship with a company. As such,
| you'll see VCs throw in $1m to $10m checks without much though,
| with the hope that if the company every does scale, they'll be
| able to write a sizable follow-on.
|
| It's weird to think about if you're used to public markets,
| where hit rate matters a lot more and diligence is centered on
| "why should I invest". In VC-land, the burden of proof is
| flipped.
| hashtag-til wrote:
| It's very interesting this point of view. I wasn't aware of -
| thanks for explaining.
| misja111 wrote:
| This is what you get when leaving your money on a bank account
| -costs- money, due to negative interest rates. Even a startup
| with a highly dubious business plan might be better than
| leaking your cash away.
| ModernMech wrote:
| > The internet, which we ALL read, including the smartest people
| of our time is written entirely by people with time to waste.
|
| I mean... tbf: https://news.ycombinator.com/threads?id=alankay
| feoren wrote:
| One of the greatest living mathematicians blogs all the time:
|
| https://terrytao.wordpress.com/
| numbsafari wrote:
| Not to mention that the post itself was written on the
| internet, so by his own admission, he's just someone with time
| to waste and not the smartest person of our time.
|
| So caveat lector...
|
| Also... it's unclear how most of this is specific to startups.
| All of these things apply to other endeavors, big and small,
| whether corporate, not-for-profit, or governmental.
| [deleted]
| infecto wrote:
| Building off of another question about VCs. I would go further up
| the chain, I am more pessimistic about Venture Capital and their
| parasitic relationship with to startups. Startups are in my
| opinion amazing and there are still many more ideas that are to
| be executed on. I have issue with the expectations that Venture
| Capital brings to the table.
|
| The VC industry to me is in a state that Hedge Funds were prior
| to their free fall in 2008. You were a high networth individual,
| you put some money into a hedge fund to be part of the club and
| paid your 2 and 20. It was often not the best investment decision
| but it was fashionable. In the past 10-15 years it has become a
| similar trend. Now of course money has been cheap so there is an
| argument that due diligence is not as important in many of these
| investments...but I am curious about returns in VC funds for the
| past 5 years and going forward. Most of the IPOs that I can
| recall have been pretty lackluster and the underlying
| businesses/economic models are pretty lackluster. Everyone was
| sold on XYZ being the next Google but that has not shaped up to
| be the truth.
|
| I am not arguing that VC should not exist, same as Hedge Funds. I
| do think the industry is in a bad spot with how many poor
| investments were made. This easy money has spawned an entire
| industry of under performing startups with stellar employee
| benefits.
| bearjaws wrote:
| My pessimism in startups is how much its been gamified.
| Ycombinator has essentially created a class of people who are now
| chasing their achievements (unicorn status, Series A, B, C
| etc...) and the startup is only a means to that end.
|
| This leads to a rat race by which instead of making the best
| product to solve the problem they originally intended, they try
| to market their company as best as possible to VCs.
|
| The idea was always build something impactful and make it as
| profitable as possible via fulfilling your company's mission. You
| can see the ramifications already in the last 2-3 rounds of
| startups, all of them looking for easy money "uber for X" "AI for
| Y"...
| jimhi wrote:
| As someone who has gone through y combinator twice (I recall it
| just starting to become cool the first time), this problems
| solves itself right?
|
| They'll run out of money in 2-3 years if it's not working.
| athinggoingon wrote:
| >> They'll run out of money in 2-3 years if it's not working.
|
| No. They won't run out of money in 2-3 years, they IPO. Or at
| least, they did in a zero-interest rate environment.
|
| "VCs pay the angels. PE pays the VCs. IBs pay the PEs. All
| for the hope of an IPO so the market will pay the IBs."
|
| "The entire market ecology has a tough time adapting to the
| end of cheap (even free) money, with cash flow, rather than
| "valuation" being the central focus. Those who entered
| finance after 2008 are, basically, unskilled labor. Lehman in
| 2008 was a picnic compared to 2000 if you were doing tech
| related ventures."
| tchock23 wrote:
| This is a big part of it. I advised a founder who has gone
| through 9 startup accelerator programs worldwide (I told him to
| stop after the first one but he didn't listen).
|
| Each one gives him some new way to 'level up' in the game that
| is startups, without having to launch a real product or
| business. It's all about grooming the startup to look good to
| VCs.
|
| I joked with him that his real business should be consulting
| with startups that go through accelerators since he's a
| veritable expert at it now.
| satvikpendem wrote:
| Wouldn't that have diluted him significantly? Or were they
| new products each time?
| michaelcampbell wrote:
| Every recruiter email I get for companies that has funding at
| all seems to go into 5x more text of what series and how much
| funding it has than what the company actually does.
| jasfi wrote:
| I see gamified as structured. A lot of new founders, and those
| who've yet to succeed, don't know how to get organized. YC is
| helping with efforts like Startup School.
| bearjaws wrote:
| Nothing wrong with structure, everything wrong with obsessing
| over your startup status instead of obsessing over delivering
| value.
|
| Witnessed it first hand in private equity and now startups.
| Usually the mission is to build a compelling product and sell
| it to the best of your ability. VCs are gasoline.
|
| Making the process more gamified changed the incentives to be
| about getting more gasoline from VCs instead of making a real
| company that makes its own gas.
| michaelcampbell wrote:
| > everything wrong with obsessing over your startup status
| instead of obsessing over delivering value.
|
| This doesn't stop, either. I've been at a company that's
| over 7 years old, a leader (top... 1? top 3 at least) in
| their space, over 500 people, and still goes on and on
| about being a startup. My inner cynic says this is because
| they can't let go of 'what got them there' and transition
| to big-boy pants, so they continue with the myth of the
| fungible tech employee, etc.
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