11 ms·

Let's All Shed Tears For The Crappy Startups That Can't Raise Any More Money

216 points by neya 14y ago

btilly 14y ago
If we're going to make it look like a train wreck, let's not forget that even the fabled YCombinator is cutting back. See http://news.ycombinator.com/item?id=4861867 http://news.ycombinator.com/item?id=4861867 for verification. Meanwhile, back in the real world, history is full of examples showing that one of the best ways to come up with great ideas is to try a lot of different ideas out. This process sucks for all of the people who had hope and will lose their businesses. But in the long run it is better for all of us that they exist. Sure, historically Silicon Valley has created 10 great companies per year. And many more successful but not widely known real ones. With the frothiness we might get 10 still. But hopefully they are better great companies. With all of the information being shared on how to be an entrepreneur, maybe we'll get half again as many moderate successes. (And the moderate successes are better off without venture capital. Really.) And established companies will get more entrepreneurial employees. Believe it or not, this is actually a good outcome. It means more startups. More dashed hopes. And on the whole a better economic outcome.
bksenior 14y ago
This is the journalism equivalent of the problem he is espousing. An article about nothing, a writer with a self-entitled attitude shamelessly riding something topical. No thanks. I will add that starting anything is difficult and companies like a food delivery service for dogs can easily pivot into an efficient way to get senior citizens their medication, cheaper faster and more efficiently. Many things start small, uninformed and experimentally.
- Apocryphon 14y ago
  I find it to be a good riposte to this fluffy NYT article: http://www.nytimes.com/2012/12/02/fashion/saying-no-to-college.html?hp&_r=1&pagewanted=all&#38 http://www.nytimes.com/2012/12/02/fashion/saying-no-to-colle...; "Saying No to College"
indiecore 14y ago
I've been thinking we're on the cusp of what I'm just going to call "Web 3.0" even though that term looks stupid to me now so I apologize to me browsing my history in a couple of months (sorry). The big social media darlings have gone bust and the cycle looks a lot like (but obviously not as bad as) the web 1.0 crash. People look up, realize that they're doing some really silly shit and then work on "serious" enterprise stuff for awhile as the market sorts itself out and as the market is sorting itself something weird and new bubbles up on the consumer side, last cycle it was social connections, cycle before it was the existence of the consumer itself. I personally think it's going to come with google glass-likes and powerful mobile computers(read: phones) and have to do with blurring the lines between the internet and real life but that's just a guess.
ryanisinallofus 14y ago
I really don't understand the hate with which Dan Lyons is speaking. Startups are crazy, sometimes hugely profitable companies that sometimes start up with the same money it takes to start a restaurant or less. Sometimes they succeed, sometimes they fail, sometimes they are a complete joke. It's intense and awesome and that's why we are all drawn to it: huge potential. VCs are a part of it and without them this market wouldn't exist. Not every startup needs VC money but some do and all the investment they have poured into the economy has had a positive impact. Again, I don't get the hate. Dan Lyons's article is completely absurd (maybe that was the point) but I see no reason to help him or anyone else by posting this ridiculous ant-startup link bait. They all the say the same thing in different ways and they all have this weird, bitter, almost-jealous resentment to them. I don't know if journalists are mad because they don't get into startups themselves, only cover them. Or because journalism has been fairly marginalized (sad but true) and is undergoing some major transitions... I don't know.
- untog 14y ago
  I don't know if journalists are mad because they don't get into startups themselves, only cover them. Or because journalism has been fairly marginalized (sad but true) and is undergoing some major transitions... I don't know. Not to defend the article (which I agree a little too snarky, but will get pageviews) but I imagine that working as a journalist covering startups is a thoroughly depressing existence. If it's anything like my (non-journalistic) interactions with the industry then every interesting, earnest startup founder you meet will be matched by five other over-confident blowhards selling bad ideas with bad polish on top. I know that I would never have the patience to actually interview people like that, so sometimes I give credit to tech journalists just for not spontaneous combusting at conferences.
  - DannyBee 14y ago
    I can't upvote this comment enough. Your explanation reminds me of why people hate lawyers so much. For every 1 good lawyer I meet, I meet 5 truly horrible ones. The same is true of startup founders i've met. The responses you usually see to pointing out someone's idea is horrible is "well, it's hard to predict what ideas will be big, so you don't really know it's horrible. You may be wrong". Given most ideas are horrible, and most startups fail, the onus is on the guy telling you how "rottenfood.com: Rotten food shipped same-day to your door!" will be the next big thing to provide evidence his idea is not horrible. Usually this "evidence" is in the form of talking points: "Rotten Food is a 500 million dollar industry just ripe for disruption". Then when it fails "the idea was good, but the time wasn't right, but it was a valuable learning experience". No! The idea was not good. It was horrible. The fact that you think otherwise tells me it was not a valuable learning experience, because you didn't learn the most important thing. I can't even write up this comment without it turning into all snark, so i'm just going to leave it to the tech journalists :)
wheaties 14y ago
This is great. When I was once looking to join a start-up I met with people who wanted to build a "social fitness food" website, a "social ebay where people shared the things they bid on," a ton of "new way to share music," a social "t-shirt based on Twitter" business, a ton of "new way to share images," a "music video" business, a "new way of producing music in the music" business, etc... I met a few companies solving real problems. I joined one. Never looked back. Real problem, real solution, real money being paid for it.
- joshbert 14y ago
  I think that's pretty much the gist of it. Only solving real problems can bring in real revenue.
- el_cuadrado 14y ago
  That witter t-shirt sounds like a great idea, I bet I can quickly create a startup for that.
bdcravens 14y ago
I think people are missing the biggest takeaway: everyone wants to get rich writing Rails apps in a weekend that really don't contribute, that our brightest minds are being wasted. Rather than creating things that are truly innovative, we're barely iterating on things that were barely iterations to being with.
- tptacek 14y ago
  The world is full of weekend-hard Rails apps that can both contribute and make loads of money. The problem has nothing at all to do with engineering, and everything to do with echo-chamber marketing. The apps don't need to be harder to write; they just need to solve problems for nurses or attorneys or auto mechanics instead of early-adopter tech consumers and advertisers. David Heinemeier Hansson put this as succinctly as anyone in the world could, and at YC startup school! - "build something useful and charge money for it; it's not rocket surgery." But despite that advice instantly getting pegged to the top of HN, a huge number of would-be entrepreneurs have ignored it for years. Dan Lyons has correctly spotted the symptoms but wildly missed the mark on the diagnosis.
  - peacemaker 14y ago
    While I agree with the quote "build something useful and charge money for it; it's not rocket surgery." I think it over simplifies things. What exactly is "useful" anyway? How do I find a useful idea? Who do I charge for it? How much should I charge? I think the real trick is finding that idea.
    - tptacek 14y ago
      A good way to find out if an idea is useful is to charge money for it. People come up with elaborate schemes to avoid doing that because asking for money and being turned down is a form of rejection, and rejection stings. I'll tell you from 15 years in startups, including long stints in companies I didn't run that weren't even part of my identity with customer prospects I didn't even care about: rejection always stings, will probably always sting, and you will subconsciously (to your great detriment) always avoid situations with potential reject even though you know you need to not do that. The result is a system that converges on stories that can pick up 6-18 months of funding runway without ever demonstrating value from real customers. There are businesses that need to boot up without asking for money from customers, but they're not common, and when you find one, it will be very clear why you'd defer revenue, and the answer won't have anything to do with monetizing eyeballs.
potatolicious 14y ago
Seems like a touch too much schadenfreude. I've seen some genuinely awful ideas in startupland, but one has to remember that predicting success is really hard, especially the big types of success like Facebook or Google. Google itself started as a product with no revenue stream, only a highly ephemeral "well we could sell ads?" one that almost didn't pan out. Facebook in its early form seemed like a website for Ivy Leaguers to fawn over each other. Both were companies created by green entrepreneurs who also similarly had little to no job experience, nor business leadership experience. The last page has yet to be written on either of those companies, but I don't think it's a stretch to say they've been two of the greater successes to come out of the "startup system". So sure, we can celebrate the fact that "we're like Groupon, except we sell trips to space!" (seriously, a founder tried to recruit me for this) isn't getting any more funding. But how many Facebooks and Googles are we going to miss out on also? And this won't be the end of the "startup crowd" - the sycophantic faux-journalists, the startup-groupies that don't ever seem to be building anything but are always present at meetups and parties, the guy at the event whose description of his company is consisted of 100% buzzword... those guys will remain. This isn't a return to sanity, it's just a plain old slowdown.
- danso 14y ago
  I think FB and Google are bad examples, because they were borne out of much more fundamental services than the kinds of start ups that the OP mocks. Sure, whatever their mission statements were sounded crazy and vague ("organize the world's information") but they had the technology to back up their lofty goals. The OP seems to be mocking startups that have neither the broad lofty goals nor the technical substance.
  - kedean 14y ago
    It's also noteworthy that neither FB or Google were ever what could be termed a startup. FB was a college website first, then expanded gradually, it didn't try to instantly be huge, and I'm pretty sure zuckerberg knew that it wouldn't make money for a while. Google was a group of genius guys who had come up with a brand new method of web search (the pagerank algorithm) that had never been seen before, they had a legitimate product already.
realrocker 14y ago
Maybe if the focus shifted to low cost-low yield start-ups we would see more successes. We don't have to all create Taj-Mahal's you know,a few ant-hills will do it too.
drupeek 14y ago
I wish I could upvote this post a dozen times.
mburshteyn 14y ago
So can we expect lower rents in SF and less congestion on the 101/280? The last stat I saw indicated that Northern California's unemployment rate is shrinking fast; it doesn't seem like this is the same situation we saw back in the dot.com bubble from that perspective. Or is it? Can somebody explain the discrepancy?
- trotsky 14y ago
  i have no idea if anything resembling the last crash is going on (it doesn't look like it to me, last time it was really obvious) but if you're looking for leading indicators i would suggest commercial occupancy rates and not employment. that is what dropped sharply first in sf a decade or so ago.
swalsh 14y ago
Was the article crude, and maybe more harsh then is needed? of course. Still, the general point is correct. The thing that is great about start-ups is the ability to solve real problems using innovative approaches. Large companies have processes in place to stay steady, to minimize risk. Start-ups thrive on risk. The problem though, is the glamour of the concept has made people more excited about the status of the start-up... and not the problem the start-up is solving. In fact the "problem" has almost been ignored. Look at PG's essay from a few weeks ago. The concept of using a start-up to solve A REAL PROBLEM was revolutionary to some, and debatable to others. Think about that for a moment. Looking for real problems to build a start-up around was revolutionary, and debatable. To me that says a lot. So my question... can anyone name one great entrepreneur who did it for their love of doing a start-up, and not for the passion of "The problem"?
- tptacek 14y ago
  The "general point" that is "correct" in this article is someone everyone commenting on this thread already knew; it's a point almost every credible technology has been making for years. A well-known Google engineer made news simply by moving from "cat picture" projects to "meaningful" projects. Anybody in the world could have made that "correct" point. The problem is that the specific points Lyons builds on "don't sell cat pictures" are either useless, false, or both. Getting a real job and learning engineering aren't a solution to the problem of selling cat pictures. When you take someone whose first instinct is to build a cat picture app and train him on type theory, the CAP theorem, quorum commits, compiler backends, and linear algebra, guess what you get? Thermonuclear cat pictures. In the end, the only actionable advice Lyons has that you should consider taking is "avoid long bus rides with Scoble". To answer your question: which person at 37signals do you think built Basecamp for the love of project management? And how many entrepreneurs can we name who are passionate about dumb problems?
trotsky 14y ago
How do you report on business for a decade and yet hold such a visceral and character flaw type thesis about behavior that's nothing more than the intended, text-book result of specific monetary policy decisions?
- tptacek 14y ago
  What's the monetary policy that's influencing startups?
  - tvladeck 14y ago
    Well, I think monetary policy is more a symptom of a larger trend than the cause, but since the massive deleveraging (or Lesser Depression) the world has been awash in excess savings looking for somewhere to go. A good explanation is here: http://krugman.blogs.nytimes.com/2009/05/02/liquidity-preference-loanable-funds-and-niall-ferguson-wonkish/ http://krugman.blogs.nytimes.com/2009/05/02/liquidity-prefer... [edit: wording]
  - astine 14y ago
    He's referencing the Austrian Business Cycle theory: http://en.wikipedia.org/wiki/Austrian_business_cycle_theory http://en.wikipedia.org/wiki/Austrian_business_cycle_theory The argument is that inflationary spending is what causes the boom bust cycle. Inflation creates an initial perspective of prosperity and causes an increase and shift in investment from capital goods to consumer goods. This leads to a self reinforcing bubble which eventually drains the economy and leads to a bust. Trotsky is effectively saying that the bubble was due to interest rates and Dan Lyons is wrong to attribute it primarily to a character flaw of the persons involved. I don't wholly agree with that, but I think the ABCT does have merit.
    - trotsky 14y ago
      Note that while it's understandable to think that this is an austrian theory given all of the argument on the internet about whether or not it's a good idea, the idea that easy credit drives business expansion is absolutely agreed upon by both schools and pretty much every working economist. You can think of it a bit like amphetamines. No doctor would disagree with the idea that amphetamines produce energy in the patient. The debate would only center around how productive or destructive that energy is.
tptacek 14y ago
This piece is unbelievably lazy. It is the easiest thing in the world to have written --- Lyons is, what, the 93rd person to hop on board this trend story? --- and yet the analysis in it crumbles to dust and floats away the moment you try to pick it up to look at it more closely. Go to medical school? Make real tech products? Don't build apps in a weekend? Avoid bus rides with Scoble? Not one person in the universe is going to make a better business decision for having read this article. All it's does is confirm a trend story, snarkily. Congratulations, Dan Lyons, you made the train before it left the station. Can we get on with our lives now?
- bryze 14y ago
  Amen. About the only thing I learned is that if I want to read flamboyant editorial I'll go to Dan Lyons.
- lmm 14y ago
  There is value in a succinct, eloquent expression of what many people are saying. If nothing else this gives me a single page to point to in six months' time that captures the attitude we had now.
carsongross 14y ago
Goood, gooood. Let the hate flow through you! (I'm an business/enterprise kinda guy, and it's been an ugly decade.)
jonny_eh 14y ago
Sure, Silicon Valley might produce only 10 great companies a year, but where I'm from (Ottawa, Canada), we'd produce only 1 great company every 10 years. (I'm referring to tech companies)
- ytadesse 14y ago
  You got my up vote just for being from Ottawa.
lifeguard 14y ago
They may be crappy, but likely they would have been customers of several quality startups as well.
jacoblyles 14y ago
The bombastic tone of this article obscures some nuggets of truth. The most promising startup founders I know have 5-10 years of experience in an industry, enough to have some domain expertise and insight into the needs of that industry. This contrasts with people who move here to "do a startup" - largely producing clones of the latest consumer success story (in my time in the valley, the cycle of clones has been Foursquare, Groupon, Zynga, and Instagram, respectively). I was in that second group when I moved here, embarrassingly working on a SoLoMo consumer app in an industry where I had zero competitive advantage. (SoLoMoPho = social local mobile photo) A little shakeout is a good thing. It will free up talent and make the valley feel less trivial.
- antr 14y ago
  I personally think you hit the nail on the head when you say " The most promising startup founders I know have 5-10 years of experience in an industry". Yes, there are exceptions, like any other thing in life, but experience in a sector is underrated by many of the recent graduates I meet who want to start a company. The problem I think is that youngsters only read TechCrunch and other similar blogs, which to me is like Warren Buffet trying to read insurance/risk management news on Seventeen magazine - flashy headlines with irrelevant information, in a world fuelled by cotton candy and hairstyles.
vergilis 14y ago
This article was designed simply to inflame Rush Limbaugh style
bjhoops1 14y ago
One of the things I love about HN is that a scathing article criticizing startups and tech entrepreneurs can make the front page.
- vyrotek 14y ago
  Until PG kills it
jameszol 14y ago
I don't understand this ranty article... Aren't startups called startups for a reason? Some aren't going to thrive, some really suck, others can't pivot their talent and drive toward something grandiose and earth shattering for their next round of investment but all should be better because of the experience, investors and entrepreneurs alike. The failure rate of startups has always been high, especially over time, right? "There are also different definitions of failure. If failure means liquidating all assets, with investors losing all their money, an estimated 30% to 40% of high potential U.S. start-ups fail, he says. If failure is defined as failing to see the projected return on investment—say, a specific revenue growth rate or date to break even on cash flow—then more than 95% of start-ups fail, based on Mr. Ghosh's research." via Shikhar Ghosh, a senior lecturer at Harvard Business School http://online.wsj.com/article/SB10000872396390443720204578004980476429190.html http://online.wsj.com/article/SB1000087239639044372020457800...
pg 14y ago
I'm going to kill this article as a dupe. It's just other articles rewritten in more colorful language. But it's giving this thing too much credit even to call it a dupe, because in the process of making the language more colorful, he's now describing something that is definitely not the case. The other articles are talking about a trend that's happening as slowly as global warming. No door has suddenly crashed down, cutting off series As. It's just gradually getting harder to raise later rounds. But the tightening up is so slow that even I, who am arguably among the best positioned to see it of anyone, can barely notice it. Which means for sure Dan Lyons has no evidence of it himself.
- ytadesse 14y ago
  With all due respect PG, I'm not sure there's precedence for you "killing" articles like this but I don't think that's a good idea. This article has a lot of people talking and trying to figure out what works and what doesn't.
  - pg 14y ago
    For cases like this where the article is fluff but the comments are substantial, we have a way of killing articles that doesn't turn off new comments, and that is what I used.
    - tptacek 14y ago
      I wish you'd kill articles for reasons like this more often.
- rexreed 14y ago
  While I don't want to second-guess your judgement, I've seen many other articles that are just as much rehashes and not shut down as dupes. Why does this article deserve the axe so quickly? Indeed, if it is saying something different from the other articles (as odious as it might be), wouldn't that indicate it is not a dupe?
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equalarrow 14y ago
I can't help but think about Peter Thiel encouraging people to drop out and start companies. But then I saw that it was Dan Lyons that wrote it. Two people's opinions, in my mind, not to heed.. So, somewhere in the middle should be about right.
bovik 14y ago
I have no doubt that pg doesn't like the article Here's a quote "...smart young people have been conned into thinking that starting a company is akin to buying a lottery ticket or rolling dice at Las Vegas -- the odds are long but you never know, you might get lucky and strike it rich. So make something up, throw it out there, and see what hapens." That's describing 99% of bullshit yc stratups. The 1% (or less) which succeed would have done so with or without yc. And they mostly actually involve real business models of charging for a product/service.
bovik 14y ago
"Ok, may I humbly ask..." "with great respect, may I ask you.." "With all due respect PG..." "While I don't want to second-guess your judgement..." And these are the comments disagreeing with pg ! Wow. Either internet ain't what it used to be or there's a lot of hero worship going on here. Come on my fearless conquerors of the Internet. Stand up for yourselves. Show some spine. You're not going to create the next billion dollar business with that sort of genuflecting attitude.
hack_edu 14y ago
Has this post been moderated away? I'm not seeing it anywhere, even 5+ pages deep. If so... is that really necessary; is someone threatened or offended? This is a real article with just as valuable a point as all the self-posted 300-word blogspam that occupies the front page daily.
wahdeh 14y ago
What if I told you there was no Series A funding: http://bit.ly/QCZCoD http://bit.ly/QCZCoD

216 points by neya 14y ago

If we're going to make it look like a train wreck, let's not forget that even the fabled YCombinator is cutting back. See http://news.ycombinator.com/item?id=4861867 http://news.ycombinator.com/item?id=4861867 for verification. Meanwhile, back in the real world, history is full of examples showing that one of the best ways to come up with great ideas is to try a lot of different ideas out. This process sucks for all of the people who had hope and will lose their businesses. But in the long run it is better for all of us that they exist. Sure, historically Silicon Valley has created 10 great companies per year. And many more successful but not widely known real ones. With the frothiness we might get 10 still. But hopefully they are better great companies. With all of the information being shared on how to be an entrepreneur, maybe we'll get half again as many moderate successes. (And the moderate successes are better off without venture capital. Really.) And established companies will get more entrepreneurial employees. Believe it or not, this is actually a good outcome. It means more startups. More dashed hopes. And on the whole a better economic outcome.

bksenior 14y ago

This is the journalism equivalent of the problem he is espousing. An article about nothing, a writer with a self-entitled attitude shamelessly riding something topical. No thanks. I will add that starting anything is difficult and companies like a food delivery service for dogs can easily pivot into an efficient way to get senior citizens their medication, cheaper faster and more efficiently. Many things start small, uninformed and experimentally.

Apocryphon 14y ago
I find it to be a good riposte to this fluffy NYT article: http://www.nytimes.com/2012/12/02/fashion/saying-no-to-college.html?hp&_r=1&pagewanted=all&#38 http://www.nytimes.com/2012/12/02/fashion/saying-no-to-colle...; "Saying No to College"

indiecore 14y ago

I've been thinking we're on the cusp of what I'm just going to call "Web 3.0" even though that term looks stupid to me now so I apologize to me browsing my history in a couple of months (sorry). The big social media darlings have gone bust and the cycle looks a lot like (but obviously not as bad as) the web 1.0 crash. People look up, realize that they're doing some really silly shit and then work on "serious" enterprise stuff for awhile as the market sorts itself out and as the market is sorting itself something weird and new bubbles up on the consumer side, last cycle it was social connections, cycle before it was the existence of the consumer itself. I personally think it's going to come with google glass-likes and powerful mobile computers(read: phones) and have to do with blurring the lines between the internet and real life but that's just a guess.

ryanisinallofus 14y ago

I really don't understand the hate with which Dan Lyons is speaking. Startups are crazy, sometimes hugely profitable companies that sometimes start up with the same money it takes to start a restaurant or less. Sometimes they succeed, sometimes they fail, sometimes they are a complete joke. It's intense and awesome and that's why we are all drawn to it: huge potential. VCs are a part of it and without them this market wouldn't exist. Not every startup needs VC money but some do and all the investment they have poured into the economy has had a positive impact. Again, I don't get the hate. Dan Lyons's article is completely absurd (maybe that was the point) but I see no reason to help him or anyone else by posting this ridiculous ant-startup link bait. They all the say the same thing in different ways and they all have this weird, bitter, almost-jealous resentment to them. I don't know if journalists are mad because they don't get into startups themselves, only cover them. Or because journalism has been fairly marginalized (sad but true) and is undergoing some major transitions... I don't know.

untog 14y ago
I don't know if journalists are mad because they don't get into startups themselves, only cover them. Or because journalism has been fairly marginalized (sad but true) and is undergoing some major transitions... I don't know. Not to defend the article (which I agree a little too snarky, but will get pageviews) but I imagine that working as a journalist covering startups is a thoroughly depressing existence. If it's anything like my (non-journalistic) interactions with the industry then every interesting, earnest startup founder you meet will be matched by five other over-confident blowhards selling bad ideas with bad polish on top. I know that I would never have the patience to actually interview people like that, so sometimes I give credit to tech journalists just for not spontaneous combusting at conferences.
- DannyBee 14y ago
  I can't upvote this comment enough. Your explanation reminds me of why people hate lawyers so much. For every 1 good lawyer I meet, I meet 5 truly horrible ones. The same is true of startup founders i've met. The responses you usually see to pointing out someone's idea is horrible is "well, it's hard to predict what ideas will be big, so you don't really know it's horrible. You may be wrong". Given most ideas are horrible, and most startups fail, the onus is on the guy telling you how "rottenfood.com: Rotten food shipped same-day to your door!" will be the next big thing to provide evidence his idea is not horrible. Usually this "evidence" is in the form of talking points: "Rotten Food is a 500 million dollar industry just ripe for disruption". Then when it fails "the idea was good, but the time wasn't right, but it was a valuable learning experience". No! The idea was not good. It was horrible. The fact that you think otherwise tells me it was not a valuable learning experience, because you didn't learn the most important thing. I can't even write up this comment without it turning into all snark, so i'm just going to leave it to the tech journalists :)

wheaties 14y ago

This is great. When I was once looking to join a start-up I met with people who wanted to build a "social fitness food" website, a "social ebay where people shared the things they bid on," a ton of "new way to share music," a social "t-shirt based on Twitter" business, a ton of "new way to share images," a "music video" business, a "new way of producing music in the music" business, etc... I met a few companies solving real problems. I joined one. Never looked back. Real problem, real solution, real money being paid for it.

joshbert 14y ago
I think that's pretty much the gist of it. Only solving real problems can bring in real revenue.
el_cuadrado 14y ago
That witter t-shirt sounds like a great idea, I bet I can quickly create a startup for that.

bdcravens 14y ago

I think people are missing the biggest takeaway: everyone wants to get rich writing Rails apps in a weekend that really don't contribute, that our brightest minds are being wasted. Rather than creating things that are truly innovative, we're barely iterating on things that were barely iterations to being with.

tptacek 14y ago
The world is full of weekend-hard Rails apps that can both contribute and make loads of money. The problem has nothing at all to do with engineering, and everything to do with echo-chamber marketing. The apps don't need to be harder to write; they just need to solve problems for nurses or attorneys or auto mechanics instead of early-adopter tech consumers and advertisers. David Heinemeier Hansson put this as succinctly as anyone in the world could, and at YC startup school! - "build something useful and charge money for it; it's not rocket surgery." But despite that advice instantly getting pegged to the top of HN, a huge number of would-be entrepreneurs have ignored it for years. Dan Lyons has correctly spotted the symptoms but wildly missed the mark on the diagnosis.
- peacemaker 14y ago
  While I agree with the quote "build something useful and charge money for it; it's not rocket surgery." I think it over simplifies things. What exactly is "useful" anyway? How do I find a useful idea? Who do I charge for it? How much should I charge? I think the real trick is finding that idea.
  - tptacek 14y ago
    A good way to find out if an idea is useful is to charge money for it. People come up with elaborate schemes to avoid doing that because asking for money and being turned down is a form of rejection, and rejection stings. I'll tell you from 15 years in startups, including long stints in companies I didn't run that weren't even part of my identity with customer prospects I didn't even care about: rejection always stings, will probably always sting, and you will subconsciously (to your great detriment) always avoid situations with potential reject even though you know you need to not do that. The result is a system that converges on stories that can pick up 6-18 months of funding runway without ever demonstrating value from real customers. There are businesses that need to boot up without asking for money from customers, but they're not common, and when you find one, it will be very clear why you'd defer revenue, and the answer won't have anything to do with monetizing eyeballs.

potatolicious 14y ago

Seems like a touch too much schadenfreude. I've seen some genuinely awful ideas in startupland, but one has to remember that predicting success is really hard, especially the big types of success like Facebook or Google. Google itself started as a product with no revenue stream, only a highly ephemeral "well we could sell ads?" one that almost didn't pan out. Facebook in its early form seemed like a website for Ivy Leaguers to fawn over each other. Both were companies created by green entrepreneurs who also similarly had little to no job experience, nor business leadership experience. The last page has yet to be written on either of those companies, but I don't think it's a stretch to say they've been two of the greater successes to come out of the "startup system". So sure, we can celebrate the fact that "we're like Groupon, except we sell trips to space!" (seriously, a founder tried to recruit me for this) isn't getting any more funding. But how many Facebooks and Googles are we going to miss out on also? And this won't be the end of the "startup crowd" - the sycophantic faux-journalists, the startup-groupies that don't ever seem to be building anything but are always present at meetups and parties, the guy at the event whose description of his company is consisted of 100% buzzword... those guys will remain. This isn't a return to sanity, it's just a plain old slowdown.

danso 14y ago
I think FB and Google are bad examples, because they were borne out of much more fundamental services than the kinds of start ups that the OP mocks. Sure, whatever their mission statements were sounded crazy and vague ("organize the world's information") but they had the technology to back up their lofty goals. The OP seems to be mocking startups that have neither the broad lofty goals nor the technical substance.
- kedean 14y ago
  It's also noteworthy that neither FB or Google were ever what could be termed a startup. FB was a college website first, then expanded gradually, it didn't try to instantly be huge, and I'm pretty sure zuckerberg knew that it wouldn't make money for a while. Google was a group of genius guys who had come up with a brand new method of web search (the pagerank algorithm) that had never been seen before, they had a legitimate product already.

realrocker 14y ago

Maybe if the focus shifted to low cost-low yield start-ups we would see more successes. We don't have to all create Taj-Mahal's you know,a few ant-hills will do it too.

drupeek 14y ago

I wish I could upvote this post a dozen times.

mburshteyn 14y ago

So can we expect lower rents in SF and less congestion on the 101/280? The last stat I saw indicated that Northern California's unemployment rate is shrinking fast; it doesn't seem like this is the same situation we saw back in the dot.com bubble from that perspective. Or is it? Can somebody explain the discrepancy?

trotsky 14y ago
i have no idea if anything resembling the last crash is going on (it doesn't look like it to me, last time it was really obvious) but if you're looking for leading indicators i would suggest commercial occupancy rates and not employment. that is what dropped sharply first in sf a decade or so ago.

swalsh 14y ago

Was the article crude, and maybe more harsh then is needed? of course. Still, the general point is correct. The thing that is great about start-ups is the ability to solve real problems using innovative approaches. Large companies have processes in place to stay steady, to minimize risk. Start-ups thrive on risk. The problem though, is the glamour of the concept has made people more excited about the status of the start-up... and not the problem the start-up is solving. In fact the "problem" has almost been ignored. Look at PG's essay from a few weeks ago. The concept of using a start-up to solve A REAL PROBLEM was revolutionary to some, and debatable to others. Think about that for a moment. Looking for real problems to build a start-up around was revolutionary, and debatable. To me that says a lot. So my question... can anyone name one great entrepreneur who did it for their love of doing a start-up, and not for the passion of "The problem"?

tptacek 14y ago
The "general point" that is "correct" in this article is someone everyone commenting on this thread already knew; it's a point almost every credible technology has been making for years. A well-known Google engineer made news simply by moving from "cat picture" projects to "meaningful" projects. Anybody in the world could have made that "correct" point. The problem is that the specific points Lyons builds on "don't sell cat pictures" are either useless, false, or both. Getting a real job and learning engineering aren't a solution to the problem of selling cat pictures. When you take someone whose first instinct is to build a cat picture app and train him on type theory, the CAP theorem, quorum commits, compiler backends, and linear algebra, guess what you get? Thermonuclear cat pictures. In the end, the only actionable advice Lyons has that you should consider taking is "avoid long bus rides with Scoble". To answer your question: which person at 37signals do you think built Basecamp for the love of project management? And how many entrepreneurs can we name who are passionate about dumb problems?

trotsky 14y ago

How do you report on business for a decade and yet hold such a visceral and character flaw type thesis about behavior that's nothing more than the intended, text-book result of specific monetary policy decisions?

tptacek 14y ago
What's the monetary policy that's influencing startups?
- tvladeck 14y ago
  Well, I think monetary policy is more a symptom of a larger trend than the cause, but since the massive deleveraging (or Lesser Depression) the world has been awash in excess savings looking for somewhere to go. A good explanation is here: http://krugman.blogs.nytimes.com/2009/05/02/liquidity-preference-loanable-funds-and-niall-ferguson-wonkish/ http://krugman.blogs.nytimes.com/2009/05/02/liquidity-prefer... [edit: wording]
- astine 14y ago
  He's referencing the Austrian Business Cycle theory: http://en.wikipedia.org/wiki/Austrian_business_cycle_theory http://en.wikipedia.org/wiki/Austrian_business_cycle_theory The argument is that inflationary spending is what causes the boom bust cycle. Inflation creates an initial perspective of prosperity and causes an increase and shift in investment from capital goods to consumer goods. This leads to a self reinforcing bubble which eventually drains the economy and leads to a bust. Trotsky is effectively saying that the bubble was due to interest rates and Dan Lyons is wrong to attribute it primarily to a character flaw of the persons involved. I don't wholly agree with that, but I think the ABCT does have merit.
  - trotsky 14y ago
    Note that while it's understandable to think that this is an austrian theory given all of the argument on the internet about whether or not it's a good idea, the idea that easy credit drives business expansion is absolutely agreed upon by both schools and pretty much every working economist. You can think of it a bit like amphetamines. No doctor would disagree with the idea that amphetamines produce energy in the patient. The debate would only center around how productive or destructive that energy is.

tptacek 14y ago

This piece is unbelievably lazy. It is the easiest thing in the world to have written --- Lyons is, what, the 93rd person to hop on board this trend story? --- and yet the analysis in it crumbles to dust and floats away the moment you try to pick it up to look at it more closely. Go to medical school? Make real tech products? Don't build apps in a weekend? Avoid bus rides with Scoble? Not one person in the universe is going to make a better business decision for having read this article. All it's does is confirm a trend story, snarkily. Congratulations, Dan Lyons, you made the train before it left the station. Can we get on with our lives now?

bryze 14y ago
Amen. About the only thing I learned is that if I want to read flamboyant editorial I'll go to Dan Lyons.
lmm 14y ago
There is value in a succinct, eloquent expression of what many people are saying. If nothing else this gives me a single page to point to in six months' time that captures the attitude we had now.

carsongross 14y ago

Goood, gooood. Let the hate flow through you! (I'm an business/enterprise kinda guy, and it's been an ugly decade.)

jonny_eh 14y ago

Sure, Silicon Valley might produce only 10 great companies a year, but where I'm from (Ottawa, Canada), we'd produce only 1 great company every 10 years. (I'm referring to tech companies)

ytadesse 14y ago
You got my up vote just for being from Ottawa.

lifeguard 14y ago

They may be crappy, but likely they would have been customers of several quality startups as well.

jacoblyles 14y ago

The bombastic tone of this article obscures some nuggets of truth. The most promising startup founders I know have 5-10 years of experience in an industry, enough to have some domain expertise and insight into the needs of that industry. This contrasts with people who move here to "do a startup" - largely producing clones of the latest consumer success story (in my time in the valley, the cycle of clones has been Foursquare, Groupon, Zynga, and Instagram, respectively). I was in that second group when I moved here, embarrassingly working on a SoLoMo consumer app in an industry where I had zero competitive advantage. (SoLoMoPho = social local mobile photo) A little shakeout is a good thing. It will free up talent and make the valley feel less trivial.

antr 14y ago
I personally think you hit the nail on the head when you say " The most promising startup founders I know have 5-10 years of experience in an industry". Yes, there are exceptions, like any other thing in life, but experience in a sector is underrated by many of the recent graduates I meet who want to start a company. The problem I think is that youngsters only read TechCrunch and other similar blogs, which to me is like Warren Buffet trying to read insurance/risk management news on Seventeen magazine - flashy headlines with irrelevant information, in a world fuelled by cotton candy and hairstyles.

vergilis 14y ago

This article was designed simply to inflame Rush Limbaugh style

bjhoops1 14y ago

One of the things I love about HN is that a scathing article criticizing startups and tech entrepreneurs can make the front page.

vyrotek 14y ago
Until PG kills it

jameszol 14y ago

I don't understand this ranty article... Aren't startups called startups for a reason? Some aren't going to thrive, some really suck, others can't pivot their talent and drive toward something grandiose and earth shattering for their next round of investment but all should be better because of the experience, investors and entrepreneurs alike. The failure rate of startups has always been high, especially over time, right? "There are also different definitions of failure. If failure means liquidating all assets, with investors losing all their money, an estimated 30% to 40% of high potential U.S. start-ups fail, he says. If failure is defined as failing to see the projected return on investment—say, a specific revenue growth rate or date to break even on cash flow—then more than 95% of start-ups fail, based on Mr. Ghosh's research." via Shikhar Ghosh, a senior lecturer at Harvard Business School http://online.wsj.com/article/SB10000872396390443720204578004980476429190.html http://online.wsj.com/article/SB1000087239639044372020457800...

pg 14y ago

I'm going to kill this article as a dupe. It's just other articles rewritten in more colorful language. But it's giving this thing too much credit even to call it a dupe, because in the process of making the language more colorful, he's now describing something that is definitely not the case. The other articles are talking about a trend that's happening as slowly as global warming. No door has suddenly crashed down, cutting off series As. It's just gradually getting harder to raise later rounds. But the tightening up is so slow that even I, who am arguably among the best positioned to see it of anyone, can barely notice it. Which means for sure Dan Lyons has no evidence of it himself.

ytadesse 14y ago
With all due respect PG, I'm not sure there's precedence for you "killing" articles like this but I don't think that's a good idea. This article has a lot of people talking and trying to figure out what works and what doesn't.
- pg 14y ago
  For cases like this where the article is fluff but the comments are substantial, we have a way of killing articles that doesn't turn off new comments, and that is what I used.
  - tptacek 14y ago
    I wish you'd kill articles for reasons like this more often.
rexreed 14y ago
While I don't want to second-guess your judgement, I've seen many other articles that are just as much rehashes and not shut down as dupes. Why does this article deserve the axe so quickly? Indeed, if it is saying something different from the other articles (as odious as it might be), wouldn't that indicate it is not a dupe?
- 14y ago

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equalarrow 14y ago

I can't help but think about Peter Thiel encouraging people to drop out and start companies. But then I saw that it was Dan Lyons that wrote it. Two people's opinions, in my mind, not to heed.. So, somewhere in the middle should be about right.

bovik 14y ago

I have no doubt that pg doesn't like the article Here's a quote "...smart young people have been conned into thinking that starting a company is akin to buying a lottery ticket or rolling dice at Las Vegas -- the odds are long but you never know, you might get lucky and strike it rich. So make something up, throw it out there, and see what hapens." That's describing 99% of bullshit yc stratups. The 1% (or less) which succeed would have done so with or without yc. And they mostly actually involve real business models of charging for a product/service.

bovik 14y ago

"Ok, may I humbly ask..." "with great respect, may I ask you.." "With all due respect PG..." "While I don't want to second-guess your judgement..." And these are the comments disagreeing with pg ! Wow. Either internet ain't what it used to be or there's a lot of hero worship going on here. Come on my fearless conquerors of the Internet. Stand up for yourselves. Show some spine. You're not going to create the next billion dollar business with that sort of genuflecting attitude.

hack_edu 14y ago

Has this post been moderated away? I'm not seeing it anywhere, even 5+ pages deep. If so... is that really necessary; is someone threatened or offended? This is a real article with just as valuable a point as all the self-posted 300-word blogspam that occupies the front page daily.

wahdeh 14y ago

What if I told you there was no Series A funding: http://bit.ly/QCZCoD http://bit.ly/QCZCoD