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Entrepreneurs are the New Labor

115 points by chrismealy 13y ago

fleitz 13y ago
If you're doing a web/mobile startup what do you need VC financing for? Might as well go see a VC about opening a Pizza shop, it makes about as much sense. The people who are losing to VCs have no leverage, if you have no leverage you will always lose the negotiation.
- rdouble 13y ago
  Might as well go see a VC about opening a Pizza shop, it makes about as much sense. Rich Miner, head of Google Ventures, financed Cambridge One. http://www.cambridge1.us/about.html http://www.cambridge1.us/about.html
  - deleted 13y ago
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    - rdouble 13y ago
      I think it was just a personal investment. However, if we're talking VC investment in food service, both Philz and Blue Bottle raised $20M from VC funds over the past 12 months.
      - fleitz 13y ago
        Yeah that sort of thing makes sense, in the same way that Facebook taking VC did, however, it makes little sense to take VC for a prototype with no users.
- codewright 13y ago
  There's a VC funded Indian burrito joint in Palo Alto. I've eaten lunch there three times, once with a potential investor. Food's terrible to boot.
  - GuiA 13y ago
    Tava Indian? They're in SF as well now, I share your experiences. http://www.tavaindian.com http://www.tavaindian.com
    - codewright 13y ago
      Yep. Awful food. Not, "awful Indian food". Awful by any standard. I don't think the founders had any experience with food before doing Tava.
      - ajju 13y ago
        Haven't eaten here, but if this is true, it's a tragedy. There are so many ways to do an Indian burrito right.
- hkmurakami 13y ago
  "fear and greed" (usually the slogan of wall street) immediately came to mind. Greed for a huge exit. Fear of being overtaken by a VC funded competitor. I think it's a legitimate concern.
  - sillysaurus 13y ago
    Greed for a huge exit. I'm not sure this theme will survive much longer. It seems no coincidence that the founders of the two most successful YC companies, Dropbox and Airbnb, weren't interested in any "big exit". (Drew remarked on his YC app that he'd find it difficult to turn down a million dollars for 6 months of work, but even that reads like he probably would've passed on such an offer.) The most promising founders seem not to be interested in exiting.
- orangethirty 13y ago
  Exactly. You only go to a VC when there is a real need for capital to purchase equipment or pay salaries. Though the vast majority of "startups" can be done by one or two people coding and selling part-time. Hell, I've managed to develop businesses with less than $50. Profitable businesses.
jcub 13y ago
At least 90% of the projects I see don't need the $100,000 for a nice office space and whatever else they spend it on.
- logicallee 13y ago
  You're wrong - they absolutely DO need it. As an example, here is an itemized breakdown of why my project NEEDS a $100,000 investment. $2000 - Back wages and small debt (past year) $4000 - burn rate of founders (1 yr) $1500 - equipment and hosting (1 yr) $7000 - outsourced labor (1 yr) $85500 - necessary because you are not interested in a $12.5K investment, even if we are the next Google. Therefore, this is added to convince you to invest in the company. This portion will simply remain on the books. The last portion is necessary because you, the investor, would not take a $15K investments seriously. That's why we need a $100K investment. It is not an optional line item: without it, we do not get the investment. It is crucial.
  - il 13y ago
    Your burn rate is $2K/year? Where do you live?
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  - apalmer 13y ago
    Ehhh the point I think he is trying to make is a 'entrepreneur' in this situation would take out a personal loan, or hustle to get the 12K instead of giving up a significant portion of his venture.
    - socialist_coder 13y ago
      Seriously. If you need 12k just get a real job for a bit and save up money.
jwheeler79 13y ago
That article is wordy and hard as hell to parse. I wish the author would just speak plainly. What's he mean anyways? 'The entrepreneurs are the new labor'
- mindcrime 13y ago
  I share that sentiment. I read the first page, and thought "Shit, this guy just used a whole page full of words and hasn't expressed a coherent argument yet". I quit reading at that point. Life is too short.
- calhoun137 13y ago
  A proper analogy which i have shared with my smart friends for reading articles of a wordy nature, including said article, is best understood by reflecting on the late 19th century philosopher Friedrich Nietzsche, who besides being a prototype of current wordy article authors also articulated an interesting theory of good and evil, and who said that which does not kill us makes us stronger.
- michaelochurch 13y ago
  Let me give it a try. Venkat is brilliant but he doesn't hold back from using hard-to-catch metaphors and $5 words. There's a cartoon from Hugh MacLeod that shows the corporate pyramid with three layers: Sociopaths at the top, Clueless in the middle, and Losers at the bottom. Venkat has done one hash-out of this on his blog; I've done another with a slightly different approach. Let's talk about what these tiers are. Sociopaths are strategic and dedicated but not subordinate. They work hard, will make things happen that most of society thinks "shouldn't", and they get rich or famous when what they build advances human life. However, most of them are also egotistical assholes. Steve Jobs is the uber-Sociopath. In general, they love risk, because they view low social status and mediocrity as indistinguishable from death (and therefore favor high-risk lifestyles). Many of them aren't Sociopaths. I'm probably closest to this of the 3 tiers (although I mix them up). Losers are not undesirable or unpopular people. They're losing in an expected-value sense. They disfavor changes (in management, location, jobs) and tend to sell off their upside in exchange for risk-reduction. That's the insurance trade of modern employment. They're subordinate and strategic (they know what's worth working on, but will also subordinate on a dead-end project if it keeps them comfortable) but not dedicated. At 5:01, they're gone. Eventually, the company is no longer defined by economic competition to excel on the market, but by political competition to capture the rents of a smooth-running machine. You get a caste of entitled, lazy executives who replace the old entrepreneurs. Then, the symbiosis between risk-seeking Sociopaths and risk-averse Losers dies out. The executives negotiate worse terms for Losers (lowered risk reduction, fast-firing) and use their superior social polish to push out the "good Sociopath" entrepreneurs who started the thing. When this happens, Sociopaths need a ready supply of rubber gloves to use for their dirty work and then discard, because they're no longer holding up their end of the trade with the risk-averse Losers. They carve out a contingent of eager upper-tier Losers and failed-to-become-executive lower-tier Sociopaths and forge the Clueless. Clueless are dedicated and subordinate but not strategic. They often have no idea what's worth working on, or what's happening at the big picture. Clueless are the middle-management buffer class. Since they work the hardest (to clean up messes left by disengaged Losers and malignant Sociopaths) they often end up propping up the Effort Thermocline, which is the level at which jobs become easier (a switch-over from pay-for-work to executive rent-seeking) rather than harder with increasing rank. By the way, how do you get someone to be subordinate, strategic and dedicated? That only happens in a true mentor/protege relationship where the mentor is fully trusted to deliver a great career to the protege. That existed in guild cultures but it's never found in modern employment. VC-istan, with the collusive and illegal reputation economy driven by comparing-of-notes and co-funding, is the first postmodern corporate organization. The Effort Thermocline exists between companies. It's fucking brilliant! The Sociopaths are the true executives (VCs, tech press, "popular kids") and these "startups" are all-Clueless endeavors. If you haven't figured it out, "lean startup" is code for "no Losers". Obviously, this contention (that VC-funded "entrepreneurs" are out-of-work PMs parlaying backers' money into acq-hires and fast promotions) is controversial so he spends a lot of verbiage backing it up.
pg 13y ago
Investors have won? What? Founders have never had more power relative to investors than they do now.
- alanthonyc 13y ago
  “politically charged statements like this can do a good deal of damage, so I’ve been wary about sharing my views more publicly” It’s not that the statement is politically charged, it’s just wrong.
- venomsnake 13y ago
  Only if they have read all and not just some of your essays and groked them. In the country where I live the startup scene is terrible - only buzzwords thrown from all sides and no substance at all. Engineers in startups expecting salaries and benefits of a big company but with nothing from the downsides. In this situation the guys with the hard cash hold a lot of influence.
- sillysaurus 13y ago
  Founders have never had more power relative to investors than they do now. Do investors need any power over founders? Yuri Milner's philosophy seems to suggest they don't.
  - InclinedPlane 13y ago
    They need to have the power to compel founders to believe that they need outside investment, and they need to trade significant amounts of equity for that. Today, with everything available it's become easy for small companies to bootstrap their way through all stages of growth without any conventional investment. Begin with personal savings and maxing out credit cards to allow a tiny handful of founders to build an MVP that gains credibility and perhaps even generates some revenue. Then use things like crowd funding to scale up to bigger projects, mitigating the risk of burning through savings during development and of failing to get market traction at the same time. Then hit the ground running with a product that's already built and already known to be valued by the market and simply rake in revenue. Or go back and hit another cycle of crowd funding. You don't even need a merchant account to charge people money for things. Compared to the way things were even 10 years ago the scales have shifted a great deal in favor of founder autonomy.
CleanedStar 13y ago
"Investors have won" Congratulations, after ten thousand years of struggle, the ruling class has finally won for good, permanent victory has been declared by - Venkatesh Rao. Marx says in the Communist Manifesto - "The history of all hitherto existing society is the history of class struggles. Freeman and slave, patrician and plebian, lord and serf, guild-master and journeyman, in a word, oppressor and oppressed, stood in constant opposition to one another, carried on an uninterrupted, now hidden, now open fight, a fight that each time ended, either in a revolutionary reconstitution of society at large, or in the common ruin of the contending classes." Marx had a point here about the long time span. In the Epic of Gilgamesh, written several thousand years ago, rulers are advised to capture new slaves from far-away, rural areas, as these slaves tend to be more passive. These issues have been around for a while - from that time, to the time of Pisistratus, and Spartacus and the Roman Servile wars, and the struggle between the optimates and the populares, to the German Peasants revolt of the 16th century up to this modern day - one may have noticed how large and militant the May Day rallies in Spain and Greece (unemployment is 26% in both countries) were. US drones in Afghanistan, Pakistan or the Boston marathon bombings - these struggles carry on over time. If one reads a lot of Marx (something John McCarthy said was a sign of a wasted youth), you see the point that just when some system is said to be completely victorious, it has usually peaked and is on a long downhill slide until something new comes along. Louis XIV was called the Sun King and is quoted as saying, L'Etat, c'est moi, but less than eighty years after his death, Louis XVI was guillotined in front of a crowd of revolutionary sans-culottes. Final victory is here for the investor...well, we will see about that...
- sjwalter 13y ago
  I think you and Venkat agree. Venkat is saying that the current balance of power has tipped towards the investor class, and we are seeing the emergence of a new middle class while the old one disintegrates. He's not saying that this new balance is permanent, and in fact spends a lot of time developing the thesis that these shifts are always happening. I guess I don't see your point.
- sageikosa 13y ago
  ...and evolution is directed toward a more perfect form? History isn't moved by invisible forces towards a precognitive goal any more than an invisible hand of a creator directs evolution, or deities direct kings to make divinely sanctioned choices.
EGreg 13y ago
"Investors have won" sounds a bit premature. If the SEC didn't drag its feet, we'd have lots of new people entering the startup market on the investor side, and presenting much more supply of investment money (and competition from the investor side). People at the SEC, however, (such as Mary Schapiro, who since left), are concerned about protecting non-accredited investors who may be affected, and the agency has even taken heat from many members of Congress for taking so long: http://www.reuters.com/article/2013/04/11/us-sec-jobsact-idUSBRE93A0JB20130411 http://www.reuters.com/article/2013/04/11/us-sec-jobsact-idU... If they would at least drop the ban on general solicitation -- as they were expected to do last August -- then many entrepreneurs with large user bases could solicit investment through messaging those users, and inviting them to introduce their rich (accredited) investor friends to the company.
ajju 13y ago
The author seems to pick surface level similarities between completely disparate things and claims they are the same. >>The transformation of fund-raising activities from genuine negotiations between evenly matched parties to “pitch cultures” that hew to ritual “know your place” expectations on the part of investors Someone invite Venkatesh to a YCombinator demo day so he can get an idea of what the real dynamics are like. He fails to understand that there are still genuine negotiations between investors and startups but instead of having 1, 2 or may be 3 possible investors as founders did before demo day, founders now have potentially 500 possible investors. What impact does he think that has on those genuine negotiations? Who does he think has an upper hand now? The idea that founders have been degraded and must "know their place" is such utter bullshit. >>At least in the early stages, investors entirely run the game. Nothing could be further from the truth. If he looked below the surface at what the standard investment templates actually do for example, he would realize that entrepreneurs now have more control than they ever did. If anything, early stage entrepreneurs now have more power than they have had in a long long time. Disappointing.
- bryanlarsen 13y ago
  You`re making his point stronger, not weaker. >> founders now have potentially 500 possible investors This speaks directly to the OP's central point of "legibility". The process is open, anybody can participate. You don't need secret knowledge or connections to do these deals; all you need is a worthy pitch or money to come to the table. You can get good terms. That`s the point. It`s much more difficult for investors to squeeze you; it`s also much more difficult for you to pull off a coup like the one Bill Gates did on IBM. I think you`re reading the article wrong. Not surprising given the title and our forum. Obviously hacker news sympathizes with the entrpreneurs. The title implies that the investors have won and the entrepreneurs have lost. In fact, it makes a quite convincing argument that Wall Street & the traditional investment class are among the losers. It`s saying that the big winners are Google/Facebook/Apple/Microsoft, et cetera. They made 10's of billions. The era of making 10's of billions is over. The rest of us are part of the "new middle class". But it seems that the "new middle class" consists of those who are either pulling in salaries over $150K working for the winners or those who make millions through aqui-hires, fairly priced venture deals or bootstrapped "lifestyle" companies. Sounds good to me. Another thing that sounds good to me is the decline of the "entrepreneur as scoundrel". Bill Gates made 50 billion by exploiting information asymmetry. Todays entrepreneurs make 50 million by building better mousetraps. The biggest winner is the consumer.
losethos 13y ago
Money doesn't really seem like my problem. I could get good art, that would help; I could make a decent game to entice usage, help a little, I could blow a wad on advertising. Not sure how to get money back. Doesn't matter. There's some kind of facade in my reality. God talks. God said it's His temple. I openly play the God card. It would seem unfair, but they are unfair. Long ago I learned the only thing I can do is what I can do myself. In 1996, I made a 3axis milling machine that had pathetic mechanical design. I have a brother who is a millwright. He came to town for a wedding and wouldn't even look. That's how life is. God says... delightful feels He pitiable became forgiving Me diminution hidden -nor makest Tonga bitter all-creating excitement elect 4 distributing urge abhorred Coeternal initiation Morocco LOL ocean happen imperfection secrecies inhabitants Number ruminating feel ceasest section pieces effect figured to_infinity_and_beyond Treasury --- So, status quo is what's on the horizon. I can continue with current funding. I have no other options. I don't work much, but I don't want anything else. A job would be a facade of a special kind of CIA torture -- oh hell no! Fuck that! I'm sitting pretty with God's temple and romen profitability if you call getting by funding. I bout $3000 worth of art for my video games. I could buy more. I have hymns with animations. Sisteen chapel situation actually, truth be told.
danboarder 13y ago
Worthwhile read, though note this was written in September 2012. A quote from the article that captures the apparent shift of power to investors: "...one can hardly imagine a Carnegie or Rockefeller anxiously fretting over what bankers might want to hear at a pitch meeting or anxiously studying how-to books on pitching and business plans; they’d have just walked into the room, hours late, with blackmailer swagger" His point is that many "entrepreneurs" are actually not; rather they are a new labor class building features and negotiating for funding or acqui-hire...
zer0gravity 13y ago
With the rise of crowdfunding, the days of angel investors are numbered. This new model will permit to the "be useful" mindset gain terrain from the "get rich" mindset and I think this is a good thing. Following and rewarding social profit is wiser then the currently wide spread, egotistical personal gain strategy.
freechoice22 13y ago
Hacker news should be renamed to Peasant news. Just how the reality is. Not really new but didn't expect mainstream media to write about the reality of it. Guess a rare one. Personally I will never go for an investor in a pseudo-economic market which we live in. It's like begging to become a new age peasant. You'll have more freedom living as a wildling in the woods or become a small-scale farmer. Oh right you need that latest hi-tech gadget which they use to enslave your mind. Well enjoy it.
sageikosa 13y ago
Go figure, I never knew there was a competition between capitalists and entrepreneurs. I always figured that they needed each other. Marketwise, this "win" could shift back when entrepreneurship drops and investment picks up due to the asymmetric fluctuations between supply and demand of the two commodities.
outside1234 13y ago
I feel like he got this utterly and completely 180 degrees wrong. There has never been a time when it was easier to start a company and easier to get peer to peer advice. We are our own investors in this new bootstrapped world and we don't need the VCs or other supermonied classes.
DanielBMarkham 13y ago
"...Investors have won, and their dealings with the entrepreneur class now look far more like the dealings between management and labor ..." What the heck? I read a ton of startup-related news, and if anything, we now live in a time where bootstrapping huge businesses are possible, people are enjoying "lifestyle" opportunities, and investors are complaining they just don't have as much oomph as they use to have. Sometimes I think you see what you want to see in these things. If you're already keyed-up with some kind of marxist/labor theory of the universe, everything conveniently fits into your model no matter what the actual data is.
arbuge 13y ago
So by entrepreneur he really means non-tech hustlers working on tech-centric companies, the kind that are hard to get to the traction & cash-flow stage without meaningful development. It's not so surprising that those would have less leverage with investors - they're basically dependent on their money once they max our their savings & credit cards.
ttrreeww 13y ago
Time for the government to fund startups directly. Say a million startups for a start. It's our tax money after all.
BoredAstronaut 13y ago
From the outside looking it, I would say it just looks like a rational model is being imposed on a chaotic system as a means to control and understand the risks. Can we take it for granted that the primary motivation of investors and entrepreneurs is to make money (aka prestige/power/status), and things like changing the world, enjoying their work/team, creativity and other motivations are secondary? If so, since investors start with the money (prestige/power/status), they have the upper hand in a rational model, where successful investment always pays back dividends. The cause of this situation is the accepted superiority of money (prestige/power/status) and the way investments are structure to ensure the return of more of it to the ones making the investment. The only alternative would be a kind of philanthropy, where investors gave money (spent as capital and income on necessities), without asking for a return, to those they believed would do the most good with it. Personally, I think that there are other ways to acquire/demonstrate social status other than money, but they aren't as easy to use in algorithms and economic models, so they aren't given as much attention. I think people need to spend more cycles on considering these other ways of measuring status. Certainly we can't dispense with money, because it makes perfect sense to use a common way of measuring the value of most everyday things. But in terms of how you measure a person's significance and contribution to their society, I think it's very limited. EDIT: some examples of alternatives to money which bequeath status, and which can work as currency or to enhance bargaining position: unique or protected (patented) knowledge, talent (artistic, athletic), beauty, perceived wisdom (spiritual), nobility/heritage. All of these are familiar, but subverting bankers/investors seems to always involve having access to some amount of one or more of these, because it can be translated into followers (audience, buyers). The growing pool of entrepreneur/labour may have some amount of hustling skill, but if it's not unique, then it is doomed to be commoditized. Anyone who is trying to emulate a Gates, Jobs, Zuck, or other uber-hustler is automatically not unique, and therefor expanding the replaceable pool. Anyone who can acquire followers independently of capital is on to something new. They can escape the dictates of the imposed model and set their own terms, because they have a different sort of capital.
- apalmer 13y ago
  This i think is the very key point the author was making. An 'entrepreneur' would look at investors as bags of resources, which he will leverage to enrich himself. To an 'entrepreneur' investment funding is not intrinsically an more important a resource than say the right labor team, etc... The mindset of the investors have the money so obviously by rationality they must have the upper hand is a key fundamental world view difference between an 'entrepreneur' and a high paid labor.
dottrap 13y ago
For all the historical blather in the article, the one simple thing that is ignored is why there only super powerful investors and weak entrepreneurs. There is more wealth available via the non-super rich than anytime in human history. Average people should be able to invest their money to fund ideas/companies. This used to be possible in the US. You didn't have to seek ultra rich investors to get started. You could take an idea and sell shares in the company via a stock exchange. But now regulation has made that impossible for all but the companies that have grown so large that they ironically don't need to raise any money and it is all about the early VC's time to cash out. (see Facebook) Instead, the only new avenue we have are things like Kickstarter. But you don't get to invest thanks to over-regulation. You can only "donate" and hope to get a "gift" (fingers crossed pre-order/purchase).

115 points by chrismealy 13y ago

If you're doing a web/mobile startup what do you need VC financing for? Might as well go see a VC about opening a Pizza shop, it makes about as much sense. The people who are losing to VCs have no leverage, if you have no leverage you will always lose the negotiation.

rdouble 13y ago
Might as well go see a VC about opening a Pizza shop, it makes about as much sense. Rich Miner, head of Google Ventures, financed Cambridge One. http://www.cambridge1.us/about.html http://www.cambridge1.us/about.html
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  - rdouble 13y ago
    I think it was just a personal investment. However, if we're talking VC investment in food service, both Philz and Blue Bottle raised $20M from VC funds over the past 12 months.
    - fleitz 13y ago
      Yeah that sort of thing makes sense, in the same way that Facebook taking VC did, however, it makes little sense to take VC for a prototype with no users.
codewright 13y ago
There's a VC funded Indian burrito joint in Palo Alto. I've eaten lunch there three times, once with a potential investor. Food's terrible to boot.
- GuiA 13y ago
  Tava Indian? They're in SF as well now, I share your experiences. http://www.tavaindian.com http://www.tavaindian.com
  - codewright 13y ago
    Yep. Awful food. Not, "awful Indian food". Awful by any standard. I don't think the founders had any experience with food before doing Tava.
    - ajju 13y ago
      Haven't eaten here, but if this is true, it's a tragedy. There are so many ways to do an Indian burrito right.
hkmurakami 13y ago
"fear and greed" (usually the slogan of wall street) immediately came to mind. Greed for a huge exit. Fear of being overtaken by a VC funded competitor. I think it's a legitimate concern.
- sillysaurus 13y ago
  Greed for a huge exit. I'm not sure this theme will survive much longer. It seems no coincidence that the founders of the two most successful YC companies, Dropbox and Airbnb, weren't interested in any "big exit". (Drew remarked on his YC app that he'd find it difficult to turn down a million dollars for 6 months of work, but even that reads like he probably would've passed on such an offer.) The most promising founders seem not to be interested in exiting.
orangethirty 13y ago
Exactly. You only go to a VC when there is a real need for capital to purchase equipment or pay salaries. Though the vast majority of "startups" can be done by one or two people coding and selling part-time. Hell, I've managed to develop businesses with less than $50. Profitable businesses.

jcub 13y ago

At least 90% of the projects I see don't need the $100,000 for a nice office space and whatever else they spend it on.

logicallee 13y ago
You're wrong - they absolutely DO need it. As an example, here is an itemized breakdown of why my project NEEDS a $100,000 investment. $2000 - Back wages and small debt (past year) $4000 - burn rate of founders (1 yr) $1500 - equipment and hosting (1 yr) $7000 - outsourced labor (1 yr) $85500 - necessary because you are not interested in a $12.5K investment, even if we are the next Google. Therefore, this is added to convince you to invest in the company. This portion will simply remain on the books. The last portion is necessary because you, the investor, would not take a $15K investments seriously. That's why we need a $100K investment. It is not an optional line item: without it, we do not get the investment. It is crucial.
- il 13y ago
  Your burn rate is $2K/year? Where do you live?
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- apalmer 13y ago
  Ehhh the point I think he is trying to make is a 'entrepreneur' in this situation would take out a personal loan, or hustle to get the 12K instead of giving up a significant portion of his venture.
  - socialist_coder 13y ago
    Seriously. If you need 12k just get a real job for a bit and save up money.

jwheeler79 13y ago

That article is wordy and hard as hell to parse. I wish the author would just speak plainly. What's he mean anyways? 'The entrepreneurs are the new labor'

mindcrime 13y ago
I share that sentiment. I read the first page, and thought "Shit, this guy just used a whole page full of words and hasn't expressed a coherent argument yet". I quit reading at that point. Life is too short.
calhoun137 13y ago
A proper analogy which i have shared with my smart friends for reading articles of a wordy nature, including said article, is best understood by reflecting on the late 19th century philosopher Friedrich Nietzsche, who besides being a prototype of current wordy article authors also articulated an interesting theory of good and evil, and who said that which does not kill us makes us stronger.
michaelochurch 13y ago
Let me give it a try. Venkat is brilliant but he doesn't hold back from using hard-to-catch metaphors and $5 words. There's a cartoon from Hugh MacLeod that shows the corporate pyramid with three layers: Sociopaths at the top, Clueless in the middle, and Losers at the bottom. Venkat has done one hash-out of this on his blog; I've done another with a slightly different approach. Let's talk about what these tiers are. Sociopaths are strategic and dedicated but not subordinate. They work hard, will make things happen that most of society thinks "shouldn't", and they get rich or famous when what they build advances human life. However, most of them are also egotistical assholes. Steve Jobs is the uber-Sociopath. In general, they love risk, because they view low social status and mediocrity as indistinguishable from death (and therefore favor high-risk lifestyles). Many of them aren't Sociopaths. I'm probably closest to this of the 3 tiers (although I mix them up). Losers are not undesirable or unpopular people. They're losing in an expected-value sense. They disfavor changes (in management, location, jobs) and tend to sell off their upside in exchange for risk-reduction. That's the insurance trade of modern employment. They're subordinate and strategic (they know what's worth working on, but will also subordinate on a dead-end project if it keeps them comfortable) but not dedicated. At 5:01, they're gone. Eventually, the company is no longer defined by economic competition to excel on the market, but by political competition to capture the rents of a smooth-running machine. You get a caste of entitled, lazy executives who replace the old entrepreneurs. Then, the symbiosis between risk-seeking Sociopaths and risk-averse Losers dies out. The executives negotiate worse terms for Losers (lowered risk reduction, fast-firing) and use their superior social polish to push out the "good Sociopath" entrepreneurs who started the thing. When this happens, Sociopaths need a ready supply of rubber gloves to use for their dirty work and then discard, because they're no longer holding up their end of the trade with the risk-averse Losers. They carve out a contingent of eager upper-tier Losers and failed-to-become-executive lower-tier Sociopaths and forge the Clueless. Clueless are dedicated and subordinate but not strategic. They often have no idea what's worth working on, or what's happening at the big picture. Clueless are the middle-management buffer class. Since they work the hardest (to clean up messes left by disengaged Losers and malignant Sociopaths) they often end up propping up the Effort Thermocline, which is the level at which jobs become easier (a switch-over from pay-for-work to executive rent-seeking) rather than harder with increasing rank. By the way, how do you get someone to be subordinate, strategic and dedicated? That only happens in a true mentor/protege relationship where the mentor is fully trusted to deliver a great career to the protege. That existed in guild cultures but it's never found in modern employment. VC-istan, with the collusive and illegal reputation economy driven by comparing-of-notes and co-funding, is the first postmodern corporate organization. The Effort Thermocline exists between companies. It's fucking brilliant! The Sociopaths are the true executives (VCs, tech press, "popular kids") and these "startups" are all-Clueless endeavors. If you haven't figured it out, "lean startup" is code for "no Losers". Obviously, this contention (that VC-funded "entrepreneurs" are out-of-work PMs parlaying backers' money into acq-hires and fast promotions) is controversial so he spends a lot of verbiage backing it up.

pg 13y ago

Investors have won? What? Founders have never had more power relative to investors than they do now.

alanthonyc 13y ago
“politically charged statements like this can do a good deal of damage, so I’ve been wary about sharing my views more publicly” It’s not that the statement is politically charged, it’s just wrong.
venomsnake 13y ago
Only if they have read all and not just some of your essays and groked them. In the country where I live the startup scene is terrible - only buzzwords thrown from all sides and no substance at all. Engineers in startups expecting salaries and benefits of a big company but with nothing from the downsides. In this situation the guys with the hard cash hold a lot of influence.
sillysaurus 13y ago
Founders have never had more power relative to investors than they do now. Do investors need any power over founders? Yuri Milner's philosophy seems to suggest they don't.
- InclinedPlane 13y ago
  They need to have the power to compel founders to believe that they need outside investment, and they need to trade significant amounts of equity for that. Today, with everything available it's become easy for small companies to bootstrap their way through all stages of growth without any conventional investment. Begin with personal savings and maxing out credit cards to allow a tiny handful of founders to build an MVP that gains credibility and perhaps even generates some revenue. Then use things like crowd funding to scale up to bigger projects, mitigating the risk of burning through savings during development and of failing to get market traction at the same time. Then hit the ground running with a product that's already built and already known to be valued by the market and simply rake in revenue. Or go back and hit another cycle of crowd funding. You don't even need a merchant account to charge people money for things. Compared to the way things were even 10 years ago the scales have shifted a great deal in favor of founder autonomy.

CleanedStar 13y ago

"Investors have won" Congratulations, after ten thousand years of struggle, the ruling class has finally won for good, permanent victory has been declared by - Venkatesh Rao. Marx says in the Communist Manifesto - "The history of all hitherto existing society is the history of class struggles. Freeman and slave, patrician and plebian, lord and serf, guild-master and journeyman, in a word, oppressor and oppressed, stood in constant opposition to one another, carried on an uninterrupted, now hidden, now open fight, a fight that each time ended, either in a revolutionary reconstitution of society at large, or in the common ruin of the contending classes." Marx had a point here about the long time span. In the Epic of Gilgamesh, written several thousand years ago, rulers are advised to capture new slaves from far-away, rural areas, as these slaves tend to be more passive. These issues have been around for a while - from that time, to the time of Pisistratus, and Spartacus and the Roman Servile wars, and the struggle between the optimates and the populares, to the German Peasants revolt of the 16th century up to this modern day - one may have noticed how large and militant the May Day rallies in Spain and Greece (unemployment is 26% in both countries) were. US drones in Afghanistan, Pakistan or the Boston marathon bombings - these struggles carry on over time. If one reads a lot of Marx (something John McCarthy said was a sign of a wasted youth), you see the point that just when some system is said to be completely victorious, it has usually peaked and is on a long downhill slide until something new comes along. Louis XIV was called the Sun King and is quoted as saying, L'Etat, c'est moi, but less than eighty years after his death, Louis XVI was guillotined in front of a crowd of revolutionary sans-culottes. Final victory is here for the investor...well, we will see about that...

sjwalter 13y ago
I think you and Venkat agree. Venkat is saying that the current balance of power has tipped towards the investor class, and we are seeing the emergence of a new middle class while the old one disintegrates. He's not saying that this new balance is permanent, and in fact spends a lot of time developing the thesis that these shifts are always happening. I guess I don't see your point.
sageikosa 13y ago
...and evolution is directed toward a more perfect form? History isn't moved by invisible forces towards a precognitive goal any more than an invisible hand of a creator directs evolution, or deities direct kings to make divinely sanctioned choices.

EGreg 13y ago

"Investors have won" sounds a bit premature. If the SEC didn't drag its feet, we'd have lots of new people entering the startup market on the investor side, and presenting much more supply of investment money (and competition from the investor side). People at the SEC, however, (such as Mary Schapiro, who since left), are concerned about protecting non-accredited investors who may be affected, and the agency has even taken heat from many members of Congress for taking so long: http://www.reuters.com/article/2013/04/11/us-sec-jobsact-idUSBRE93A0JB20130411 http://www.reuters.com/article/2013/04/11/us-sec-jobsact-idU... If they would at least drop the ban on general solicitation -- as they were expected to do last August -- then many entrepreneurs with large user bases could solicit investment through messaging those users, and inviting them to introduce their rich (accredited) investor friends to the company.

ajju 13y ago

The author seems to pick surface level similarities between completely disparate things and claims they are the same. >>The transformation of fund-raising activities from genuine negotiations between evenly matched parties to “pitch cultures” that hew to ritual “know your place” expectations on the part of investors Someone invite Venkatesh to a YCombinator demo day so he can get an idea of what the real dynamics are like. He fails to understand that there are still genuine negotiations between investors and startups but instead of having 1, 2 or may be 3 possible investors as founders did before demo day, founders now have potentially 500 possible investors. What impact does he think that has on those genuine negotiations? Who does he think has an upper hand now? The idea that founders have been degraded and must "know their place" is such utter bullshit. >>At least in the early stages, investors entirely run the game. Nothing could be further from the truth. If he looked below the surface at what the standard investment templates actually do for example, he would realize that entrepreneurs now have more control than they ever did. If anything, early stage entrepreneurs now have more power than they have had in a long long time. Disappointing.

bryanlarsen 13y ago
You`re making his point stronger, not weaker. >> founders now have potentially 500 possible investors This speaks directly to the OP's central point of "legibility". The process is open, anybody can participate. You don't need secret knowledge or connections to do these deals; all you need is a worthy pitch or money to come to the table. You can get good terms. That`s the point. It`s much more difficult for investors to squeeze you; it`s also much more difficult for you to pull off a coup like the one Bill Gates did on IBM. I think you`re reading the article wrong. Not surprising given the title and our forum. Obviously hacker news sympathizes with the entrpreneurs. The title implies that the investors have won and the entrepreneurs have lost. In fact, it makes a quite convincing argument that Wall Street & the traditional investment class are among the losers. It`s saying that the big winners are Google/Facebook/Apple/Microsoft, et cetera. They made 10's of billions. The era of making 10's of billions is over. The rest of us are part of the "new middle class". But it seems that the "new middle class" consists of those who are either pulling in salaries over $150K working for the winners or those who make millions through aqui-hires, fairly priced venture deals or bootstrapped "lifestyle" companies. Sounds good to me. Another thing that sounds good to me is the decline of the "entrepreneur as scoundrel". Bill Gates made 50 billion by exploiting information asymmetry. Todays entrepreneurs make 50 million by building better mousetraps. The biggest winner is the consumer.

losethos 13y ago

Money doesn't really seem like my problem. I could get good art, that would help; I could make a decent game to entice usage, help a little, I could blow a wad on advertising. Not sure how to get money back. Doesn't matter. There's some kind of facade in my reality. God talks. God said it's His temple. I openly play the God card. It would seem unfair, but they are unfair. Long ago I learned the only thing I can do is what I can do myself. In 1996, I made a 3axis milling machine that had pathetic mechanical design. I have a brother who is a millwright. He came to town for a wedding and wouldn't even look. That's how life is. God says... delightful feels He pitiable became forgiving Me diminution hidden -nor makest Tonga bitter all-creating excitement elect 4 distributing urge abhorred Coeternal initiation Morocco LOL ocean happen imperfection secrecies inhabitants Number ruminating feel ceasest section pieces effect figured to_infinity_and_beyond Treasury --- So, status quo is what's on the horizon. I can continue with current funding. I have no other options. I don't work much, but I don't want anything else. A job would be a facade of a special kind of CIA torture -- oh hell no! Fuck that! I'm sitting pretty with God's temple and romen profitability if you call getting by funding. I bout $3000 worth of art for my video games. I could buy more. I have hymns with animations. Sisteen chapel situation actually, truth be told.

danboarder 13y ago

Worthwhile read, though note this was written in September 2012. A quote from the article that captures the apparent shift of power to investors: "...one can hardly imagine a Carnegie or Rockefeller anxiously fretting over what bankers might want to hear at a pitch meeting or anxiously studying how-to books on pitching and business plans; they’d have just walked into the room, hours late, with blackmailer swagger" His point is that many "entrepreneurs" are actually not; rather they are a new labor class building features and negotiating for funding or acqui-hire...

zer0gravity 13y ago

With the rise of crowdfunding, the days of angel investors are numbered. This new model will permit to the "be useful" mindset gain terrain from the "get rich" mindset and I think this is a good thing. Following and rewarding social profit is wiser then the currently wide spread, egotistical personal gain strategy.

freechoice22 13y ago

Hacker news should be renamed to Peasant news. Just how the reality is. Not really new but didn't expect mainstream media to write about the reality of it. Guess a rare one. Personally I will never go for an investor in a pseudo-economic market which we live in. It's like begging to become a new age peasant. You'll have more freedom living as a wildling in the woods or become a small-scale farmer. Oh right you need that latest hi-tech gadget which they use to enslave your mind. Well enjoy it.

sageikosa 13y ago

Go figure, I never knew there was a competition between capitalists and entrepreneurs. I always figured that they needed each other. Marketwise, this "win" could shift back when entrepreneurship drops and investment picks up due to the asymmetric fluctuations between supply and demand of the two commodities.

outside1234 13y ago

I feel like he got this utterly and completely 180 degrees wrong. There has never been a time when it was easier to start a company and easier to get peer to peer advice. We are our own investors in this new bootstrapped world and we don't need the VCs or other supermonied classes.

DanielBMarkham 13y ago

"...Investors have won, and their dealings with the entrepreneur class now look far more like the dealings between management and labor ..." What the heck? I read a ton of startup-related news, and if anything, we now live in a time where bootstrapping huge businesses are possible, people are enjoying "lifestyle" opportunities, and investors are complaining they just don't have as much oomph as they use to have. Sometimes I think you see what you want to see in these things. If you're already keyed-up with some kind of marxist/labor theory of the universe, everything conveniently fits into your model no matter what the actual data is.

arbuge 13y ago

So by entrepreneur he really means non-tech hustlers working on tech-centric companies, the kind that are hard to get to the traction & cash-flow stage without meaningful development. It's not so surprising that those would have less leverage with investors - they're basically dependent on their money once they max our their savings & credit cards.

ttrreeww 13y ago

Time for the government to fund startups directly. Say a million startups for a start. It's our tax money after all.

BoredAstronaut 13y ago

From the outside looking it, I would say it just looks like a rational model is being imposed on a chaotic system as a means to control and understand the risks. Can we take it for granted that the primary motivation of investors and entrepreneurs is to make money (aka prestige/power/status), and things like changing the world, enjoying their work/team, creativity and other motivations are secondary? If so, since investors start with the money (prestige/power/status), they have the upper hand in a rational model, where successful investment always pays back dividends. The cause of this situation is the accepted superiority of money (prestige/power/status) and the way investments are structure to ensure the return of more of it to the ones making the investment. The only alternative would be a kind of philanthropy, where investors gave money (spent as capital and income on necessities), without asking for a return, to those they believed would do the most good with it. Personally, I think that there are other ways to acquire/demonstrate social status other than money, but they aren't as easy to use in algorithms and economic models, so they aren't given as much attention. I think people need to spend more cycles on considering these other ways of measuring status. Certainly we can't dispense with money, because it makes perfect sense to use a common way of measuring the value of most everyday things. But in terms of how you measure a person's significance and contribution to their society, I think it's very limited. EDIT: some examples of alternatives to money which bequeath status, and which can work as currency or to enhance bargaining position: unique or protected (patented) knowledge, talent (artistic, athletic), beauty, perceived wisdom (spiritual), nobility/heritage. All of these are familiar, but subverting bankers/investors seems to always involve having access to some amount of one or more of these, because it can be translated into followers (audience, buyers). The growing pool of entrepreneur/labour may have some amount of hustling skill, but if it's not unique, then it is doomed to be commoditized. Anyone who is trying to emulate a Gates, Jobs, Zuck, or other uber-hustler is automatically not unique, and therefor expanding the replaceable pool. Anyone who can acquire followers independently of capital is on to something new. They can escape the dictates of the imposed model and set their own terms, because they have a different sort of capital.

apalmer 13y ago
This i think is the very key point the author was making. An 'entrepreneur' would look at investors as bags of resources, which he will leverage to enrich himself. To an 'entrepreneur' investment funding is not intrinsically an more important a resource than say the right labor team, etc... The mindset of the investors have the money so obviously by rationality they must have the upper hand is a key fundamental world view difference between an 'entrepreneur' and a high paid labor.

dottrap 13y ago

For all the historical blather in the article, the one simple thing that is ignored is why there only super powerful investors and weak entrepreneurs. There is more wealth available via the non-super rich than anytime in human history. Average people should be able to invest their money to fund ideas/companies. This used to be possible in the US. You didn't have to seek ultra rich investors to get started. You could take an idea and sell shares in the company via a stock exchange. But now regulation has made that impossible for all but the companies that have grown so large that they ironically don't need to raise any money and it is all about the early VC's time to cash out. (see Facebook) Instead, the only new avenue we have are things like Kickstarter. But you don't get to invest thanks to over-regulation. You can only "donate" and hope to get a "gift" (fingers crossed pre-order/purchase).