I feel young people ride the “startup wave” just because its trendy, not because they want to make a company!
A “pandora box” is just around the corner. The startup scene has gone way to far, and in a way too wrong of a direction. I have been thinking about this phenomenon for years now, but was happy to finally start reading about it.
Cristofer Jeschke post on Medium titled: “Profit, not funding, defines a company” is spot on! Startups are more focused on gathering funding and capital rather than making a product to serve needs.
The more you read about startups the more you begin to understand that it has nothing to do with business. The startup culture is a business in itself.
Just google “startup ecosystem”. See the Wiki page? Found this graphic?
How is this not a basic stakeholder overview of any other business out there?
But First — What Is A Startup?
Basically a company that is in the early phase of development, focused on creating a drastically new product/service or drastically improving an already established process/habit.
Due to its nature, a startup may not present a real business logic in the beginning. These shifting efforts require a lot of time and resources to happen. Startups are therefore backed up by investors that give resources to make the idea happen. But even then, no economic justification is guaranteed.
How We Got Here?
You see, startups got a really big push in the 90s during the DOT-COM BUBBLE. Back then a huge number of companies started out as startups because it offered enormous speculative opportunities.
Why? Because you could take a company public (IPO) even though it had no real revenue/profit, shady business models and a LOT of fancy marketing. Unlike conventional businesses, startups rarely have any tangible assets (read: anything that can be sold it goes bankrupt).
They could present enormous growth but very little returns. Bet on an idea changing the World. The bubble was based on a hype of crazy overnight riches. Yet, good old economics showed what true supply-demand is. No market can grow forever. Just read many of the dot-com bubble bankruptcy stories.
The ecosystem continued to evolve as soon as the market forgot the bubble — or at least found a new one. Once back at it, startups got an even greater role in our society. We started to read about “valuations”, “CEOs under 30”, “staggering growth” and my favourite “UNICORNS.”
The Implications of This Hype
I feel really sad that young “founders” of the next “unicorns” have a no real idea of what it means to create, develop and operate a business. Just simply doing everything that you read does not make you a startup founder — or in laymen’s words:
I have a tech company, I must be a startup! — FALSE (what is even a tech company?)
I go to pitching sessions and do a lot of networking! I am a startup founder!— FALSE
I have an idea for an app/website. I have a startup! — FALSE
I use fancy wording such as MVP, lean/agile, proof of concept, hustling, valuation, business models, VCs, round, seed, burn rate, acquisition, angels, bootstrapping, convertible dept, equity, vesting, IPO…! Every founder uses them therefore I must be one too!-FALSE
I am currently working on 3 startups! — FALSE (and really impossible)
I have branding, website and a logo! My startup is born! — FALSE
Today the modern startup founders spend most of their energy on meaningless things. That is why they are always busy and have no real time to develop a business.
The Harsh Reality! And What to Really do About It!
Any company that has since moved the World was a startup at some time. It was not necessarily only a tech one. Just read the stories of The Ford Motor Company, Boeing, L’Oréal, Lego, Ikea and many more.
If you really want to found a company do the following:
- Do not use the word startup.
- Plan like you do not have any money.
- Face the customer. Gather real feedback.
- Investors are not your primary goal.
- Forget pitches, events, competitions, hackathons, projects, VCs and other fancy things.
- Never forget that a company’s primary goal is profit!
One More Thing
If you ever feel stuck and have second thoughts about my words watch this video:
…and let me know how is this more BUSINESS rather than ENTERTAINMENT?