Here’s some stunning, Earth-shattering news: You know all those hundreds of incredibly stupid startups that have been raising seed money in Silicon Valley despite the fact that the people running those startups have no experience doing anything, ever, and have no idea at all how to generate revenue (let alone profit) with their lousy ideas, because, in fact, there is no way to make money with their lousy ideas, because in fact their ideas are lousy?
Well, nobody wants to give those dopes any more money. So now they’re going to go out of business.
I know. Shocking.
And the dopey angel investors who wrote the checks for those startups are going to lose their money. Because they can’t foist their bad investments onto the venture capitalists who occupy the next rung up on the food chain.
Believe it or not this is actually a big story in Silicon Valley right now. People are writing about this phenomenon as if it is a surprising turn of events.
But who didn’t see this coming? For the past few years we’ve had people calling themselves “investors,” who have no experience investing, swanning around the Valley, slinging money at people calling themselves “entrepreneurs” who have never held an actual job, let alone run a company.
How could this have ended in anything but a train wreck?
We’re Shocked — Shocked! — By All Of This
The sweet irony is watching the buffoons who have been cheering on this clown show and raving about “traction” and “disruption” and “pivots” now reporting on the mess that they helped create.
PandoDaily is reporting on the “Series A crunch” in which companies that have raised seed funding now are discovering (presumably to their utter amazement) that actual venture capitalists aren’t as stupid as the angels who gave them their first bag of cash, and, given the opportunity to invest in their pointless companies, the VCs have decided to politely decline. Thus, now we are facing a “nuclear winter” (!) where thousands of companies will go out of business.
TechCrunch says they knew all about this a year ago and, by the way, it’s good for all these companies to die because this is the natural ebb and flow. To be sure, when everybody could raise money, even with stupid ideas, well, that was a good thing too, and we were all supposed to cheer for those idiots because that’s our job as bloggers, to cheer on and support those heroic entrepreneurs, but now that all those heroic entrepreneurs are going broke, well, that is a good thing too, because, well, right.
And remember when there supposedly was no bubble? How many times did the tech blogs go out of their way to insist that all of this over-investing and overpaying made perfect sense?
Then Facebook went splat and Zynga went splat and Groupon went splat and now VCs are pulling back and nobody can raise money and all those people who claimed there was no bubble are reporting that guess what, something like 2,000 lame-ass companies are going to flame out, but this just means that things are coming back to normal and isn’t it great that the frothy times are over?
But if that’s the case, doesn’t it mean that we were in fact in a bubble back when all those blogs were saying there was no bubble? Apparently the answer is, No, that wasn’t a bubble. That was just frothy.
I’m sorry but the whole thing is hilarious. Or sad. I can’t decide which.
A Confederacy of Dunces
This is what the Valley has become these past few years:
It’s wannabe journalists writing about wannabe investors giving money to wannabe entrepreneurs and everyone in the circle jerk believing that the whole thing makes perfect sense because, trust us. This. Will. Be. Huge. Oh, and by the way, bloggers aren’t just bloggers anymore — they’re now entrepreneurs too. Because blogs are being funded by venture capitalists. Get it?
It’s Robert Scoble riding on the StartupBus to SXSW, gushing about some kids from Stanford — Stanford! — who take three whole days to build an awesome company called Gourmair that solves a huge world-changing problem: how to find gourmet food and have it shipped across the country to your doorstep. Why? Because “there isn’t a centralized place to discover, discuss, rate or buy these kinds of gourmet meals.” And because, “According to our market research, the top vendor in the space does more than $450 million in annual sales.” Wow.
It’s John Doerr of Kleiner Perkins, age 60, trying to be hip by wearing a hoodie and T-shirt and sneakers, and announcing a fund for social apps. So cool!
It’s Ben Parr of Mashable, whose background includes blogging and … blogging, announcing that he too is now a venture capitalist and is creating a “celebrity fund” that has a super cool name — #DominateFund. What kind of guy is Ben Parr? The kind of guy who makes up a name like #DominateFund. And who announces a fund before he’s actually raised the money. And who launches a fund focused on consumer Internet just when all the smart money is moving away from the consumer Internet and rushing toward the enterprise, and when VCs are closing the door on the deals that angels bring them. Enough said.
What Happens Now?
Maybe the Valley will get back to what it once was all about — making actual technology products.
The great lie of these last few years is that anyone can be a tech entrepreneur. You don’t need to know electrical engineering or computer science. You don’t need to know anything about business. You just need a positive outlook and an ability to speak confidently while saying things that make little or no sense.
What really offends is that 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 happens. “Spray and pray,” it’s called.
Meanwhile our country is facing a crisis because we have a shortage of students in STEM — science, technology, engineering and math. Every big company in Silicon Valley is starved for talent. And there is an entire generation of young people who, instead of studying those hard subjects, would rather slap together the fourteenth version of a peer-to-peer car sharing service or alternative taxi service. Because it’s easy and you might get rich quick.
So maybe now all those people who have been playing “entrepreneur” will go get actual jobs making actual products and gain some actual experience. Maybe they’ll go back to university and study medicine, or engineering. Maybe they will realize that not everyone should be an entrepreneur – the Valley produces maybe 10 good companies a year – and that being an employee at a good company adds value too.
In my dreams I imagine them leaving the Valley and going off to accomplish something meaningful. Using those brains to do medical research, develop new drugs or eradicate poverty. I imagine them teaching in public schools, providing health care to poor kids. Joining Tesla or SpaceX. Pushing AI a few steps forward. Solving big problems, the kind that can’t get solved in three days on a StartupBus.
They might not get rich, but at least they’d be doing something useful.
So who knows. Maybe this will happen. Maybe these young people will realize they have only one life and that they should do something valuable with the brief time they have.
Maybe the angel investors and cheerleaders will feel guilty for having wasted so many people’s time and energy and resources that could have been used for something good. Maybe they’ll realize that easy money isn’t the solution – it’s part of the problem.
Maybe all the angels will simply get sufficiently butt-hurt on these lousy deals there won’t be enough of them around to mislead thousands of other kids into creating another one of these seed-round bubbles, or whatever you want to call what’s happened. Maybe we’ll all buckle down and start trying to solve big, important problems.
Yeah. I know. Not gonna happen. Maybe once we were that kind of country. But that’s not who we are anymore. Oh well. But as Papa Hemingway once wrote: Isn’t it pretty to think so?
Image courtesy of Shutterstock.