The Technology Sector’s Dangerous Obsession With Startups

I have a serious issue with the internet technology sector as it exists today. Specifically, I take issue with the way startup culture is venerated in digital circles.

In pursuit of ‘innovation’, technology startups are seen as the biggest value creators of the digital economy. The technology media is almost exclusively focused on reporting what is happening with Silicon Valley startups,  startup founders are depicted as modern day heroes, startup culture is seen as the guiding model for running a business, and massive industry events have become evangelical gatherings of startup believers where they can engage in the worship of everything even vaguely associated with technology startups.

And I think all of that is very wrong. Worse than wrong – it’s dangerous and damaging.

Any idiot can start a company (and many do). Being a startup founder or an entrepreneur is not an accomplishment in any way, shape or form. Building a sustainable business, that’s the real challenge.

The emergence of the mobile app ecosystem has given rise to a plethora of startups – literally millions – whose initial founding idea was “let’s build an app!” The startup itself is the raison d’etre of many a fledgling business, and that is a very bad way to start a company intent on any semblance of longevity at all.

But what about all those super successful app startups, you say? The Instagrams, Foursquares, Paths, and Pinterests of this world?

There’s a word to describe those: lucky.

For every technology startup that makes it, tens of thousands of others (quite literally) fail to achieve anything other than a spectacular waste of venture capitalist’s money.

The VCs don’t mind much though, because they’re playing a numbers game. For every 50 million they waste on disastrous startups, they only need one startup to actually succeed and make them 100 million when it gets sold to Google or Facebook or Yahoo or any one of the other technology giants that beat the odds and actually made it big.

I would argue that the ones that actually do manage to get bought out and make a pretty buck are not necessarily indicators of success either. We are, after all, experiencing the second internet bubble, with astoundingly unrealistic valuations for technology companies resulting in painfully inflated prices for startups.

It is ignorance being fed by naivety disguised as optimism and enthusiasm. A hollow, self-perpetuating machine where startup founders get bought out and become venture capitalists driving a new generation of meaningless startups founded by the next batch of intoxicated twenty-something ignorami.

At some stage the money will run out, the stock values will plummet to realistic levels, and it will all come tumbling down. Afterwards we’ll look at this whole episode with profound levels of embarrassment and 20-20 hindsight.

In the meantime, you can do your bit to prepare for the inevitable collapse of Bubble 2.0. First of all, don’t buy in to the startup hype. Don’t get caught up in the founder-buyout-VC-founder cycle.

Instead, focus on solving real problems. Focus on doing great work that delivers real value for your customers, whoever they are.

Avoid the cult-like startup worshipping events like the Web Summit and SxSW, and instead listen to people who have resisted the lure of the quick buy-out and managed to build sustainable businesses. They might not be able to show triple-digit month-on-month growth figures, but these people are the real engines of the digital economy. And they’re not necessarily founders, CEOs, or MDs themselves.

The people that add the real value to the technology sector are the ones that are quietly getting on with things, doing great work for their customers, and not getting high inhaling the evanescent vapours of Silicon Valley sycophancy.

Also take care to avoid the secondary fallout from the industry’s startup-veneration, such as the astonishingly ignorant ‘common wisdom’ around employee productivity outlined here, which leads to factory-like coding sweatshops that results in burnt out employees and the release of sub-par bug-ridden products.

Instead you would do well to foster a great working environment where staff feel appreciated and empowered and where creativity can thrive. Free massages, pool tables, and on-site dry-cleaning services are not requirements for a great company – often those perks are just fluff to hide a lack of substance and intended purely to lure in job-hopping talent from other startups. And that sort of employee, chasing the ‘next big thing’, is not the type of staff member you should be courting.

Don’t believe the hype. Startups are not where the majority of the technology industry’s value is created – established businesses are where much of the innovation actually emerges from. And startup culture is not the standard by which technology companies should be measured – in fact startup culture, with its focus on hype-driven vacuity and short term gain, can be anathema to sustainable business operations.

Focus on substance and real value, and you’ll survive the oncoming collapse of the second internet bubble just fine.

Hype, Strategy

Comments

  1. I’ve missed this… Never go on holiday again please!

    Love this point of view Barry and appreciate you very much putting pen to paper to get it across. I think this sentence “It is ignorance being fed by naivety disguised as optimism and enthusiasm.” pretty much sums it up for me.

    I agree totally that, similar to when the first bubble burst, very little people had to common sense to take stock and actually realise how unrealistic or downright stupid things were happening around them. And by ‘things’, I mean the ludicrous 27-digit valuations and frequent ‘blow smoke up arse’ journalism that vomits out interviews Jeremy Wallstreet, the Internet’s new ‘big thing’, who I bet you won’t remember in 9 months, nay 3 months, time…

    Sometimes, some people just deserve a good hard slap to bring them round to reality.

  2. Thanks @simonwharton for getting me suckered into comment at nearly midnight. Whilst we wait for @p7r to respond properly, let me quickly share my thoughts.

    There are many ways to skin a cat. Every one of us have a choice. We can decide to build a company for the long term, or build for quick acquisition. The choice is ours. There is nothing wrong with any of this. Yes, there is a bubble – those who are clever knows how to ride it. And there will be failures. Why do you think Silicon Valley god, BradFeld talk about fail fast? By the way, I am actually anti-fail fast and not a big fan of leanstartups either.

    Just take stock market as an example. You can allow company shares to be sold in public markets. And then all those whizz kids came up with shorting, contracts for difference, swops and god knows what, they are selling thin air – but it’s big business. And we all have accepted there is nothing really wrong with this, though its crazy to think we can run billion dollar businesses selling nothing tangible.

    My point is – get over this! Decide what role you want to play. If you don’t want to play, stay at the sideline and show everything wrong with the startup bubble. That is fine as well.

    At the end, there is no right or wrong answer when it comes to startups.

    For me, I would rather be a player (god knows how hard I try – but very little to show) than simply stay at the sideline and throw few bricks at the passing crowd.

    But hey, we needs guys like you to show us how insane we are. And that’s just cool as well.

    Good night
    Manoj

  3. @Manoj; thanks for your comment. I don’t agree with your assertion that there’s “nothing really wrong with that”. Just like Wall Street’s profoundly dangerous obsession with rapid transactions and short term gains carries a significant risk for the entire world economy – real people’s jobs are at risk because of the gamblers’ attitudes that pervade the stock markets – so too does the technology sector’s obsession with Silicon Valley startup culture severely impact the entire sector, and hinders businesses in manifold ways.

    For example, one symptom of the startup obsession is that it’s become increasingly difficult for established SME businesses to attract investment to pursue innovative ideas, because many investors are brainwashed in to thinking true innovation worth investing in only emerges from startups. Additionally businesses wanting to invest in a long term project are vying for VC funds that are increasingly being gambled on short-term startups in the hopes of massive payoffs.

    There is something very wrong with the startup-mania in the technology industry, and we should not abide by it.

  4. Barry, great points made. I had been having this discussion with a couple of (successful) tech entrepreneurs very recently – agreed, there’s a ‘startup bubble’ whereby any twit who wants to create an app is encouraged and actually can get funding(!). It’s been created by government and the media because 1. small businesses create a disproportionate number of jobs so gov. wants to encourage it, 2. it’s today’s ‘romantic’ story of success, 3. investors don’t know where to put their money because so much has changed, and 4. each city wants to be the next location for a tech uni, investors, etc, so encourages all that. Long-term, I think it’s a good thing because it’s a test model for how the future economies really could be open and flatter, and although some money will be lost, and that will make investors more sensitive, that should help help set people’s expectations straight, whilst not stopping the smart, qualified people enter the market.

  5. “The people that add the real value to the technology sector are the ones that are quietly getting on with things, doing great work for their customers, and not getting high inhaling the evanescent vapours of Silicon Valley sycophancy.”

    Yes, this completely true!! Couldn’t agree more. Such a great article.

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