Getting to "yes" in a world of "no"…

A few quick thoughts before I head off to the TechHub seed funding meetup this evening. Note that the following list is neither definitive, ironic, sarcastic, nor even grumpy: it’s just a whole bunch of contemporary startup things I genuinely don’t get, however much in vogue they may be.

(1) Whatever Sweary Dave McClure says, 500startups seems exactly like mentored spray-and-pray to me. Given that Dave’s a self-professed metric fan, talking up the merits of a proposed 85% fail rate before barely any investees have got round to failing seems somewhat, errrm, anti-metric. Perhaps I’m missing Something Really Important here, and bless the Sainted Dave for trying, but… nope, I don’t get it.

(2) Eric Ries’ “Lean Startup” movement. Look, I do truly understand why customer development and iterative engagement are hugely important – if not indeed utterly central – to effective product development. However, as a way of presenting startups to the investment community, I think it is an abject failure, a weighty conceptual millstone placed around entrepreneurs’ necks at the precise moment they’re starting to swim against the external economic tide. Maybe in ten years’ time (when a handful of self-funded lean startups have somehow managed to go big) angels will see it as some kind of “contrarian bandwagon” to jump on and it’ll make sense: but not now, not even slightly.

(3) The UK Government’s bipolar attitude to technology. On the one hand, you have Vince Cable who seems to want to singlehandedly bootstrap a manufacturing technology revolution in the UK (oh, as long as it’s nowhere near the South-East: ta for that, Mr C) – while on the other hand, you have most of the rest of the government for whom “technology” now seems operationally synonymous with “web technology” *sigh*. Either way, I can’t honestly say this makes any real sense to me.

(4) Old Street / Shoreditch / Tech Cities / Silicon Back Alley. Why is anyone seriously suggesting that the UK needs more office space for startups? The UK is full of empty offices – that’s what happens when an entire generation of businesses gets suddenly squeezed by the banks and is forced to downsize just to retain sufficient day-to-day liquidity. What’s so wrong with home offices, shared offices, garages, etc?

(5) Super-angels. To my ears, this phrase always has echoes of Terry Jones saying “He’s not the Messiah, he’s a very naughty boy“: for most so-called super-angels are neither “super” nor even “angels”, but just naughty boys micro-VCs. Can a super-angel represent a group of other angels and still manage to make a £20K investment? Or even a £50K investment? I suspect probably not.

(6) Early stage VCs. Come on – how’s that going to work, then? To make a minority investment of £2m+, an early stage VC would need to find a whole set of early stage startups that it could sensibly value at £4m-£5m. But outside of pharma and energy, startups just don’t work at that scale any more. I don’t get it.


Comments on: "Some voguey startup things I just don’t get…" (2)

  1. hmm nick… dunno, but you seem pretty grumpy to me 😉

    whether the fail rate is 85% or not, i don’t think you’ll get much of an argument that most Startups fail. to suggest otherwise is to ignore reality.

    given that fundamental observation, there are likely two rational strategies: 1) concentrate effort and investment in a few startups, and try to reduce failure, or 2) expand the # of investments and simply try to identify the few that beat the odds and find success… then continue to increase investment in the winners.

    prior to 5-10 years ago, the latter strategy wasn’t prudent or realistic, but with recent reductions in cost for startups it’s now possible to make many little bets on a rather low budget. with additional increase in access to customers via the advent of many new social & mobile online platforms, it’s actually possible to try lots of these experiments and only spend larger amounts after risk has been reduced.

    hope that explains some of the rationale behind our approach… but I’m guessing you may still remain skeptical… which is ok, I don’t need to justify the approach, I just need to show results. see you in a few years with the data.

    • Dave: all I’m saying is that a predicted 85% fail rate of mentored startup experiments has lots of additional costs tied in that go beyond that of “pure” spray-and-pray. To be precise, I’m guessing that every $100K 500startups investment involves a further $100K of ancillary investment that most angels simply don’t make – that’s the ‘semi-incubation’ mentored side of the whole play, isn’t it?

      Note that I’m really not saying one is right or wrong – I think 500Startups is very bold, and in many ways a breath of fresh air – but I don’t think it’s quite the apples-to-apples comparison you make it out to be. You definitely need data to back up your claims – but then again, at the speed most startups manage to burn through $100K, that shouldn’t take very long. =:-o

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