As I said before in a previous article ‘Is it Time to Breakup with the Startup Guy?‘, open any financial, business or economic magazine or newspaper section and you will be bombarded with interviews, news and speculations about the heady world of the tech startup. All of it, in the pursuit of finding the next tech startup ‘unicorn’. In the previous post – Carrie Bradshaw style – ‘I started to wonder‘… at a point where out of 60 IPOs since 2011, only 10 ever made a profit, perhaps it’s time to stop chasing unicorns and invest in a blue chip racehorses or even the occasional reliable commodity-carrying slow but reliable donkeys instead?
This goes beyond merely the now common stories of startup cheats or techy bro cultures that excuses such behavior with a ‘fake it till you make it’ rationale… and equally excuse a lack of cultural diversity under the new PC excuse for racism, ageism and gender bias called ‘cultural fit’. This goes to the root of the entire business model.
Why aren’t we questioning a mass strategy that is entirely based on ‘Grow fast. Get valued via potential rather than real earnings. Start to lose money. Go Public… Cash Out?’
Twitter, for example, is a perfect example – having lost two and a have billion since it’s going public. Ouch.
As I said before I’m in no way an expert or even much of a speculative hobbyist…however, it appears my previous musings may have stumbled on some unfortunate truths.
People much smarter than me are finally starting to talk numbers. And it is not a pretty picture.
We have seen a VC explosion since 1995 that has led to twice the funds, twice the firms, and four times the active investors. Cumulative Capital has grown from $66 to $627 billion. Perhaps most historically telling is that gap between CEO-to-worker compensation which is creeping up to previous .com bubble levels. To hear more, check out Fortune journalist and author Dan Lyons‘s latest talk below.