Should have just stayed home,
Where results still make some sense,
Not some alchemy
Another week, another conference thing in NY. I figured that since this might be my last summer in the Northeast (fingers crossed), I'd attend Techcrunch's annual-ish conference in NY on startups. I've generally kept up with Techcrunch (along with Hacker News) regularly ever since my 2009 summer working for Jamlegend. I'm not as hyped on startup culture as I used to be, but it's always neat and inspiring to read about the stories of growth from obscurity to runaway success (and then sometimes to utter failure). In thinking about my future, I've still wondered from time to time whether or not I'd go back to a startup, especially since there have been more and more interesting hardware/robotics startups coming out of the woodwork recently. This event seemed like a good opportunity to get a good feel for what the venture funding and startup landscape looked like nowadays. The student ticket was $300 (discounted down from $2k for a regular ticket), and I had to commute on Metro North everyday, so it wasn't the best of circumstances. I ended up skipping the final day, and I probably wouldn't go again as an attendee, if that tells you anything, but I still came away with a couple of insights:
Big Money and Buzzwords
The term "startup unicorn" got thrown around a lot during the conference. It describes the tech companies that somehow achieved a billion-dollar valuation. A lot of the questions to the interviewed founders with early startups seemed to focus on their plan to reach unicorn status. Maybe I just haven't been paying attention, but the obsession with big money seems to be at an all-time high, with major investments in (imo) gargantuan startups currently operating at a loss. It's a bit crazy to me just how many big-name startups (ie. Box, Dropbox, Postmates) employing hundreds of people are still operating in a loss just in hopes of dominating their subsection of the market. I'll begrudgingly admit that strategically, it makes sense, assuming they come out of this phase on top of the direct competition, but it just seems like a ridiculously risky investment to make. Granted, I'm a grad student with no money, so maybe it's just a world I don't understand.
A lot of the companies that came to pitch or present seemed to already have decent amounts of funding. Techcrunch Disrupt certainly wasn't your typical showcase of bootstrapped and just-launched startups, and it was especially evident with most of the hardware groups, most of which had been around for several years. Every company's presence at the event also definitely felt very calculated, but I guess you'd expect that for a conference with Techcrunch's name recognition. I think there were definitely at least a couple of basic, run-of-the-mill startups with minimal results/traction that got a significant bump by just being at the event. That said, I felt that the NY Startup Job Fair showed off a larger number of interesting startups/companies, many of which have had more traction or success than the ones at Disrupt (also, the tickets to the latter were free!).
Success for Reasons Unknown
For sure, no one's found the magic formula to startup success, so it was really interesting listening to some of the VC heads and founders of the more successful companies. If anything, their talks just reinforced that point more. I don't think anyone really has any clue whether a company will be a runaway success, or what steps they should take for an optimal result, though everyone there would probably be quick to give their opinion if you asked. The survivors' bias among the participants was very real, and I imagine you could find several failed startups that made most of the similar steps towards success.
Dave McClure of 500 Startups seemed to have the same sort of realist view as me. His fund gets some criticism for the large number of startups they support, a so-called "spray-and-pray" approach. Less unicorn, more my little pony (I forget who used this analogy at the talks). He said that he expected maybe 35% of his startups to provide any sort of return, and maybe 10% to provide a significant return. I'm guessing (pure speculation, no research) that he'll tend to invest earlier, perhaps giving him a lower ceiling but at lower risk. I guess this resonates more with my risk averse personality, but I often wonder just how well these angels and VC firms actually understand the startups they're investing in, especially when dealing with novel tech or new markets. Even in the established and well-studied space of online procrastination (ie. Instagram, Facebook, Twitter), driven by constant and extensive social use, I don't think anyone quite understands just what conditions make it easy for a startup to just blow-up in popularity.
Just a couple years ago, I kept hearing the term "ride the wave" from a startup friend of mine, meaning that we should be looking at the major trends in the current tech space and trying to capitalize on that. You could argue anonymity (ie. Secret, Yik Yak, etc) was one of the "waves" that was popular to discuss at this conference, but I don't even think anyone could provide even a single concrete suggestion on how to capitalize on it.
Don't Get Absorbed
(side note: go play agar.io!!)
I really enjoyed the talk from one of the Foursquare founders, maybe because I haven't been keeping track and didn't even know they were still relevant (sorry!). I guess they in a while answered the question of "how will you monetize?" by moving to an enterprise model, selling their tech services and data to other companies, instead of trying to trying to make money directly from the users. Their mini-pivot while staying true to their initial goals seemed to provide an example of what might happen to a surviving startup after the initial buzz settles. I hated the Yik Yak founders' answer to the same question, something along the lines of "well, with so many users, there must be a way to make money".
That said, I really keyed in on the Foursquare founder's claim that they now have an extensive portfolio of location-based tech and data that no one else has. That seemed a little bold. It seemed to me that their success (or even survival, depending on how you look at it) has been dependent on the increased proliferation of cell phones with improved GPS capabilities, factors completely out of their control. For any company depending on someone else's tech, either software or hardware, is there a future other than being absorbed by a bigger, umbrella company or dying a slow death? At one point do you become a strategic purchase to put the pressure on a competitor? And is there anything wrong with that?
(I don't intend for this section to be anything more than social observation, not commentary. My view of race/gender, though I admit I struggle with it, is that the world is unfair, we're all inherently biased in some ways, and there will always be both benefits and drawbacks no matter your background. As individuals, we should try to be empathetic where possible and be open to changing your biased behavior when asked)
Techcrunch Disrupt NY was super white. There's no way around it. It was made even more apparent in that the janitorial staff and people hired to man the food and drink bars were mostly black or minorities. Most of the pitches were presented by white males. One of the startups even seemed to make a point of having the white co-founder with no tech background give the presentation on behalf of the Asian co-founder who developed the research that made the hardware work. I don't think this is necessarily a reflection on the attitude of the startup scene that a white face is preferable for a given company, but it certainly stood out.
Again, I kind of liked McClure's take on diversity: from even a purely financial, investment-based perspective, female and minority founders are undervalued. He didn't go in depth, but I can easily see that: 1) perhaps female/minority founders are more interested in addressing markets that the average founder would miss or avoid, and 2) female/minority founders stand out, especially in the current socioeconomic climate, and that means at least some degree of additional/useful publicity. We all have characteristics that we can leverage, as well as ones that hold us back, many times at no personal fault of our own. It's not fair, and it doesn't balance out across all demographics, but it's probably more useful to leverage the factors that benefit us than to lament the ones that hurt us.
The startup world's still nuts (to me). I prefer interesting tech over interesting money, but I guess you need interesting money to make interesting tech.