Stick figure startups
This phrase popped out during a conversation with a friend the other night, who was considering leaving a publicly traded technology company to go to a startup. It seems like everyone these days is starting a company or thinking about doing it. One thing we went back and forth on was the decision to go to an early stage startup (e.g. Series A, less than 100 people, etc) or a later stage startup (Series C or later, $100M+ valuation, etc) and what was the more difficult challenge.
A year ago, I was faced with this choice. I left Google to join Square, which would fall into the latter category (at the time I joined, Square was well over 300 employees). I did it because I felt like that size suits me best. I also did it because I think it’s a harder challenge to go to a Square – or a Dropbox, a Pinterest, an Uber or a Palantir – than it is to join one of the seemingly millions of early stage startups trying to figure things out for the first time (or at the other end of the spectrum, to go to an Apple, Google or Facebook that has already scaled and is seeking to maintain or extend). With all of the money and enthusiasm for finding the next big thing in tech before anyone else knows about it, I feel like this is not a common opinion.
We mythologize the founder in the tech industry– in particular the two engineers that start in a garage. The idea that the iconic tech companies of Silicon Valley over the last half century came from such humble beginnings is what inspires the new generations of entrepreneurs. While it’s true that you cannot skip the Angel round and just fast forward to a venture flush with products and customers, that does not necessarily mean that things are hardest at the start and then get easier with increasing momentum. I would argue it’s actually the middle period — between startup and corporation – that is the hardest phase.
There is freedom in starting at the beginning. There is boldness that comes easily when it’s just you on a whiteboard with 7-8 other people. There is vibrancy in building a prototype, bringing something to life for the first time. For many, it’s not the same juice if you’re refining something that’s already been launched – kind of in the same way that the 10th customer is not the same as the first. Some people in tech live for this. It’s all they want to do and talk about: starting something new because of what it might become.
At the same time, when you’re starting something, no one really cares about what you’re doing. There is an advantage in that. And since right now a lot of people are willing to throw a ton of cash at anything just in case it hits, and since building an initial technical infrastructure that can service millions of users costs roughly the same as my cable bill, and since everyone in the Bay Area has a smartphone and will download just about anything that their friend of a friend that used to work at Google/Facebook is starting because it takes less than ten seconds to give it a shot – Im saying it’s just not nearly as hard as building something that lasts.
This is not to say that its easy to get something going. It’s difficult when there are just a few of you, having no idea if you’re going to make it to next month and being acutely aware that no one gives a shit about you. In today’s environment, however, because of the robust startup market with so many disruptive offerings and with the talent pool stretched so thin, scaling operationally is harder than getting something off the ground. My observation is that there are currently an awful lot of work friends who’ve been meaning to start a company together, who get a bunch of money to see what happens and that the network effect of the people they used to work with while employed by truly successfully tech companies gets them through prototype and into Version 1.1. And there you have it: entrepreneurial success.
This sounds flippant. It probably is. Starting something from nothing with an ROI for investors, founders and early stage employees is undeniably a desirable exit in the purest sense.
The legacy of Silicon Valley is the technologist entrepreneur – absolutely. But the ones that are important were the company builders – those who repeatedly turned away a buyout at the early stages (or were lucky enough to be unable to sell) who ultimately created a legacy. Intel. HP. Oracle. Apple. Yahoo. EBay. Google. Facebook. This is what Silicon Valley is known for around the world and what will be remembered. Those founders that started something and then sold it a couple of years later? Successful economically, in the same way as people who flip houses in a hot real estate market. There is definitely nothing wrong with making a lot of money this way. It’s just not, in my opinion, what sustains the tech industry. As others have surfaced, the list of tech companies that successfully scaled to real significance is somewhat scarce. It is really hard to get to this level. In technology, or at least in technology today, we overvalue the people who take off to start something and undervalue those who join at 50, 100, 300, 500 and even 1000 to make something that persists for decades.
The term stick figure startup popped out when I was trying to describe these startups that are just drawing a sketch and calling it a finished masterpiece. They prototype an MVP, get some traction and then draw an imaginary line and have someone else fill in the rest. They are getting to the point where they could maybe become the next big thing, which is not the same as actually becoming the next big thing.
You hear the same thing at every start up now. Apple is done since Steve Jobs died. Google is the new Microsoft. We’re gonna be bigger than the Beatles, man!
Look – getting to the point where people care about what you’re doing (drawing the stick figure) is a huge milestone. But Silicon Valley is what it is today because of the people who joined up at the later stages and made these fledgling startups into lasting companies.