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Golden Oldies: Entrepreneurs: Are Investors Watering Down Innovation?

Monday, August 19th, 2019

https://www.flickr.com/photos/hikingartist/5726811997/

Poking through 11+ years of posts I find information that’s as useful now as when it was written.

Golden Oldies is a collection of the most relevant and timeless posts during that time.

There’s not a lot on TV that I like, but I used to really enjoy Shark Tank. Past tense; haven’t watched in several years. Why? Two words: lifestyle products. With very few exceptions that’s what was being presented, whether an app, a product or a service. I understand that entrepreneurs create stuff that will get funded, and while I’m not saying they are bad investments or that the entrepreneurs don’t mean well, I am saying that I don’t care about them. They won’t change the world or even improve it. Uber and Lyft are good examples; they haven’t decreased traffic, as they claimed they would, in fact, they’ve increased it. Most in the “life style” category are focused on “personal care.” (Have you noticed that sometime in the recent past “personal growth” morphed into “personal care”?) More packaging in the landfills, more time on the screen, more focus on self — so not my mindset.

Read other Golden Oldies here.

Innovation isn’t nearly as mind-boggling today when compared to what startups were doing in the late Seventies/early Eighties when I started working with them.

That’s not surprising when you consider who gets funded these days.

A recent Reuters report found that the majority of Silicon Valley startup founders that receive Series A funding come from the same pedigreed cohort: either they previously worked at a large, well-known tech firm, a well-connected smaller tech company, they previously created a successful startup, or they come from one of three universities—Stanford, Harvard, or MIT.

Not surprising when you consider the attitude of Valley stalwarts like Paul Graham of Y Combinator, who publicly stated that he would be unlikely to fund someone with a strong accent or a woman.

It’s been 15 years since I first wrote about the proclivity of managers to hire people like themselves and more over the years showing it leads to homophily and the negative impact that has on a company.

It seems it’s no different for investors.

They are funding people like themselves who were raised, educated and worked along paths similar to their own who they either know or are introduced to them by a friend.

“Like a lot of the investments [Instacart] that have come our way, a friend of a friend talked to us about it, and told us about it, and encouraged the founder and the CEO to come and chat with us. One thing led to another.” –Sequoia partner Mike Moritz

When you fund from a homogenous group, no matter where they are, creativity and innovation are watered down, because those groups tend to be insular and badly interbred talking mostly to each other.

If you’re fishing from a pond of rich white guys, you’re mostly going to get ideas that address the needs of rich white guys.

AKA, people like themselves.

Image credit: Frits Ahlefeldt

Ducks in a Row: Pundit Poop from Graham and Kalanick

Tuesday, June 14th, 2016

http://www.flickr.com/photos/spacepleb/249761636/

Background:

  • Austin passed a law requiring fingerprint-based criminal checks;
  • Uber and Lyft spent $8 million on a referendum to repeal it; and
  • lost on May 8.
  • On May 15 Paul Graham tweeted

    I will go out on a limb and say Austin has zero chance of being a serious startup hub without Uber and Lyft. (I am an investor in neither.)

Essentially, Graham, a man devoted to innovation and startups, discounted any possible innovation in ride-sharing beyond the current scenario.

(Keep in mind that this is the same guy who claimed that London’s not a startup hub because some establishments still enforce a dress code.)

Little did Graham know just how weak that limb was.

Contrary to his expectations, Austin did not reel in shock, wallow in grief or stay home.

Arcade City Austin / Request a Ride is a Facebook group that has grown rapidly in the weeks following Uber’s and Lyft’s departures. The group, which requires approval to join, is currently populated by more than 33,000 members who use the group to find rides to and from their destinations.

Beyond that effort, there is Zipcar, getme, Fare, Fasten, Wingz, zTrip, RideAustin and InstaRyde riding into town (if not already there) and all willingly complying with the required fingerprint background check.

All this should bring a note of caution to Uber CEO Travis Kalanick’s stated plan to avoid going public as long as possible.

“So I say we are going to IPO as late as humanly possible. It’ll be one day before my employees and significant others come to my office with pitchforks and torches. We will IPO the day before that. Do you get it?”

Amazing arrogance.

  • Graham discounts the world, the people in it and innovation itself.
  • Kalanick plans Uber’s IPO with no consideration of the economy, competitors or the speed at which things change.

Graham’s words have already come back to bite him; Kalanick’s probably will, too.

Flickr image credit: Dave Gough

Entrepreneurs: the Silly Side of Paul Graham

Thursday, June 9th, 2016

http://www.paulgraham.com/images.html via w:en:Image:Paulgraham_240x320.jpg

I’m not sure what I dislike most about Paul Graham; his arrogance, narrow-mindedness (previous link) or his misogynist mindset .

I suppose his latest comments fit the arrogance category, but I’m inclined to add a just-plain-silly category instead.

It all started with Sam Altman’s shoes, which weren’t allowed at the Ritz in London.

Shallow though this test may seem, it shows London’s not a startup hub yet. No hotel in SF could afford this rule.

— Paul Graham (@paulg) (read the thread.)

So, according to Graham, in order to be a good place for startups, a city/all businesses must drop any standards and just accept whatever.

Of course, this is the same guy who said that a city can’t be serious about startups if it doesn’t have Uber and Lyft.

Hmmm, does that mean Silicon Valley wasn’t a startup hub prior to 2009?

As I said — silly.

Image credit: Sarah Harlin via Wikipedia

If the Shoe Fits: Your Survival is Spelled P-R-O-F-I-T

Friday, May 6th, 2016

A Friday series exploring Startups and the people who make them go. Read all If the Shoe Fits posts here.

5726760809_bf0bf0f558_m

Users, users, we’ve got users.

Hypergrowth has been all the rage for the last few years, but is it enough?

Twitter’s Q1 revenues  were $595 million, but it’s still not profitable. The stock tanked 14% in after hours trading and is about $35 below its 52 week high and $11 below its IPO price.

The company continued to lose money in the first quarter, posting a net loss of $80 million. That’s less than the $162.4 million that it lost in the year-ago period.

Meanwhile, Etsy turned a surprise profit a year after it went public; the stock jumped 12% in after hours trading, but that’s still down nearly 50% from its IPO price.

The crafty online marketplace posted its quarterly earnings on Tuesday, and reported its first quarterly profit since going public in April 2015.

For years, the attitude, fueled by the likes of Paul Graham, has been who needs profit?

Bill Gurley’s recent post was not only a wakeup call, but scared the hell out of a lot of founders who looked to funding, instead of profits, for their valuations.

In Silicon Valley boardrooms, where “growth at all costs” had been the mantra for many years, people began to imagine a world where the cost of capital could rise dramatically, and profits could come back in vogue. Anxiety slowly crept into everyone’s world.

Harry Edwards, an emeritus sociology professor at Cal, recently made a very apropos comment, although he was talking about race and the NFL.

“Progress is one of those issues that’s like profit: It really comes down to who’s keeping the books.”

“They” keep saying that the problems today are different than those that caused the dot com crash. But I think at heart they are very similar.

In both cases the emperor had no clothes.

Granted, for a long time his clothes were described differently than in 2000.

But the in both cases, the clothes were strictly in the mind of the beholder.

Image credit: HikingArtist

Ducks in a Row: the Cost of the So-Called Bro Culture

Tuesday, March 1st, 2016

https://www.flickr.com/photos/bonniesducks/4612160187/

There is far more to diversity than gender, but I’ll save my comments on that for another post, although everything I say here applies to the wider exclusions.

Last Friday, in polite language, KG commented on the ignorance/idiocy of not hiring women, since they have to be so much better to achieve the same opportunities/promotions as men.

For proof, you have only to consider GitHub’s treatment of contributors.  

They found that when a woman programmer made a contribution to an open source project, that work was more likely to be accepted by their programming peers than contributions by men as long as those judging the work didn’t know the programmer was a woman.

If they did know the programmer was a woman, the work was more likely to be rejected.

For the unknowing, the bro culture refers to the culture found in most frat houses (although it exists in several other forms) and has become a hallmark of startups in Silicon Valley.

Jennifer Brandel, co-founder and CEO of Hearken, and Mara Zepeda, co-founder and CEO of Switchboard, wrote a terrific post that starts by depicting the startup ecosystem in sexual terms that perfectly drive the point home with the same class and light touch as Tootsie used to drive its point home back in 1982. (It’s a great read with serious analysis and suggestions for change.)

Startups, like the male anatomy, are designed for liquidity events. Consider the metaphors: “seed” funding, “up and to the right” trajectories, “acceleration,” “exit.” Paul Graham’s seminal essay “Startup = Growth” argues that explosive growth is the only measure of success. “Making it” means one of two things: go public or sell.

The bro culture also manages to turn a blind eye to just how much of their vaunted tech is the result of women.

Hilariously, it was not only a woman who the technology that paved the way for everything from Wi-Fi to GPS, it was film goddess Heddy Lamarr. She invented a secret communications system during World War II for radio-controlling torpedoes.

Dr Grace Murray Hopper invented COBOL, the first business-friendly programming language, in the 1940s. She was a computer scientist, a rear admiral in the U.S. navy and the first person to use the term “bug” in reference to a glitch in a computer system when she literally found a bug (moth) causing problems with her computer.

Then there is Ada Lovelace, the first computer programmer who wrote the first algorithm and dreamed up the concept of artificial intelligence; her notes were an essential key to helping Alan Turing’s work on the first modern computers in the 1940s.

Not to forget Dr Shirley Jackson include portable fax, touch tone telephone, solar cells, fibre optic cables, and the technology behind caller ID and call waiting.

Most of male culture runs on pizza and beer, which, according to Beer Historian Jane Peyton was developed, sold and drunk but Mesopotamian women centuries ago.

A few more that guys should be aware of,

  • Nancy Johnson invented and patented the ice cream maker in 1843 and is still in use today.
  • Margaret A Wilcox invented the car heater in 1893, as well as a combined clothes and dishwasher.
  • Elizabeth Magie invented Monopoly in 1904.
  • Anna Connelly invented the fire escape in 1887.
  • Maria Beasely invented life rafts in 1882, as well as a machine that makes barrels.
  • Dr Maria Telkes, a psychiatrist, invented residential solar heating.
  • Letitia Geer invented a one-handed medical syringe in 1899.
  • Florence Parpart invented the electric refrigerator in 1914, along with improving street cleaning machines.
  • Josephine Cochrane invented the dishwasher (where would guys be without it?) in 1887
  • Marie Van Brittan Brown invented CCTV in 1969.
  • Margaret Knight invented a machine that makes square bottomed paper bags in 1871, although Charles Anan tried to steal her work claiming that it wasn’t possible for a woman to create this brilliant invention.  She also invented a safety device for cotton mills when she was 12 that is still being used today.
  • Alice Parker invented a natural gas powered central heater in 1919 that inspired the central heating systems used today.
  • Stephanie Kwolek invented Kevlar 1965, to which thousands of guys, and more recently gals, owe their lives.

Unwelcoming/disparaging culture goes far beyond the startup world and the pro/con about women is a minefield for companies, as witnessed by the Lands’ End contretemps currently playing itself out on social media.

The catalog had the temerity to feature Gloria Steinem, which brought a strong reaction from a customer.

“This family will not buy one single thing from Lands End ever again unless this drive highlighted by Gloria Steinem is fully retracted. (…) Lauding Gloria Steinem is beyond what I can understand from a company that ‘appears’ to celebrate family.” (Posted to the company’s Facebook page.)

Lands’ End apologized and scrubbed all mentions of Steinem, along with references to the ERA.

This, of course, brought enormous reaction from the other side.

As of midmorning Friday, close to 4,000 people had commented on the company’s Facebook post that addresses the flap.

Oops. Damned if you do and damned if you don’t.

Lands’ End and other companies may lose customers when they end up in the middle of this no-win situation, but the bro culture has a much higher cost.

Talent.

And that can cost them the very breakthroughs that would put them on the road to an IPO.

Then again, with that attitude they don’t deserve great talent.

Which leaves KG and kindred spirits to scoop them up.

Flickr image credit: Duck Lover

Entrepreneurs: the Arrogance of Paul Graham

Thursday, February 4th, 2016

http://www.paulgraham.com/images.html via w:en:Image:Paulgraham_240x320.jpg

Paul Graham is a poster boy for many of the things wrong in Silicon Valley — unlike Y Combinator president Sam Altman.

Graham says he won’t fund people with strong accents or women with young kids or who are planning on having kids, whereas Altman believes that eliminating gender bias is very important.

It seems that Graham’s arrogance knows no boundaries.

January 27, Graham took to Twitter to condemn Shark Tank, and shows like it.

Startups: Instead of appearing on Shark Tank, spend that energy fixing whatever makes your product so unappealing you think you need to.

 Mark Cuban, a Tank investor, was not amused.

@paulg you mean like the sense of entitlement and arrogance they get when they become part of a YC class ? It’s hard to wash it out

Chris Sacca, a guest this season, chimed in.

@paulg Yeah, because a free 10-minute pitch to 7 million Americans is something every startup should turn down.

Beyond the sheer arrogance, it’s obvious Graham has never watched the show. He also doesn’t believe time should be wasted on marketing.

The entrepreneurs aren’t just in tech; they span multiple industries and many of them have already built their business and are at the point that they need not just money, but enterprise-strength expertise, which the Sharks offer.

Cuban hit it on the head when he said “arrogant and entitled.” Not to mention where he sees Y Combinator’s future.

@paulg the real question is why does a startup become part of YC any more ? The good old days of YC are just that

Read the whole thread here.

Image credit: Sarah Harlin via Wikipedia

If the Shoe Fits: the Importance of HR from the Start

Friday, August 14th, 2015

A Friday series exploring Startups and the people who make them go. Read all If the Shoe Fits posts here

5726760809_bf0bf0f558_mAre you one of the many founders who revel in a so-called startup culture that eschews structure and ignorantly confuse process with bureaucracy?

If so, you aren’t doing your company, your people, your investors or yourself any favors.

  • In a 2012 post I quoted Paul Graham, co-founder of Y Combinator, regarding the need for financial controls and frugality during good times in order to survive the bad ones.
  • The number of leaders, investors, academics and others who have recognized the impact culture has on success is as diverse as it is numerous — ‘culture eats strategy for lunch’ didn’t become a catchphrase by accident.

Now listen to the money.

Robert Siegel, general partner at XSeed Capital and lecturer in organizational behavior at the Stanford Graduate School of Business, makes the case for incorporating viable HR practices from the beginning.

 “The single largest issue that causes the most emotional heartache in a startup is people challenges. Every organization has them. If you put best HR practices into place in the earliest days and are doing the right things right, you’ll have fewer and fewer issues and blowups.”

If you want to build a successful company you need a solid base that includes a consciously designed culture based on your values, financial controls/accountability that engender frugality and best HR practices that enhance growth, while protecting the company.

Image credit: HikingArtist

If the Shoe Fits: Seeing the Forrest, but not the Trees

Friday, August 15th, 2014

A Friday series exploring Startups and the people who make them go. Read all If the Shoe Fits posts here

5726760809_bf0bf0f558_mSince Spring the media has been sharing stories and statistics about the rampant sexism, ageism and general bigotry in tech, its self-proclaimed “meritocracy” and the amazing male hyperopia (farsightedness) that seems almost incapable of recognizing bigotry in themselves or those close to them.

Y Combinator President Sam Altman and founder Paul Graham are a good example.

Last month Altman posted the importance of eliminating the gender bias in tech and Silicon Valley in particular, and that people need to stop pretending.

“One of the most insidious things happening in the debate is people claiming versions of ‘other industries may have problems with sexism, but our industry doesn’t.'”

He cited Y Combinator’s track record of accepting women founders into the incubator as proof that it isn’t sexist.

He did not, however, explain Graham’s statements in May that he doesn’t fund founders with strong accents or women who have/want kids.

Altman thinks HR can be a solution.

“Our sense is that many will benefit by doing it [human resources infrastructure] earlier. Traditionally, startups have thought of HR as a drag on moving fast and openness, but a well-running team is one of the best assets a company can ever have.”

However, the dozens of women who work for established companies with plenty of human resource infrastructure and have shared horrific stories on platforms from Whisper to Fortune are proof that rules don’t work.

The real solution in any company, from startup to Fortune 50 is a founder/CEO who backs a culture that is blind to gender, age and color and, most importantly, walks the talk, both professionally and personally.

This puts you, as a founder, in a position to truly change the working world.

Image credit: HikingArtist

Entrepreneurs: Stupidest Funding Criteria

Thursday, August 14th, 2014

https://www.flickr.com/photos/fortunelivemedia/7587824160

Anyone who tracks the startup community hears stories of the stupid criteria investors use when deciding who to fund.

  • No strong accents or women with young kids or who are planning on having kids according to Paul Graham of Y Combinator (more on Graham tomorrow).
  • An anonymous investor who, although he considered the product and team brilliant, passed because the founder wasn’t Caucasian.
  • Age (way off base)

At a guess, I’d say that more than 90% of stupid turndowns are based on standard bigotry.

The other 10% fall in the Stupider category

  • Dislike of founder’s alma mater
  • Talk funny (Southern, Bostonian, New England, New York, Texas, etc.)
  • Grooming bias

Now Peter Thiel has added a new bias that is so silly it calls for a Stupidest category.

Don’t fund anyone wearing a suit.

A slicked-up entrepreneur is inevitably a salesman trying to compensate for an inferior product. Based on this perception, Mr Thiel’s venture fund instituted a blanket rule to pass on any company whose principals dressed in formal wear for pitch meetings.

There’s a basic problem with these kinds of rules.

  • No rule can be applied universally, without question and no exceptions.
  • Universal rules are just another form of bigotry—one size does not fit all.

But if a suit is a sign of “a salesman trying to compensate for an inferior product” then why does Thiel himself wear a suit?

Flickr image credit: Fortune Live Media

Entrepreneurs: Are Investors Watering Down Innovation?

Thursday, June 19th, 2014

https://www.flickr.com/photos/hikingartist/3514537597/Innovation isn’t nearly as mind-boggling today when compared to what startups were doing in the late Seventies/early Eighties when I started working with them.

That’s not surprising when you consider who gets funded these days.

A recent Reuters report found that the majority of Silicon Valley startup founders that receive Series A funding come from the same pedigreed cohort: either they previously worked at a large, well-known tech firm, a well-connected smaller tech company, they previously created a successful startup, or they come from one of three universities—Stanford, Harvard, or MIT.

Not surprising when you consider the attitude of Valley stalwarts like Paul Graham of Y Combinator, who publically stated that he would be unlikely to fund someone with a strong accent or a woman.

It’s been 15 years since I first wrote about the proclivity of managers to hire people like themselves and more over the years showing it leads to homophily and the negative impact that has on a company.

It seems it’s no different for investors.

They are funding people like themselves who were raised, educated and worked along paths similar to their own who they either know or are introduced to them by a friend.

“Like a lot of the investments [Instacart] that have come our way, a friend of a friend talked to us about it, and told us about it, and encouraged the founder and the CEO to come and chat with us. One thing led to another.” –Sequoia partner Mike Moritz

When you fund from a homogenous group, no matter where they are, creativity and innovation are watered down, because those groups tend to be insular and badly interbred talking mostly to each other.

If you’re fishing from a pond of rich white guys, you’re only going to get ideas that address the needs of rich white guys.

AKA, people like themselves.

Flickr image credit: HikingArtist

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