musings about entrepreneurship & life…
Article originally published in Built in Denver.
1. Some US ecosystems are excellent places to brew startups. In the case of Boulder, CO, home of TechStars, the ecosystem is good to create ventures in the range of USD $1M to USD $20M or so. With exception of Rally Software and Sengrid, most ventures have the tendency to remain small or get acquired.
One of the reasons for this phenomenon is the fact that Boulder fails at attracting leaders that can actually scale ventures. Having interacted with quite the arrange of international entrepreneurs, the feedback I receive is that Boulder is not a cosmopolitan place. It doesn’t have cultural or demographic diversity.
Any town that aspires to attract talent capable of scaling ventures needs to work on cultural/demographic diversity. One can’t pretend to be the next Silicon Valley when leadership is in the hands of a single racial majority.
2. Investors in general are interested in large returns with a very specific and hopefully short payback period. As such, many US ecosystems are placing the majority of its economic efforts in brewing tech startups predominantly. That approach leaves behind other types of ventures that can contribute to more diverse ecosystems. Investors, who are interested in brewing economic and industry diversity, should begin thinking outside the scope of just tech startups.
3. Given the over emphasis placed on tech startups, there is an overabundance of incubators that brew “tech entrepreneurs”. As such, we have created an excess of idea supply with not enough demand to justify it. Entrepreneurs end up competing fiercely for scarce Series A rounds. Fierce competition causes entrepreneurs to scale at rates that are simply not sustainable in the long run. As such, cash flow problems arise and most startups end up failing prior to the famous Series A crunch. I wonder what role investors play in this arena.
How many more pitch seminars, incubators, tech conferences, accelerators and alike do we really need? The startup scene is beginning to look quite similar to the Self Help Bookshelf in Amazon.com. What I find interesting is that large amounts of money are being made in the “Startup: You Can Do It” Motivational Space. I wonder if failure to scale is really a motivational issue.
4. Because of the overabundance of tech startups, investors are now demanding product traction rates that are unrealistic for every single startup. They are also advocating lean methodologies that are not necessarily realistic for every individual case. Even though I understand that our human tendency is to behave like cows, we need to start thinking whether Eric Ries’s advice applies to every single business model. Cows, by the way, follow each other out of fear.
In my mind:
Lean + Strong Traction + Small Exceptional Team = Larger Investor Return = Larger Entrepreneur Burnout Rate & Failure = Continued US Economical Stagnation.
5. US early stage entrepreneurs are not placing enough focus to the tremendous opportunity that exists in emerging markets. As such, they all compete for the US market leaving behind other less crowded opportunities available internationally. As more startups crowd the waiting lines of different incubators and accelerators, innovation is going to be needed not only at the idea/product stage but also at the go-to market strategy. We can’t all aspire to have above average traction rates by only focusing on optimizing products made for the US market exclusively.