The Art Of Corruption In Silicon Valley
“A warm referral is the first test for a founder. It shows your ability to network your way to investors. If you can’t figure out a way to network to a VC firm, then you’re unlikely to be able to network your way into hiring a great team, or network your way into selling your product to customers.”
Marc Andreessen.
It seems that the future of innovation is jeopardized in Silicon Valley. Today, a lot of products get featured despite a lack of innovation. VC money gets thrown away and startup valuations jump through the roof.
What we call a “warm referral” is an idea validated by at least one entity, it could be a relative, ex-colleague, journalist, friend, friend of a friend or neighbor, the list goes on! In other words, when networking influences decision making and market validation, then it’s most likely coming from a warm referral. This doesn’t necessarily move the needle in terms of innovation and user acquisition, but it certainly helps startups get noticed by investors.
True story — Imagine Tech journalists invested their own money into XYZ, a promising startup coming straight out of the largest incubator in the Valley. XYZ offered a revolutionary… Wedding Planner app… Something that has never been done before (how many wedding planner apps out there? A lot!). They magically got featured on the front page of a gigantic Tech blog after receiving an astonishing amount of $4.5 million in seed funding! Wow! How crazy is that?
Just a few years ago investors would have laughed. In fact, this would have been the biggest WTF moment since 2012, when Kanye West interrupted Taylor Swift at the VMA — “Yo Taylor! Imma let you finish but… Snapchat had on of the best deals of all time!”.
In 2017 unfortunately, it is just another day in Silicon Valley… Rather than looking around digging for the big next thing, Venture Capital firms invest in the least promising startups that have the most connections in common. It seems that a large majority of Silicon Valley is corrupt, or at least we know there’s something wrong at the very beginning of the process. Just a few lucky people dictate the future, they get invited to the same parties and hang out with the same people. They have the power of seeding their own grains and eating their own fruits. Meanwhile, Venture Capital firms control the seasons.
So. the real question is, how many good startups never get warm referrals? How many awesome ideas get filtered because of a lack of visibility from the founders? A bunch of wanna-be entrepreneurs who will remain invisible, working in the dark, just because they are not connected to the right people in the first place. We might be missing out on the next Google or Facebook, who knows? Just because we’re too lazy to do the work and to dig for the next big thing outside of our own bubble.
This whole thing hurts innovation in the Valley…
Some Warm referrals:
“Hey, take a look at my brother’s startup — it’s a cool product and you might like it!”.
“I’m in with XYZ, I worked with the founders in the past, they’re awesome. It’s gonna be huge!”.
F.
