If You Think Moving to San Francisco Will Make Your Startup Work Out, Then You’re Going to Have a Bad Time

Let me disclaimer this by saying this is just my opinion, and not a statement of concrete truth.

I do believe a bubble is coming in the startup world.

There are too many windfall companies, with nothing more than a pitch deck and a semi-capable prototype, generating millions of dollars in funding from Angels, VCs, and Syndicates. I’ll call these the “Daddy’s money” startups, as they remind me of the days when you would ask your parents for money to do something, promise them something in return, and then you either don’t deliver when the time comes or half-ass deliver. You still spent the money on what you wanted, but then shit gets real after the fact and you try to blissfully ignore it. Then the next thing comes up, you ask your parents for money again, but really really promise that this time it will be different, and the cycle repeats. Eventually, though, the cycle comes to a halt one way or another. It’s an unsustainable ecosystem.

The root of the problem is that this was enabled to happen in the first place.

There is an abundance of people with ideas trying to get in on the startup game and make it to the next level, but in reality very few do. Every startup has dreams to make it to the “startup NBA” with the likes of Uber, Airbnb, Snapchat, etc, but such a small percentage actually get there. It’s an extremely intense, arduous path and a tremendous commitment. Unless I’ve got some special sauce cooking, it’s not practical for me to expect an overnight eruption in success (as an example, research the history of Uber back to 2009 and you will see). Too many startups and cofounders are chasing stardust expecting they could be the next viral hit or future members of the Unicorn club based on having the right surroundings and some cleverness. I see an abundance of egos and starstruck hopefulness, but not enough backup plans. If every other emerging startup is filled with buzzwords about how it is “life changing” and “serving an untapped market”, then something is fundamentally wrong with the system. I seriously wonder how investors, advisors, and funds allowed this to perpetuate for so long. Unless these entities really don’t put much forethought into how they gamble with their money, it’s genuinely surprising that some startups have been able to make it past million dollar A and B-series funding rounds without having anything substantial to show for it. Startups with beta-test sized userbases and zero revenue still manage to make the cut as long as they possess a certain abstract potential. If rounds are passing by, but the overall state of the startup is not progressing forward, that is a problem. Since we live in an imperfect world, there will always be snags and hiccups along the way, but something is really wrong if the overall business model is becoming a ‘snag’. There are lots of cool ideas out there, but not all of them are made out to be cash generating machines. Everyone wants their ideas to be heard, but maybe transforming them into a startup isn’t always the best way to go about it. There are ideas that are diamonds in the rough, but they need to be distinguished from those that are just rocks.

As with other trends on the market, the more people hear about startups, the more they want in on them. The move into the startup world should be a calculated decision more than an impromptu one. Running a business at any level is hard and a lot of work. Not to mention it’s even more stressful when your entire income stream is riding on it. As I’ve been told before, a startup is always the third person is a relationship. Like a real partner, if it’s not something you can fully get behind or trust that it will be sustainable beyond the very near term, then it’s worth doing some soul searching to validate the future of the company.

Sometimes getting too many “Yes”s is a bad thing. It’s fun to use someone else’s money to make your vision come true and create a disruption in the business world, but the high from the initial delight of coming up with a startup idea is short lived. The real struggle begins once you get that first investor check in your hands. That’s when reality hits hard and the sink or swim period sets in. If a startup doesn’t have the legs to stand on its own in its infancy, chances are it will be even harder trying to stay afloat at the next level with bigger players. Enabling and approving unstable startups creates a pool of companies held up by floaties in order to survive — and when the air drains out that’s when the bubble bursts.