Hey yPlan — how dare you go bust ?
When YPlan got acquired (well, acqui-hired), it sure left a crater. It’s nothing like the billion dollar bonfire of venture money that was Webvan of course, but as failures go it was visible enough and large enough to get more than a few people in the London startup community quite excited. After all, we all know “fail fast” is good for you, but burning a £30 million hole is a bit different.
Pitchforks for Profits !
So the torches and pitchforks came out. For all those people who struggle mightily as entrepreneurs to make ends meet and raise money, there’s understandable anger and bemusement at the entrepreneurs for letting this happen. Don’t you know anything about running a business ? Don’t you guys know the value of profits ? Aren’t you ashamed your company was all hype and had NOTHING to offer ?
It seems the less people know about the company the more they feel entitled to come out and slam it. See Jamie Edwards for a round-up.
My personal favourite in terms of throw-away commentary (and huh, let’s blame the media ?) is from Nandini Jammi:
What made this app newsworthy, a so-called “rising star,” was never its usefulness. Rather, it was a one-time association with British actor Stephen Fry, Demi Moore’s ex-husband Ashton Kutcher, and a launch party in Bowery featuring Pharrell Williams. And money. Lots of it.
Note to know-it-alls and jealous people: I looked at their Series A and it had all to do with strong adoption and usage in London. The company ended up getting financed by General Catalyst, which is a very savvy ecommerce investor (Kayak, Jet, Oscar etc). I have no idea what they did next with the money and I’m not trying to defend them, just to highlight an ongoing weird attitude to failure.
Ahem, so huh, yes, they ran out of cash. That tends to be how companies go bust, though, ya know ? They also raised cash because they needed to run themselves unprofitably for a few years. Another shocker! You want a few other companies that ran at a loss for a while: Amazon, Google, Facebook, Uber. Oh and Intel, Apple, Microsoft etc.
The System is Rigged !
And of course, let’s keep it a bit of scorn for the Tesla brigade (aka the Venture Boyz). Oh my god, why do venture capitalists let startup companies run at a loss for so long ? Are they complete idiots ? Is it because they JUST DON’T CARE and are playing roulette with pension fund money ? Do they truly sit back all day being fed muscat grapes, reclining on impossibly well-designed daybeds made out of reindeer skin whilst entrepreneurs with pointy goaties and pointy shoes pitch heady stories of the next SnapChat ? Do they actually all go the sauna together after their pilates class and decide which harebrained idea they are collectively going to fund ? Are they as obsessed about the Midas List as people say ? And why have they all been to Harvard with the guys running the investment industry ? And why didn’t they pick me ?
#ULM : Unicorn Lives Matter
So let’s reiterate a few basic facts about venture capital and startups, people:
- When we back a company, we always, ALWAYS look for massive upside. That means $500M as a baseline and credible $5BN+ scenarios. We don’t throw these numbers out to impress people; we mean them.
- We’re playing a highly skewed game. Invariably, over long periods of time, great venture funds are made by outlier outcomes. You can’t create outliers if you don’t take chances. It doesn’t mean we don’t care about building great, sustainable and profitable businesses; in fact, my best investments all have great business models (Zoopla, Secret Escapes, Integral Ad Science etc.). It just means we don’t prioritise short term profits over long term potential.
- Companies fail and will continue to fail, after they have raised $1M, $10M or $100M. If none of them fail, it means they weren’t trying hard enough and you can bet a competitor is owning the market today or will tomorrow. Building venture business is a hard and competitive endeavour and it’s not because you’ve established yourself and achieved profitability that you’re necessarily sustainable. We live in fast moving markets where we constantly need to re-invent ourselves.
Enduring Failure
I always thought that this idea of “celebrating failure” was somewhat weird. Failure’s just plain hard and it stays with you for a long time. It’s just an unavoidable part of the game.
Like every hard circumstance in your life, it is an opportunity to grow and evolve as a human. You want to learn from failure, do hard post mortems and draw honest lessons that everyone involved can learn from and apply in their next job. Failure is the foundry of future greatness. Sounds like a Brad Feld quote, hah !
What frankly you don’t have the right to do is to come out of nowhere with your business 101 notions of the value of profits and slam entrepreneurs for failing. Unless you’ve done your investigative journalism and got the whole story, let them come out with it.
PS : so, about that yPlan thing… I know they got funded on the back of great traction in the UK with a lot of repeat usage around their original booking app and their very unique supply. When I met them for Series A (I was in Boston at the time) I had concerns about scaling supply (without looking like the next guy i.e. Ticketmaster or Viagogo) and their planned speed of US expansion (how may NFL cities can you do in parallel). But I think it was a worthy shot. I’m as interested as the next guy in an insider account in what mistakes they made and what there is to learn (see some concerning hints below). But for all those who claim yPlan had “nothing” I say don’t talk about what you know nothing of. You’re not doing yourself or the rest of the industry any favours.
