‘Eventual Capital’: The new paradigm
A new breed of ‘entrepreneurs’ is being born before our eyes. And the quotes are intentional. They might be guiding your money on a journey to a black hole of failures, where nothing useful comes out of it. Angel investors, VCs, accelerators, governments (you name it): I'm talking to you. This is serious.
Recently, I was invited by the guys at Bunny Inc. to a closed event with like-minded entrepreneurs, where we met Erik Torenberg, from Product Hunt, and shared our ideas and opinions regarding "entrepreneurship and execution", or so the event description said.
There were 20 of us, sitting around a table: developers, designers, CEOs, mentors, etc., sitting around a big table on a small restaurant in Bogotá. Everyone introduced themselves, and Jun Loayza proposed that we should discuss about distributed work and how to handle remote teams. It was a nice conversation with everyone sharing their experience and suggesting tools and techniques for managing groups of people remotely.
But after a while –I don't know how or when exactly–, we ended up discussing about a subject that's pretty common among entrepreneurs all around the world: What does a startup ecosystem need to become or mimic Silicon Valley? It's so common, I'd say it's a cliché topic.
And there were many perspectives: the guy from the government, the product manager, the successful guy who's now a mentor for startups, a couple of CEOs, developers of all kinds (including myself), people with experience on both the private and public sectors. You know, the usual suspects.
So while they were all trying to explain why Colombia has not ‘taken off’ – in terms of trying to emulate Silicon Valley's success and its vast network of talent, startups and venture capital–, I suddenly realised that, although I don't have the answer in my hands, not even close, I had actually discovered a vicious circle that could explain why there seems to be a considerable amount of money flowing into the ecosystem, but rarely turning into innovation, or profit of some sort.
As much as people complain about the apparent absence of venture capital for startups in this region, there certainly is. There’s money from a handful of VC firms, maybe a few dozens of Angel investors that “want to believe” (smart money). There's just regular people and companies with some extra money, but zero experience in tech or investment, that still invest (not so smart money). And finally there are two special groups in which I’d like to focus: the government and the tech accelerators/incubators.
There’s a big budget being allocated by the government and ministries to, theoretically, boost or accelerate towards their goal of creating the next big tech hub in the country. And there are accelerators/incubators, often sponsored by big companies that are ‘sort of’ into tech. Why are these two groups so important? Well the answer is not in them, but in the startups.
The TechCrunch Syndrome
It goes like this: A guy reads that X company raised millions of dollars and their founders became millionaires overnight, then he becomes an ‘entrepreneur’, comes up with an idea, founds a ‘startup’ and drools just by thinking what color his Maserati will be. He feels the need to hire some people to work on his idea (because bootstrapping is out of the question), and voilà… He finds out some random accelerator (or the government) will give his startup $50K in exchange of equity or no equity at all. Then he applies, gets in, hires people, 6 months later he’ll spend the money before even getting to break-even, and crash his startup in a spectacular fashion. Then he’ll do it again, ad infinitum. I call this The TechCrunch Syndrome.
It is an increasingly common condition, that affects an important part of the entrepreneurial population, by initially invading their minds with the idea of anyone being able to become billionaire overnight using technology, no matter what the business model is or if they don't have a clue or any experience in programming, design or management. There are two variations of the people suffering from it.
The first and less harmful one is called ‘Event Bitches’. You can spot them in almost every tech-related event, meetup, dinner, party, product launch, Startup Weekend, etc. Especially if there’s free pizza and/or beer. No matter what the subject or the nature of the event is, they will be there. For years I wondered what they did for a living, as I saw them posting pictures and tweets of the dozens of events they were in, later becoming "mentors" in some of them, just because they had the experience of attending to many of them. It took me years to kind of understand how they earned money. The event organisers, which could be the Government or some random company, noticed they seemed to be everywhere, ergo, maybe it meant they were important for the ecosystem, ergo, they needed to be sponsored (paid for). That's still my best guess.
Then there's the second, most harmful variation, called the ‘Eventual Capitalists’ (which might or might not follow an Event Bitch stage). You can usually see them either applying to an accelerator or some ‘government innovation fund’, or crashing a startup for the nth time. Why ‘Eventual’? Well, as the Merriam-Webster dictionary puts it:
Eventual (adjective | even·tu·al): Taking place at an unspecified later time. Ultimately resulting
Usually a term like "X capitalists" is coined for a set of people willing to invest, such as Venture Capitalists, not to the people willing to get the money. But I used it in the latter form. And that’s because Eventual Capitalists are individuals looking for money that might turn into a sustainable company or might not. That's why the ‘unspecified later time’ part of the definition works. And not only that, because even the best entrepreneurs fail several times before succeeding, but because they just don’t care. Really. They don't give a sh*t about their startup, product, users or business model at all. It's just their way of living.
If you asked one of these 'entrepreneurs' what they do for a living, they'd just say something like: "Oh, I apply to accelerators". Yeah, that's a thing now.
And they really do. I've seen people apply and get accepted into accelerators three or more times. And their MO basically never changes. They might or might not have a team. They hire developers, designers and marketers anyway. They spend a lot in marketing. They’re really good a pitching their startup to anyone. And I mean really good. It’s a skill they develop throughout the years they spend in these programs, especially because, apart from filling out hundreds of useless canvas models, they’re always required to prepare a perfect pitch. Or many of them: 5-minutes pitch, elevator pitch, a 140 characters pitch (or tweet-pitch), friends-and-family pitch, etc. And not only that. They become really good at knowing how to fill out all those long and boring government forms, where the most innocuous questions are asked, especially because they know very few people will actually fill them.
I also coined the term Eventual for its similarity with Event and its meaning in Spanish, which is: "Subject to some event", which clearly applies to the above mentioned Event Bitches.
And so the cycle repeats. And so the vicious circle is born. They’re not actually looking for eventual success (because that word also means "ultimately resulting"). They're looking for eventual money, Eventual Capital. The kind of money they’re not sure where it is right now, but they’re sure they’re going to get through some incubator or government program. Just because that’s what they do for a living.
And it goes on and on, I dare to say, especially because of a condescendent government. They just assign some resources to some program, asking for some kind of results or outcome (startups created, people involved, etc.), but they don’t really care about what actually happens inside. Or who’s getting the money, or if it is being spent for good purposes. Sure, they audit that money, but they just make sure it is spent according to some business plan the 'entrepreneur' sent attached to some boring government form. They don't pay too much attention to what the business plan really proposes, or if it is viable, or innovative, or disruptive, or some_techie_buzzword.
It’s the ultimate emptiness of capitalism in tech: Raising money just for the sake of it.
If you read carefully, basically nobody cares. Not the government, nor the accelerators, not even the entrepreneurs! Money just flows freely, to later fall into a black hole of failures, where nothing good ever comes from. It’s the ultimate emptiness of capitalism in tech: Raising money just for the sake of it. It's happening here in my country. It might be happening in yours as well. Be careful, watch out.
Does it even matter what I think? I don't know, I'm just yet another entrepreneur sharing my thoughts in here like everyone else. But hey, again, it's their money. Your money.