Product Hunt’s Sale Demonstrates What’s Wrong With Startup Culture
That’s the collective thought that ran across our team when we saw the news that Product Hunt had been bought by Angel List for … cough… $20 Million Dollars. Sorry, hard to get those words out. Yes, $20. Million. Dollars.
So why was our team so shocked? Because it was clear at this point, if it wasn’t already clear to many of us, that startup culture is out of control emanating from the vast reaches of Silicon Valley and spreading to other tech and startup hubs across the country.
At Launchpeer we work with early stage startups daily, with many of our team members working with 2–3 clients at a time designing user interfaces, writing code, and helping with growth hacking strategy, all to help these early stage entrepreneurs do one of two things; raise money or get to profitability fast enough so they don’t need to.
That last sentence is key; ‘get to profitability fast enough so they don’t need to’ raise money. This is 100% the opposite of the mindset that’s permeated throughout Silicon Valley culture and spread to startup ecosystems around the U.S. When you initially get involved in a startup ecosystem, the first thing you‘ll likely notice is the sheer number of pitch competitions that prop up early stage startups with promises of glory, but failing to see the bigger picture of getting these startups to profitability.
PROFIT. Making a profit is the lost art of the startup ecosystem that should actually be at the forefront followed closely by, and correlated with, revenue. This is the opposite of where we see Product Hunt; a startup with no profit or revenue, and not even a clear path to either. Sure, Product Hunt has loads of loyal fans, daily page views, and a huge email list, but in this type of business model the number of users hasn’t translated to revenue or profitability.
I understand some will say Angel List probably bought Product Hunt for other reasons like page views, popularity, or influence, but at the end of the day the message that will spread like wildfire throughout startup communities is that yet another startup in Silicon Valley was sold without having a path to revenue or profitability, meaning those two things aren’t necessary. That kind of thinking will lead to lower success rates for early stage startups whose ecosystems rely on places like the Valley to set trends, and as it stands one of those trends is ‘there’s no need to worry about paths to revenue and profitability, just worry about page views and loyal fans.’ That just won’t work.
So how do we fix this? By getting back to basics. We start by valuing a sale over a trophy at a pitch competition. We start by teaching entrepreneurs that getting revenue isn’t secondary to raising money. To put it simply, we start by teaching entrepreneurs to build businesses.
EDIT: We’ve gotten a ton of awesome convos going from this and some good points as to why PH was a good buy. The most compelling is that AngelList bought PH for the data they have which they can turn into profit. Although that’s a very valid argument, for a majority of very early stage entrepreneurs and startups holding out 3 years without a clear path to revenue or profitability is beyond risky.
Also, note that this isn’t a knock on Ryan or the PH team; we love the product and what they’ve done! We just don’t want entrepreneurs and startups taking this as the rule. Instead it should be looked at as the exception.