Hero Myths and the Expendable Entrepreneur
Every so often, my brother and I will cycle the 25 mile circuit through Portola Valley, riding past the venture capital titans of Sand Hill road while we exchange our technology musings and entrepreneurial discontents over shortened breaths. Perhaps we should save our breath as nowhere outside of Silicon Valley has the term entrepreneur been uttered so frequently as to become rather meaningless — a tautological meme like rockstar ninja.
Ask someone around here to describe an entrepreneur and they’ll likely describe an innovative, aggressive, technically adept young white man who dropped out of college before taking over an entire industry on his way to a multi-billion dollar IPO. And along with this mythos comes the thought leadership and startup lifestyle that preaches the gains and pains of it all. But the question remains, is founding a startup with the hope of a liquidity event within 5 years arguably worth the 60–80 hour work weeks, personal cost and physic toll?
Calculably no. But you already guessed that, at least anecdotally and are in this to make that “fuck you” money (<$10M after taxes) like your Silicon Valley heroes. Still, you could Build a Business, Not an Exit Strategy? Or at least Correctly Value Your Startup Offer first.
I’ve met my share of would-be entrepreneurs at pitch nights and product launches, ravenous on overflowing cheese plates, bullish on his brilliant idea and singular in his passion, that I often ask myself why? I’m not alone in questioning the entrepreneurial myth that drives young people away from school and secure jobs to try giving birth to the next unicorn—which sounds at least as miserable as unlikely these days.
I once spent a year working with a chocolatier to grow her small business, learning accounting and sales just to keep things upright. Twice each week, I’d wake up at 4am to prepare spiced Ecuadorian hot chocolate from pure cacao solids and farm fresh milk, suffering through midwest winters in open air farmers markets to sell a few thousand dollars worth of products, truffles, bars, turtles. Barbara employed about a dozen people between the makers in Michigan and harvesters in Ecuador, and by now she’s patiently grown the business to where you can find it in about a hundred fine food stores throughout Michigan. It’s nothing glamorous but, those wintery hot chocolates made plenty of folks happy. Ignoring the cold that would seep up from the concrete into your boots until your toes went numb, or the brief shuffle around the propane heaters, my first entrepreneurial foray made me quite happy then.
In Silicon Valley, there is a myth perpetuated by the Paypal mafia and the like that seems to overplay the successes and economic activity of Silicon Valley startups. Yet Derek Lidow, entrepreneur, professor and author, suggests that hero entrepreneurs, “make up less than 1% of all successful entrepreneurs and [account for] less than 10% of all the economic activity generated by startups.” I’d like to blithely ignore the subject of would-be entrepreneurs with their delusions of grandeur, but I’d been asked to research this subject for a friend.
James Marks, CEO of Whiplash, had just begun building a delivery fulfillment startup around the same time (and in the same town) I was selling chocolate. We reconnected in Oakland years later when he hired me to rebrand his company. Now, after five years of scaling their operation internationally, they’d decided to join one of the many startup incubators in the area and he shared with me some of what he’s learned in building successful businesses (tech and non-tech). In comparing his notes against the mainstays of tech entrepreneurialism, I began questioning if you need to be innately genius, independently wealthy or overly aggressive to succeed as an entrepreneur as is so often suggested by the titans.
By contrast, Lidow prefers to compare entrepreneurship to rearing a child through the various phases of growth, up until they are self sustaining. It’s the sort of business acumen you rarely hear mentioned, the sort that suggests leaders aren’t born but made, that I’ve only now begun to wonder how popular entrepreneur myths might be destructive more than instructive. To be clear, I’m not speaking about the gulf between valuations and revenue or whether funds are overpriced or simply underappreciated but simply that, as Marc Andreesen of a16z himself concedes, “odds are, nothing your VC does, no matter how helpful or well-intentioned, is going to tip the balance between success and failure.”
The pragmatist might take stock of Silicon values and wonder who benefits from myths that churn and turn over young companies. New startup formation is once again on the rise according to the 2015 Kauffman Index after years of stagnantatnon where entrepreneurs preferred to fly solo. Perhaps the “valuation sensation” of billionaire founders distorting realities of success, combined with a recovering economy has given hope to new entrepreneurs. But given the costly realities of startup failure, from long hours to insolvency—a reality that creeps in typically 20 months after a startup’s last financing round—memes like “fail fast, fail often” might undermine this burgeoning entrepreneurial spirit with shortcuts and hacks. It should come as no surprise that the same firm that studied trends in startup failure, also sells a list of dying tech startups to those looking to passively acquire assets.
How exactly has startup culture bred such a sink or swim expendability that espouses the stickiness of spaghetti thrown on a wall, bowls of instant ramen, technology teenager dropouts and millennial homelessness? Given Lidow’s framework of child-rearing, such methodology seems much more like throwing a baby in the air and seeing if it flies. But whether your baby flies, and regardless of whether venture funds significantly outperform the public market, venture capital is rewarded by limited partners.
Venkatesh Rao offers some macroeconomic insights on how technology entrepreneurs were turned into a labor class alongside the emergence of engineering mercenaries demanding exorbitant wages and the production of useless apps ad nauseam. Rao’s essay Entrepreneurs Are The New Labor is worth reading in its entirety for his prescience in identifying expendability, brokered by a financial imbalance between titans and broke newcomers. Had I read it when I first moved here, I might not have suffered through the charade of hackathons and pitch nights that paraded the large dreams of hopeful contestants for a small entry fee. Every such event left me wondering what faith must convince someone to forgo sleep, wages and decent housing for a statistically low chance at success—even as VCs raise larger rounds of capital.
So my message to the 90% of would-be entrepreneurs who are not seasoned execs of existing wealth, consider business diligence over bumbling expediency and interpersonal happiness over instant wealth as your business goes from formation to funding. Given that most companies die before raising $1M, this might be a call to challenge prevailing mythologies of hero entrepreneurs in favor of something more pragmatic and achievable. Learn how to be a good leader, grow your revenue, nurture customer happiness and maybe we can bring back entrepreneurship out of the realm of memes.
Thanks for reading.