Silicon Valley Startups: The Chase of Theoretical Monetary Value
Most startups fail, say the market numbers and the investors who have reached the level of God-like creatures in Silicon Valley, being a permanent part of every young entrepreneurs wet dreams, wearing Polo shirts and driving expensive cars to make up for childhood issues of soft underbelly upbringing.
Walk of Shame
One sunny day I was walking around the hallways of Plug and Play Sunnyvale, enjoying my cheap and tasteless coffee. While waiting for my meeting, I went for a tour of this Startup Mecca. A lesser entrepreneur will say it’s “spying”, I call it “market research”. Slowly navigating between cubicles, trying to soak in as much info as possible by watching every logo and motto, engaging in meaningless conversation and trying to avoid being pitched, I was busy confirming point by point, in my head, the PR born image of the mythical realm of Silicon, where rivers of money flow, and only brilliant people have access, people who know where the technology is heading without even looking, who strive to advance mankind beyond code and credit cards, into the vastness of simplified complexity.
The cheap carpet and crammed space dominated by foreigners who wore typing away the tools of tomorrow, the PR image began to fade and reality set in. The bulk of the companies wore about client engagement solutions and sales cycles, mostly automation tools. There was also a IoT space who had just a few companies (a lot more now), that’s where I was heading.
Heart in hand and invisibly disappointed (post-soviet education keeps your feet on the ground and eyes on the prize, no matter what you feel), me and my parter walked into a small room where our meeting was about to begin. Much to my surprise the gentleman we met, a veteran of the accelerator, was not a reflection of weak business ideas that I saw earlier. He was smart, on point, very persuasive, clear and focused. He gave us simple and effective ideas, methods of presentation, he spoke honestly, open to suggestions and tech-savvy.
hmm….
Eat your own sh*t if you want others to join
A few weeks went by and I was still at odds with the reality of Silicon Valley. Having attended a number of events private and public, where I was pitched without asking for it many times, meeting entrepreneurs, I have heard impossibly stupid ideas from people with no skills and of average intelligence, but quite good at tricking immigrants to work for them, using this magic corporate-like veil of the magic Valley land.
Walking around San Jose, Sunnyvale, Palo Alto and Menlo Park, I was trying figure out why the majority here is chasing capital but in the rest of the world they are chasing customers?
Theoretical monetary value
There is a certain sense of satisfaction working for your goals. It’s tough at times, unpredictable, but it develops your senses in ways that can’t be thought, no matter how much experience you “borrow” from speeches and inspirational bullsh*t.
After going through the trials and tribulations of proving that your product is useful, the valuation moment arrives. Your company receives the stamp of approval from the higher powers of our times, investors, that is based on a mutually agreed upon lie in the form of a magic number and a set of documents, “all for your protection” of course.
The theoretical monetary value of the company, or valuation, is set by multiplying the EBITA, which can vary wildly based on a number of financial factors like industry, market size, revenue etc and more human factors like your money guy spent way to much on the new mistress, or the divorce broke the bank, so he will advise “prudence” on your part when asking money. The truth is there are always valid arguments to push it down or up, but mostly down, so don’t despair, this isn’t the last time you are getting fu*ked.
Value target or target value?
Chasing the “f**k you” moment when you made it in Series A and, your friends didn’t, is as childish as it sounds. The illusion of the great escape, where money buys you the right to be lazy again and dwell in your mediocrity as others work to build your dream and have the stripes needed to yell and fuss when the product, YOUR product, is not done.
As a coder and founder of 8 business so far, 7 of them finishing in failure and number 8 is going strong, I see the real motivation of the mushroom founders, as they follow the path of PowerPoint-ing their marvelous idea, for which they only need someone to build, sell, fund and maintain it, as they provide much-needed guidance in the form of facts without data=(opinions)
mushrooms pop-up everywhere after the rain, much like founders with “better than” ideas at pitch events trying to get foreigners to work for them, proposing equity-only deals so they can build 90% of company value and get 3% parts.
If you build it, they will come. If they don’t, you still built something…
Chasing imaginary numbers in a real-world setting is an artificial growth system that does what it’s meant to: separate the mushrooms from the coders so they can power the powerful. Discard the weak and gather the strength, put them in close-knit social circles, inspire a cult-like following, sell them to the highest corporate bidder and voilà : you just experienced Silicon Valley
