A Notable Omission

Bryce Roberts
Apr 21, 2016 · 3 min read

“Why the Unicorn financing market just became dangerous…for all involved.” That was the title of the bombshell dropped on silicon valley last night.

This wasn’t the first time that Bill has sounded this alarm, nor is he the only one to have been calling out bad behavior in the VC funding market. But his post was detailed and thorough and took the conversation to a level few have pressed. In Bill’s world, ALL involved in the Unicorn market include Founders, Employees, Investors, LPs, even Sovereign Wealth Funds. That about covers it, right?

After reading through the piece a few times I began to recognise one notable omission- customers.*

Nowhere in the piece does it mention, or even hint, at the potential impact to the customers of these Unicorn companies. Somehow “all”, doesn’t factor in the reason for these companies to exist in the first place.

What happens when they go under? If you read this post your takeaway might be that founders egos are crushed, employees options are worthless and Investors have very difficult conversations with their LPs.

But, what about the customers who took the risk and started building, or running, their businesses on the tools and services offered by these fledgling startups? Or consumers who rely on these startups to do their work, plan their entertainment, order their meals, or solve a much needed problem for themselves?

The only hint of how customers play into this Unicorn funding frenzy comes in the following advice:

The takeaway? Paying customers are the only surefire way to avoid future dilution? Or, that getting customers are a necessary evil for getting off the fundraising treadmill that investors are incentivized to keep founders on? Or, that the public market is the only safe place for founders to escape short term investors in search of hyper growth?

If there’s ever been a more seminal piece written acknowledging that startups have become financial instruments to be tweaked, contorted and gamed I’ve not read it. Single horned, majestic, Weapons of Mass Extraction.

Coincidentally, I wrote a post a year ago this week titled Drafting a Declaration of Independents which aimed to codify some of the ideas we’d been trying to embody in the terms and values of Indie.vc. One paragraph stands out:

Perhaps the answer to the Unicorn dilemma isn’t to take the down round or the dirty term sheet. Maybe, just maybe, the answer is to break the addiction to the fundraising markets that worship at the altar of maximizing shareholder value and consider customers an afterthought, if they are considered at all.

If “companies” are designed to solve problems for real customers, what are these “startups” Bill is concerned about designed for?

*this tweet from Aaron Coleman sparked the theme for this post.

Strong Words

Independent Thinking for Independent Businesses

Bryce Roberts

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VC, Dad

Strong Words

Independent Thinking for Independent Businesses