What's the failure rate on startups in a non-recession? I seem to remember the figure being something like "90% will fail in the first 2 years" when my father got the ball rolling on his medical manufacturing startup some 20 years ago. Different sector obviously.
Why is what Calacanis saying news? Just like 2000-2001, we have a surplus of startups in a lot of segments or niches, offering overlapping, underperforming, failing-in-innovation services in many cases. We're due for a shakeout, it would have happened sooner or later, now it's just happening faster.
fredwilson
· 1 year ago
I think the 90% figure is accurate
For companies that get venture backing, the number is at least 33% and probably a tad higher.
AndyFinkle
· 1 year ago
Calacanis writes to serve one purpose...Publicizing Calacanis (even when he doesn't have a clue, and more often than not just to be controversial). I always had an easy time at different start-up events figuring out which would fail...they were the ones giving away the nicest T-Shirts.
At peak VC cycles, I believe a lot of companies get funded that should not have been. In public market peak cycles this becomes even more apparent, when every company spins off a one horse dog and pony. Such as when every networking company spun off one Router or one Switch only start-ups.
During trough's in a VC cycle, start-ups still have opportunities. They need to think outside the box. This is where strategic investors will play a more important role. Can't find traditional VC financing? Figure out what other company your technology benefits and look to them.
Lastly, when I previously headed up marketing for a *cash poor* start-up, I wore multiple hats (we all did). So I not only managed marketing, but also business development, affiliate marketing, PR...At the end of the day, everything I did had a P&L, hell I even took out the trash at the end of every night. To manage through these tough times, Start-ups have to be creative, nimble and their employees need to be willing to take on more than their core roles. Oh ya, and fire the guy who bought the T-shirts to give-a-way.
Great comment, I particularly like the take out the trash line
That's the way to think in times like this
mediaeater
· 1 year ago
Never made t-shirts and still empty the office trash. Feel good about both after reading this.
AndyFinkle
· 1 year ago
There are more specific things that I did in my daily role, that I now realize perhaps are not so obvious to others - so I will share;
1) Don't pay the rate card - Whether it is online advertising, print or other - I was often able to negotiate steep discounts when paying for advertising (example was rate card was $24k I paid $6k / rate card $70k, I paid $10k ... It's all a poker game, when you first inquire, be a little aloof and ask them to keep you in mind when they have remnant inventory.
2) Don't buy CPM, or even only CPC - Make them a vested partner. When I built an affiliate channel, the most successful partners were ones that were revenue shares (they only made money, when they sold a product)
3) Don't waste your money on a meaningless booth at a meaningless tradeshow (I was dumbfounded by some of the companies that had paid for a presence at this years Web 2.0 in NY).
4) Let others do the heavy lifting - A lot of start-ups that I advise bring their social network business plans to my attention for my opinion/comment. They all make the same mistake, in that they are going to create this great social network around a particular niche. Why reinvent the wheel? If you need to be nimble early on, consider leveraging someone else's already existing social network (ie- make your service into a widget for FaceBook, or use Twitter as your member base). Consider that getting a new user to your service will likely eat up the majority of your cash.
5) Partner up with non-competing (even better complimentary) start-ups where you can share infrastructure costs. This can be anything from sharing office space, to sharing servers,etc.
6) Realize that your most important asset is not your programming expertise...consider hiring someone with a marketing background (*hint) early on. Most start-ups I speak with have ZERO marketing guys on board of their first 20 hires! A competent marketing person can often pay for themselves 10 fold by bringing you ideas, partnerships,etc that you likely would not have thought of on your own.
That's all the IP I feel like giving away today...hope someone finds it useful!
I'd like to second the comment about startups not taking booths at trade shows.
Booths are expensive (and not just for the space, but also in terms of materials, time, transport). But it's worse than that. At a booth you're at the mercy of random passers-by. Sometimes that can work out in nice and unexpected ways, but that's a 1 in a 1000 chance. The booth ties you down. While you could be legging it around the convention, meeting with people of your choosing (ideally in the luxury of the corporate meeting rooms they paid to have upstairs in their booth, served drinks and fruits that they paid for by freshly showered youths - well, you get the idea), you're shackled to your booth, because you've no-one really excellent to leave there, and you wouldn't want to not be there when the president of BigCo Inc happens to walk by with an hour to spare chatting to an unknown startup. Ain't gonna happen.
So don't give up the many advantages of not being tied to a booth. A convention is a great setting for guerilla marketing - it's full of tons of people with some extra time on their hands, as opposed to NO time which is the normal case. And you can always take Jason's other advice, which is to throw a dinner. At $1K that's dead cheap (and way more effective) than getting a booth.
alexklaff
· 1 year ago
I think Andy makes some excellent points!. Especially 4, 5 & 6.
With respect to #4& 5 i think this makes great sense. However, i also think there is room to expand on this type of "partnering up" scenario.
In my opinion, why stop there? I think given the landscape these days (with respect to niche start-ups) there is a lot that we, as entrepreneurs, can do in the way of building mutually beneficial partnerships. And by "mutually beneficial", i of course mean not only financial, but also user, content, feature sets, etc. As an early stage start-up this is something i have started to focus on as we continue building out our Alpha. I guess my theory is on this is: why spend the money AND time to build something out when there is a good chance that another start-up out there is focused on this piece? In my specific example, it was reaching out to Profilactic ( a similar service to FriendFeed) in hopes that they could provide the lifestreaming component we plan to develop for Urban Revurb.
Personally, i think there is huge potential in this area. Another great example would be utilizing someone like Disqus versus building out your own commenting system. Or for Twitter to reach out to the hundreds of apps built around their platform and cherry pick some that they could add to enrich the user experience, instead of purchasing them (ie the acqiusition of summize). Honestly, i could go on and on. But i won't. :)
Bottom line is; this is something that i feel that should be a huge focus for both early AND late stage start-ups moving forward. Right now, i know of one that will be trying this route--especially in this down market.
One thing i do disagree with (at least in my example/opinion) is building your product as a widget, etc. When i look at a lot of these "social" sites i see little more than basic web "fads". So for me the thought of staking my companies future in the future of another social network seems even more risky than taking the bigger plunge. Plus, i guess also feel that if your idea isn't working in current form.... you can always scale it back down to a widget. (Unless of course you have destroyed your brand in the process)
Lastly, i'll say number 6 is dead on. Sadly, most companies (start-up or otherwise) don't get this. Fortunately for my start-up, i am not the tech guy, I am the marketing guy.
Cheers. Alex
P.S. to Fred. I mentioned two of your portfolio companies in my above comments. Obviously there are others--which begs me to ask; is there a reason why VC's don't forge partnerships between their investments?
I look at Tumblr (another one of yours) and wonder why there isn't an option to integrate Disqus in my blog right from the customization tab. Certainly both these companies could benefit from tighter integration (especially when most of the comments systems on tumblr are via Disqus). But more importantly, i think it helps simplify the UE for those of us who want to add comment capabilities. Is there something i am missing in my logic?
AndyFinkle
· 1 year ago
Alex,
My point regarding building your product as a widget was not intended to imply that you should solely back any one platform. This comment was specific to a launch phase, and is a suggestion on how to jump start your customer acquisition phase.
Gonzalo Arzuaga
· 1 year ago
Andy, I think what Jason did was great: he started a conversation about "what's gonna happen with startups in this bad economic environment". If he makes out of this a good advertising to his name, i'm not bothered. Good for him. The fact that now Fred is writing about it, and we're commenting about it, it means several people thinking about this, which is a good thing.
Maybe the 2008-2010 period for startups will be remembered as the "leaner, focused, profitable" time, who knows?
fredwilson
· 1 year ago
I'm with gonzalo. Jason did a good thing. Who cares about the motives. At some level we are in this for our own benefit
andyswan
· 1 year ago
This is a bit of a narrow view. There is nothing keeping Calacanis from publicizing himself and creating value for others in the process. That's sort of the entire point of what we're all doing here.
Invisible Hand.
T-Shirt Printing London
· 1 year ago
It is not the guy that gave away the t-shirts that is the problem. T-Shirts are in fact a very cheap form of marketing. The more fundamental issue is cost control - or lack of. These start-ups are given so much money they end up burning it rather than remembering that the conventional rules of business apply to all companies
Well, at Combo we've seen this trend coming...our product development has struggled to keep up with the changing VC climate. First the milestone was a prototype, then a beta, now a full release - we just said forget the VCs, let's go make money and switched gears and have started bringing on enterprise clients. There's going to be a lot of capital and not much venture for the next few years, as I see it...
Chris Dodge
· 1 year ago
Since you describe seed-stage funding asbeing the first to dry up in late VC funding economic cycles, when do you expect - if it's at all visible now - that window to re-open? Obviously, there are many dependencies at hand here which may extend timelines, but if it is cylical by nature, when would it normally come around again.
fredwilson
· 1 year ago
It won't go away but it will be harder to obtain. Great people and great ideas will still get funded. The hurdles will go up. I suspect it will be at least a couple years for that dynamic to change
peteonrails
· 1 year ago
"Venture capital firms will get more conservative and they will urge their portfolio companies to do everything Jason suggests (and more), but they will also be there with additional capital infusions when and if the companies are making good progress toward a growing profitable business."
One data point doesn't make a trend: but I am seeing big-name VC firms that we in the A round opt out of subsequent rounds for companies that find themselves in need of more capital. I have lots of startup colleagues that are flipping out right about now.
fredwilson
· 1 year ago
I have not seen that yet but of course I only see a small part of the overall market. I'd love to learn more. If you aren't comfortable sharing the details in the comments a confidential email would be great. I won't blog it without permission
peteonrails
· 1 year ago
I'd be happy to share a few details. Not sure how to get it to you privately, though. Can you contact me at pete - at - peteonrails - dot - com?
proales
· 1 year ago
Since everyone is in a pesimistic mood now, tell the Flatiron losing its funding source story.. the interaction with LP's is always fascinating.
fredwilson
· 1 year ago
I am waiting for the right time to tell that story. I don't think we are there yet. Stories are most impactful when told at the right time
andyswan
· 1 year ago
Great post Fred.
It's another one of those reasons that I always tell entrepreneurs that my #1 rule of INITIAL fundraising is to start small and DO NOT SQUEEZE your investors on valuation. You want partners who feel profitable upon entry. You want an absolute alignment of priorities and motives. And you want people with flexibility and enthusiasm to help your company when times get tough.
Hyman Roth style.... always make money for your partners.
fredwilson
· 1 year ago
Exactly
daryn
· 1 year ago
I'm interested to hear what you think will happen in the m&a realm during this period.
fredwilson
· 1 year ago
I think m&a will continue, this time led by more traditional companies using the dowturn in valuations to get moving on their internet opportunities
Gonzalo Arzuaga
· 1 year ago
Exactly, I totally agree with you Fred. Even us, being a very small internet company, started looking at opportunities (aka websites to acquire). Valuations should be on our side.
RacerRick
· 1 year ago
If you've got a great idea and you've got cash, a downturn is a nice time to slowly build out your product or service.
RacerRick
· 1 year ago
I was an investor in 2 startups that got screwed by their vc backers in 2001-2002.
[Some] VCs turn into vultures when they've got cash and the music stops.
fredwilson
· 1 year ago
I agree. But 'screw' is often in the eye of the beholder. I am sure some entrepreneurs felt screwed when we did recaps of companies in the last bust
RacerRick
· 1 year ago
I still don't think that we're going to go into a serious downturn. At this point last time (2001), programmers and designers were begging people for gigs and going back to actuary school.
I know NO ONE who has been laidoff. Even with gas at $140 a barrel this summer, I couldn't convince employed techies to do side projects for me.
If congress can get something passed that allows the credit markets to loosen a little bit, I think we'll all be fine.
David Noël
· 1 year ago
Thanks for this post, Fred. I think what you and Jason wrote are much needed eye-openers and just like garzuaga said, it's useful to start the discussion about start-ups during a down cycle now in order not to loose time, energy and money. Thanks also to Andy for the notes.
I do have a question though and I hope you, Fred or anyone participating in this conversation, can give me some insights: Would you not recommend to start a web business at this point? As it should be everyone's focus to build a strong product and reach profitability asap, that clearly is not always the case. So if you say, that seed and early stage will dry out, is there any other possibility of raising funds i.e. family & friends that you would consider realistic? Thanks, David
andyswan
· 1 year ago
I'm just one guy but I give you a very enthusiastic green light. I started my first company....a FINANCIAL company in the fall of 2000.....ya, neat. But the fact is we made it work and we learned extremely valuable lessons in flexibility, profitability and resolve.
When the storm passed, we were a leader in a newly surging industry....and it paid off big for 3 years and into an exit.
Start by swimming upstream :)
David Noël
· 1 year ago
Thanks Andy, that sounds energizing. Good point also in your above comment, cheers.
karls
· 1 year ago
I guess we must closet swimmers then :)
We started our financial web startup 1 week before Lehman blew up. What a way to commemorate your entrance.
We're feeling pretty edgy these days but thankfully, funding is still obtainable but hiring is harder than ever with more people seeking the comfort of a paycheck from a Fortune 500 company. People tend to be skeptical of the survivability of startups during downturns.
fredwilson
· 1 year ago
Friends and family funds tend to be there in good times and bad.
As andy said, many great businesses are started in downturns. It may be that they are great because of the dna ingrained from starting during a downturn
If you can't think of doing anything else because you are so passionate about the idea, then go for it
David Noël
· 1 year ago
Thanks, Fred. Back to work then ;-)
Taylor Davidson
· 1 year ago
Personally, I'm excited about the potential of so many intelligent people freed from the potential of the wall street money train to spend their time creating solutions to the problems they saw (in wall street and other industries).
And before we question the "intelligent" part, I'm willing to bet most people either: a) could see potential problems, but went along with the ingrained incentive system because it was the right personal choice (local optimization resulting in global minimization), or b) couldn't see what was going on because they were asking the wrong questions.
Some will learn, some won't.
While right now may not be the best for for ALL entrepreneurs, I'm betting it's the right time for the BEST entrepreneurs.
Gonzalo Arzuaga
· 1 year ago
IMHO friends and family, as Fred mentions, always are gonna be supportive. Problem is, they're gonna be supportive regardless of what your company does. In general (generalizations are not good) they have no much idea about your business, they just support YOU. That's why, I think, VCs bring more value: when analyzing your idea, they think about more things: your management team, competitors out there, potential exit strategies, etc.
What's absolutely certain is that these days VCs won't be financing "new startups that still have to prove their concept". Those startups (web businesses or not) are gonna be hit the most. Angel investors get scared so I think that source of income for "new ventures" (read riskier ventures) will have harder time getting from idea to reality.
But again, if it's 4am and you're still fired up with your idea, it sounds like "go for it!" would be the way to go.
David Noël
· 1 year ago
Thanks, Gonzalo. I agree on your thoughts. What do you think about a combination of cash (through friends & family) and guidance (through angels)?
Gonzalo Arzuaga
· 1 year ago
Well, the exercise of "selling" your idea to as many people as possible always helps because it helps you see your idea from different angles (based on their feedback). What you want is to have people challenging your idea, trying hard to find flaws to your concept. That's the help you need, IMHO. After "convincing" 10 people (assuming people that are more or less knowledable in the field you're venturing in) it means you've gone somewhere, at least in paper. A different story is having people to commit and investing the real dollars they've earned. There's no rule here. I personally wouldn't enjoy reporting to a bunch of different people about how things are going, one by one (specially when things are going badly). What you suggest might very well work for you (cash from friends and family - guidance from angels) but the thing is you're gonna have to split the pie in more slices.
David Noël
· 1 year ago
Thanks again, Gonzalo. Points taken and concidered. Appreciate your detailed feedback, thanks.
Steven Kane
· 1 year ago
Hi Fred
Beg to differ regarding your suggestion that "Venture capital firms are largely flush with capital from sources that are mostly rock solid."
That was true back in the last crash. For, during the tech crash of 2000-2002, most LPs had limited or containable exposure to tech stocks etc. Even better, despite the cfrash, most LPs had mad so much money -- truly historic and outlandish returns -- from VC that they had high tolerance and expectation going forward.
So - back then - for the most past VC fund sources indeed remained rock solid.
This time around LPs -- endowments and pensions and funds-of-funds and the like -- are getting massively hammered. They have massive exposure to the finance sector and its meltdown. Moreover, they typically rely heavily on credit facilities to fund PE and VC commitments.
Worse -- and again unlike the last crash -- this time around the LPs are coming off a period of remarkable returns from every asset class *except* VC. For the last many years, LBO funds, hedge funds, and the public markets (domestic and international and emerging) have been providing excellent, even amazing, returns -- all the while VC returns have been middling to poor -- or worse
And now all those non-VC asset classes are nose diving and fast. LBO funds, hedge funds, emerging markets -- no one expects these asset classes to be as fruitful in next few years as in last few years.
So LPs will no longer be able to ignore poor VC returns because they are obscured by massive returns elsewhere in LP portfolios.
Which means, IMHO, that your other note that "If you look back at the last market downturn, most venture capital firms did not lose their funding sources" will maybe not play out this time at all.
Either LPs are going to bet that VC is finally, finally due for its return to return heaven -- and so pile in and pile on -- or else they are going to say, help! i need stability and some kind of acceptable return and I can no longer afford to indulge in VC asset class anymore...
fredwilson
· 1 year ago
That may all be true steve but that will play out, if it does, in the next fund cycle
I expect they will meet their capital calls on the funds they are in already. The cost of not doing so is high, both financially and reputationally
And most vc firms don't fund companies from more than one fund and reserve fully for follow ons
So I stick with my statement even though I recognize your point and somewhat hope you are right about LPs willingness to pour capital into the VC sector
Steven Kane
· 1 year ago
sorry of course you are right - my points, if thy are valid at all, are looking head at next VC fundraising cycle (when VC funds raise their next funds)
i agree there will be almost zero default on existing LP commitments (though I would not be surprised if LPs start breathing down VC funds necks a bit more now...)
fredwilson
· 1 year ago
Yes, that will happen, just like VCs breathing down entrepreneurs necks
rfradin
· 1 year ago
Fred -
I think a key difference between this startup depression and the last, at least as it pertains to online advertising, the last depression didn't just destroy the startups, it destroyed the powerful companies as well - Yahoo, AOL, Excite, DoubleClick, CMGi, InfoSpace, etc... Which meant there was ample opportunity for young companies with cheap business plans to work smarter & harder and emerge with amazing businesses - TACODA, Blue Lithium, Tribal Fusion, etc...
This time the problem younger companies will have is that Google, Yahoo, Microsoft and Platform-A, are not going anywhere, they are very large are profitable. Neither is Adify for that matter though we are in a mildly different space and I don't want this to be an Adify advertisement.
Last time the young companies profited because despite the capital market dislocation there was still a secular shift in spending for advertisers. Online grew quite quickly and the startups who survived were around to pickup those dollars. Very specifically from my own experience, ValueClick and Advertising.com are only the large companies they are today because DoubleClick Media and Engage effectively disappeared.
I think this downturn will hurt smaller companies much worse than last time. I am sure you're correct that VCs will continue to back their portfolio, from personal experience I know this is the type of thing you do with companies during downturns. I would be concerned that ad budgets will be harder to come by for new mediums like social applications, wireless, etc... not because demand will go away but because, in a downturn, smaller experimental budgets will mean a larger share of spend going to larger, already established players.
Russ
fredwilson
· 1 year ago
that's a useful perspective russ. but i still think the best companies in a VC's portfolio will continue to get funded and they will perform like a lot of 99/2000 vintage deals performed during the last downturn. if companies can acquire and retain audience or customers in large numbers, there will be a business in that.
gsik
· 1 year ago
Similar discussion on fast company about "Wall Street and the New Startup Economy"
(Of course) Great post Fred. I added this comment to Jason’s original post just before it was pulled. Jason’s advice is very direct, honest, and transparent. He draws deeply from his personal experiences – I always appreciate his points of view, and we should all listen carefully - then take our own advice
I would offer a slightly different view of the outcome of the Web 2.0 orgy of ideas. I think this could be a more dire prediction than simply high volume bankruptcies (which is bad of course). Worse than the definitive nature of failure that results in bankruptcy is simply that ‘Nothing Happens.’ My predictions is that we are going to go through the ‘Chapter of Nothingness.’ No exits, no meaningful venture funding for emerging ideas, erosion of equitable A to B Series financing terms. This will result in trapped talent and capital in neutral to bad ideas with no hope of a material exit. My friend Caterina Fake said it best: The majority of Web 2.0 companies are ‘All Satellite, No Planet.’ My advice to any startup in this market is to find way to transform into a planet and do it quickly. The Chapter of Nothingness is going to be far more painful than the quick market spike of ideas during the Web 1.0 crash. In this market correction, many will look back and realize that they were actually out of business long before they continued development for year(s) and round(s) of angel financing later.
jeremystein
· 1 year ago
"but you have to start thinking about how you are going to get where you want to go without venture funding."
shouldn't that be the goal of every business, regardless of market cycles-- only raise money when you need to?
Guy
· 1 year ago
Completely off topic, but inspired by the above post, I have a start-up related question: How does one go about finding a great entrepreneur / CEO to join a startup?
Specifically, I was the co-founder of a technology start-up in the financial management space in Europe, started in 2003 and sold in 2007 with 100 000 paying customers and for a good price. My partner and I have an idea we wish to pursue but both of us are still recovering from the last ride (along with some family issues I won't go into here).
It just doesn't work to hire a CEO and hope they will make a success of it. We tried that once but the CEO we hired was really only in it for the up-side (he had nothing to lose) and as soon as the first real hurdle arrived, he jumped ship. We need someone willing to give it everything, someone who doesn't see walls, only hurdles. We could provide initial funding, coaching and heavy involvement in designing the system, but the entrepreneur / CEO has to run with it.
So where does someone start looking?
DorianBenkoil
· 1 year ago
Fred, wonderful, provocative post. I have a question that will seem snarky, but is meant in earnest: What would a VC consider 'profitable" in these times? Cashflow positive? or...?
fredwilson
· 1 year ago
Self sustaining from a cash perspective
leigh
· 1 year ago
"you have to start thinking about how you are going to get where you want to go without venture funding."
I think this is good advice regardless of a downturn market or not. Figure out how to get to where you need to go so that the money comes to you and not the other way around. Work with people who are hungry and do it in that other 40 hrs a week that's not your FT job.
davemorgan
· 1 year ago
Great post Fred and great job by Jason to get this conversation started.
My view is that there is no better time to be in a start-up and to be "pre-revenue" than when revenue is hard to come by, when hungry talent easy to come by, and when large incumbent potential competitors are drained and distracted. While it may be harder to come by financing in those times, it is more likely to come from smart money, which will pay off in the long-term anyway.
Phillabelle
· 1 year ago
Thanks Fred for helping us keep the spirit alive! Metrics and a clearing system were the missing elements on Wall Street. So if we aggregate this to our startups' biz plan, we may prevent the crash and burn situation that awaits most of us!
alan meckler
· 1 year ago
Interesting to read these comments from Fred and Jason. While I am no longer blogging (for now) I long ago predicted the demise of many Web 2.0 ventures for the basic reason that most would not be able to make profits. the down cycle we are seeing will only speed up the process and prove my prediction. Therefore Web 2.0 failures will be blamed on the credit crisis when in fact the credit crisis only accelerated what was bound to happen.
Igniter
· 1 year ago
One segment that I think will remain strong are 'social ventures' - those that are tackling serious environmental and social challenges. The number of investors moving into this area seeking an investment that has the potential to provide feel-good social returns is growing. Many of those folks are looking to 'social ventures' as an alternative to traditional donations. While people are getting beaten up in the markets - they still have money and are more than ever looking for meaning in what's happening with the world and how they can play a role.
For all ventures, it's time to dig deeper into using our social capital (networks and relationships) to get done what we need to get done. It's also worth seeing if we can push our business to 'open' up more - becoming more permeable, iterative, and emergent - and leveraging the community and other resources to create the value that we are uniquely trying to orchestrate. The open-source and social change worlds have some great lessons for us in creating huge value with limited financial resources.
ekan
· 1 year ago
Downturns are a great excuse for failure and "covering your business model *ss"...but as a startup, you should do better in a downturn because you're theoretically providing higher value beyond the current market. The industry I'm in, digital signage, is starting to see companies fail. Yesterday, a company called LocalVision blamed their failure on the economy. Not sure the full story in their situation...but please, don't blame the economy.
Andy Graham
· 1 year ago
I feel people mix up business, they equate an Internet business to have the same mechanics as a brick and mortar business. I have two website, both having daily unique visitors from 7000-14,000. An internet business only needs time invested in the project, the essential need is to understand how a web site make money, then be able to pay for the initial beta version of the site.
I believe people need to differentiate, "Great entrepreneurs build value and market-share in down markets."
That is a comment of a person who is starting a business.
The majority of the comments who worry about the money are having their dreams of money destroyed, they are depressed about a dream of money, not the dream of a great business.
Mark McGuire
· 1 year ago
Jason brought up some excellent points in his post, I just wish they wouldn't have been limited to times of economic hardship. As entrepreneuers, we should always be relentlessly focused on staying lean, executing and finding that winning value proposition regardless of what is happening in the market. And I hope that our start-up and others like us that don't have an existing VC partner prove you wrong in the upcoming months/years Fred. We are just closing a large angel round at Alice.com and will be looking for a VC partner in 09 post-launch. Our early socialization efforts with VC leaves me with the impression that there are still lots of VC's that are actively pursuing Series A investments. I think start-ups that take Jason's advice and execute well will continue to get the funding they need. Mark McGuire (flywheelblog.com)
alexklaff
· 1 year ago
"I say that because in down market cycles, it's the seed and startup stage investing that dries up first. It happens every time. Seed/startup investing is most profitable early in a venture cycle and late stage investing is most profitable late in a venture cycle. It makes sense if you think of venture capital as a cyclical business and it is very cyclical. Early in a cycle you want to back young companies at bargain prices and enjoy the demand for those companies as the cycle takes hold. Late in a cycle you want to back established companies that need a "last round" to get to breakeven and you can get that at a bargain price compared to what others paid before you"
Fred: I am curious about this comment form your post. Certainly i can see how this would apply in most typical funding scenario's but the question i have is; What percentage of the "late stage start-ups" out there are close to breaking even? Obviously you can't speak for all start-ups, but i think most of us can agree that there is a LARGE percentage of businesses out there who are operating sans a sustainable financial model. At what point to VC's cut their losses and start funding start-ups that actually HAVE a plan to make money? Seems to me if most stick with the above philosophy their ONLY hope is to sell that company (which is a whole different ball of depressing-wax in a down economy). If not, i would think you guys would be just throwing good money after bad.
Any thoughts?
fredwilson
· 1 year ago
Meetup is a good example of this. We recently invested in Meetup. They've been around for five years and are very close to profitability on double digit millions in annual revenues. They needed one more round to get there. I think there are literally hundreds of companies that fit this example.
alexklaff
· 1 year ago
I won't disagree that there are probably hundreds of VC backed companies in positions like that of meetup. However, i would probably also say that for every meetup, there are probably 2-3 others (give or take) that are not close profitability. It's those companies that i wonder when VC's say enough is enough--let's put a viable business model in place, or let's move on.
In his post the other day Calacanis talked about building leaner, more focused and more profitable businesses in these times of financial uncertainty (a sentiment you echoed here). However, i can't help but wonder if on the flip side, it doesn't also make some sense to seek out early stage companies that are building their businesses with these goals already in the forefront? To me i would think that an early stage start-up with a solid plan of revenue would take less time, money and VC resources to reach a level of profitability equal to that a meetup. Am i wrong in my logic? If so, forgive me but i am new to the web start up world and this angle of funding.
Thanks in advance.
Best, -A
fredwilson
· 1 year ago
Yes, it does make sense in new startups and that's the vast majority of what we invest in and it will continue to be
But my point is that early stage investments will not have the same wind at their sails they've had in the past four years
It doesn't change how we will invest, but it likely will change how quickly we'll generate returns
So a few smart later stage investments is a good compliment for us and we've been doing that since the start of the year
alexklaff
· 1 year ago
Gotcha. I'm glad to hear my logic isn't all screwed up. Thanks for sharing your insights. Hopefully you'll give us a look soon (us being Urban Revurb). :) if not, i'll have to find another app like tumbltape so i can continue to have an excuse to send you random emails shamelessly promoting my company.
On another topic, i am digging the disqus features. Especially being able to follow/reply to threads via my email. So much more convenient to both track and fire off responses.
Cheers, Alex
dmreinke
· 1 year ago
My own perspective as the founder of an early stage startup - I'm glad to be heading into the downturn. I'm excited by the potential to focus on basic blocking and tackling. If you have a strong idea you want out of the hype bubble and you want to focus on building a great company.
In my mind all the elements from moving from "2.0" to "3.0" are not in place yet. There is still a lot of work to be done to turn all this social network data into valuable assets. Maybe a few years of quiet execution will lead to some new breakthroughs that create the next Google or facebook.
antje wilsch
· 1 year ago
Jason's comments are not atypical of the valley myopia on this subject that frustrate me b/c I used to deal with start-ups day in and day out, although now I'm somewhat removed but I still maintain professional contacts and check in with them.
>1% of all companies who seek money get it. That's not even ALL start-ups; just the ones seeking money. I don't understand why people look at funded start-ups as any bell-weathers for what the entire start-up community is doing. Most companies get funded b/c they have good contacts, a leader who's been there before (prior success) or has another personal connection. VERY few companies walk in off the street and ever get funded.
Yet if you talk to all the hopefuls at all the various silicon valley events, you'd think that's the only way any company ever makes it is by getting VC funds. Most companies don't. And most start-ups eventually fail. I guess it's the dream that's sold that keeps them coming back and trying. But I wish language like this was tempered down b/c you're right Fred, the ones who are funded right now, again less than 1% of all companies who sought funding overall, aren't the ones who need to worry. It's everyone else.
I've always said thank god for technology and innovation - without it, where would the US be right now?
Samuel Diamond
· 1 year ago
Not to be mean, but if you are knee-deep in the startup business, the thoughts from Calacanis shouldn't have been a wake-up call. It should've been more of a reminder.
People should already be aware of this information. Even beforehand, business models around manufacturing and energy ( including 2.0 sites that use energy from companies who might increase prices for their server use ) were getting shredded by the 100 dollar barrel.
If people were not aware, and that somehow the 10 steps were going to save people who read it, then those people were most likely going to fail anyway. Or they were saved from information that should already be known.
The percentages are always malleable: Who comes up with 90%? Not all startups are funded by VCs, and not all VCs publicize where their money is going ( except for bigger firms ).
Calacanis is a great innovator, but in terms of analyzing, is mediocre at best, and haughty at worse. Don't ask Jordan about the future of the NBA, because he has no clue. Let the innovators innovate; if you start listening to their percentages and "sky is blue" logic, no one will get anywhere with creating a successful business.
This motivates me to write a book. Because people go nuts over simple logic.
All Comments
Why is what Calacanis saying news? Just like 2000-2001, we have a surplus of startups in a lot of segments or niches, offering overlapping, underperforming, failing-in-innovation services in many cases. We're due for a shakeout, it would have happened sooner or later, now it's just happening faster.
For companies that get venture backing, the number is at least 33% and
probably a tad higher.
At peak VC cycles, I believe a lot of companies get funded that should not have been. In public market peak cycles this becomes even more apparent, when every company spins off a one horse dog and pony. Such as when every networking company spun off one Router or one Switch only start-ups.
During trough's in a VC cycle, start-ups still have opportunities. They need to think outside the box. This is where strategic investors will play a more important role. Can't find traditional VC financing? Figure out what other company your technology benefits and look to them.
Lastly, when I previously headed up marketing for a *cash poor* start-up, I wore multiple hats (we all did). So I not only managed marketing, but also business development, affiliate marketing, PR...At the end of the day, everything I did had a P&L, hell I even took out the trash at the end of every night. To manage through these tough times, Start-ups have to be creative, nimble and their employees need to be willing to take on more than their core roles. Oh ya, and fire the guy who bought the T-shirts to give-a-way.
www.twitter.com/A_F
That's the way to think in times like this
1) Don't pay the rate card - Whether it is online advertising, print or other - I was often able to negotiate steep discounts when paying for advertising (example was rate card was $24k I paid $6k / rate card $70k, I paid $10k ... It's all a poker game, when you first inquire, be a little aloof and ask them to keep you in mind when they have remnant inventory.
2) Don't buy CPM, or even only CPC - Make them a vested partner. When I built an affiliate channel, the most successful partners were ones that were revenue shares (they only made money, when they sold a product)
3) Don't waste your money on a meaningless booth at a meaningless tradeshow (I was dumbfounded by some of the companies that had paid for a presence at this years Web 2.0 in NY).
4) Let others do the heavy lifting - A lot of start-ups that I advise bring their social network business plans to my attention for my opinion/comment. They all make the same mistake, in that they are going to create this great social network around a particular niche. Why reinvent the wheel? If you need to be nimble early on, consider leveraging someone else's already existing social network (ie- make your service into a widget for FaceBook, or use Twitter as your member base). Consider that getting a new user to your service will likely eat up the majority of your cash.
5) Partner up with non-competing (even better complimentary) start-ups where you can share infrastructure costs. This can be anything from sharing office space, to sharing servers,etc.
6) Realize that your most important asset is not your programming expertise...consider hiring someone with a marketing background (*hint) early on. Most start-ups I speak with have ZERO marketing guys on board of their first 20 hires! A competent marketing person can often pay for themselves 10 fold by bringing you ideas, partnerships,etc that you likely would not have thought of on your own.
That's all the IP I feel like giving away today...hope someone finds it useful!
www.twitter.com/A_F
Booths are expensive (and not just for the space, but also in terms of materials, time, transport). But it's worse than that. At a booth you're at the mercy of random passers-by. Sometimes that can work out in nice and unexpected ways, but that's a 1 in a 1000 chance. The booth ties you down. While you could be legging it around the convention, meeting with people of your choosing (ideally in the luxury of the corporate meeting rooms they paid to have upstairs in their booth, served drinks and fruits that they paid for by freshly showered youths - well, you get the idea), you're shackled to your booth, because you've no-one really excellent to leave there, and you wouldn't want to not be there when the president of BigCo Inc happens to walk by with an hour to spare chatting to an unknown startup. Ain't gonna happen.
So don't give up the many advantages of not being tied to a booth. A convention is a great setting for guerilla marketing - it's full of tons of people with some extra time on their hands, as opposed to NO time which is the normal case. And you can always take Jason's other advice, which is to throw a dinner. At $1K that's dead cheap (and way more effective) than getting a booth.
With respect to #4& 5 i think this makes great sense. However, i also think there is room to expand on this type of "partnering up" scenario.
In my opinion, why stop there? I think given the landscape these days (with respect to niche start-ups) there is a lot that we, as entrepreneurs, can do in the way of building mutually beneficial partnerships. And by "mutually beneficial", i of course mean not only financial, but also user, content, feature sets, etc. As an early stage start-up this is something i have started to focus on as we continue building out our Alpha. I guess my theory is on this is: why spend the money AND time to build something out when there is a good chance that another start-up out there is focused on this piece? In my specific example, it was reaching out to Profilactic ( a similar service to FriendFeed) in hopes that they could provide the lifestreaming component we plan to develop for Urban Revurb.
Personally, i think there is huge potential in this area. Another great example would be utilizing someone like Disqus versus building out your own commenting system. Or for Twitter to reach out to the hundreds of apps built around their platform and cherry pick some that they could add to enrich the user experience, instead of purchasing them (ie the acqiusition of summize). Honestly, i could go on and on. But i won't. :)
Bottom line is; this is something that i feel that should be a huge focus for both early AND late stage start-ups moving forward. Right now, i know of one that will be trying this route--especially in this down market.
One thing i do disagree with (at least in my example/opinion) is building your product as a widget, etc. When i look at a lot of these "social" sites i see little more than basic web "fads". So for me the thought of staking my companies future in the future of another social network seems even more risky than taking the bigger plunge. Plus, i guess also feel that if your idea isn't working in current form.... you can always scale it back down to a widget. (Unless of course you have destroyed your brand in the process)
Lastly, i'll say number 6 is dead on. Sadly, most companies (start-up or otherwise) don't get this. Fortunately for my start-up, i am not the tech guy, I am the marketing guy.
Cheers.
Alex
P.S. to Fred. I mentioned two of your portfolio companies in my above comments. Obviously there are others--which begs me to ask; is there a reason why VC's don't forge partnerships between their investments?
I look at Tumblr (another one of yours) and wonder why there isn't an option to integrate Disqus in my blog right from the customization tab. Certainly both these companies could benefit from tighter integration (especially when most of the comments systems on tumblr are via Disqus). But more importantly, i think it helps simplify the UE for those of us who want to add comment capabilities. Is there something i am missing in my logic?
My point regarding building your product as a widget was not intended to imply that you should solely back any one platform. This comment was specific to a launch phase, and is a suggestion on how to jump start your customer acquisition phase.
I think what Jason did was great: he started a conversation about "what's gonna happen with startups in this bad economic environment". If he makes out of this a good advertising to his name, i'm not bothered. Good for him. The fact that now Fred is writing about it, and we're commenting about it, it means several people thinking about this, which is a good thing.
Maybe the 2008-2010 period for startups will be remembered as the "leaner, focused, profitable" time, who knows?
Invisible Hand.
Alex
www.twitte.com/indigo
One data point doesn't make a trend: but I am seeing big-name VC firms that we in the A round opt out of subsequent rounds for companies that find themselves in need of more capital. I have lots of startup colleagues that are flipping out right about now.
It's another one of those reasons that I always tell entrepreneurs that my #1 rule of INITIAL fundraising is to start small and DO NOT SQUEEZE your investors on valuation. You want partners who feel profitable upon entry. You want an absolute alignment of priorities and motives. And you want people with flexibility and enthusiasm to help your company when times get tough.
Hyman Roth style.... always make money for your partners.
[Some] VCs turn into vultures when they've got cash and the music stops.
I know NO ONE who has been laidoff. Even with gas at $140 a barrel this summer, I couldn't convince employed techies to do side projects for me.
If congress can get something passed that allows the credit markets to loosen a little bit, I think we'll all be fine.
I do have a question though and I hope you, Fred or anyone participating in this conversation, can give me some insights: Would you not recommend to start a web business at this point? As it should be everyone's focus to build a strong product and reach profitability asap, that clearly is not always the case. So if you say, that seed and early stage will dry out, is there any other possibility of raising funds i.e. family & friends that you would consider realistic?
Thanks, David
When the storm passed, we were a leader in a newly surging industry....and it paid off big for 3 years and into an exit.
Start by swimming upstream :)
We started our financial web startup 1 week before Lehman blew up. What a way to commemorate your entrance.
We're feeling pretty edgy these days but thankfully, funding is still obtainable but hiring is harder than ever with more people seeking the comfort of a paycheck from a Fortune 500 company. People tend to be skeptical of the survivability of startups during downturns.
As andy said, many great businesses are started in downturns. It may be that they are great because of the dna ingrained from starting during a downturn
If you can't think of doing anything else because you are so passionate about the idea, then go for it
And before we question the "intelligent" part, I'm willing to bet most people either:
a) could see potential problems, but went along with the ingrained incentive system because it was the right personal choice (local optimization resulting in global minimization), or
b) couldn't see what was going on because they were asking the wrong questions.
Some will learn, some won't.
While right now may not be the best for for ALL entrepreneurs, I'm betting it's the right time for the BEST entrepreneurs.
What's absolutely certain is that these days VCs won't be financing "new startups that still have to prove their concept". Those startups (web businesses or not) are gonna be hit the most. Angel investors get scared so I think that source of income for "new ventures" (read riskier ventures) will have harder time getting from idea to reality.
But again, if it's 4am and you're still fired up with your idea, it sounds like "go for it!" would be the way to go.
combination of cash (through friends & family) and guidance (through
angels)?
always helps because it helps you see your idea from different angles (based on their feedback). What you
want is to have people challenging your idea, trying hard to find flaws to
your concept. That's the help you need, IMHO. After "convincing" 10 people
(assuming people that are more or less knowledable in the field you're
venturing in) it means you've gone somewhere, at least in paper. A different
story is having people to commit and investing the real dollars they've
earned.
There's no rule here. I personally wouldn't enjoy reporting to a bunch of
different people about how things are going, one by one (specially when things are going badly). What you suggest
might very well work for you (cash from friends and family - guidance from
angels) but the thing is you're gonna have to split the pie in more slices.
feedback, thanks.
Beg to differ regarding your suggestion that "Venture capital firms are largely flush with capital from sources that are mostly rock solid."
That was true back in the last crash. For, during the tech crash of 2000-2002, most LPs had limited or containable exposure to tech stocks etc. Even better, despite the cfrash, most LPs had mad so much money -- truly historic and outlandish returns -- from VC that they had high tolerance and expectation going forward.
So - back then - for the most past VC fund sources indeed remained rock solid.
This time around LPs -- endowments and pensions and funds-of-funds and the like -- are getting massively hammered. They have massive exposure to the finance sector and its meltdown. Moreover, they typically rely heavily on credit facilities to fund PE and VC commitments.
Worse -- and again unlike the last crash -- this time around the LPs are coming off a period of remarkable returns from every asset class *except* VC. For the last many years, LBO funds, hedge funds, and the public markets (domestic and international and emerging) have been providing excellent, even amazing, returns -- all the while VC returns have been middling to poor -- or worse
And now all those non-VC asset classes are nose diving and fast. LBO funds, hedge funds, emerging markets -- no one expects these asset classes to be as fruitful in next few years as in last few years.
So LPs will no longer be able to ignore poor VC returns because they are obscured by massive returns elsewhere in LP portfolios.
Which means, IMHO, that your other note that "If you look back at the last market downturn, most venture capital firms did not lose their funding sources" will maybe not play out this time at all.
Either LPs are going to bet that VC is finally, finally due for its return to return heaven -- and so pile in and pile on -- or else they are going to say, help! i need stability and some kind of acceptable return and I can no longer afford to indulge in VC asset class anymore...
I expect they will meet their capital calls on the funds they are in already. The cost of not doing so is high, both financially and reputationally
And most vc firms don't fund companies from more than one fund and reserve fully for follow ons
So I stick with my statement even though I recognize your point and somewhat hope you are right about LPs willingness to pour capital into the VC sector
i agree there will be almost zero default on existing LP commitments (though I would not be surprised if LPs start breathing down VC funds necks a bit more now...)
I think a key difference between this startup depression and the last, at least as it pertains to online advertising, the last depression didn't just destroy the startups, it destroyed the powerful companies as well - Yahoo, AOL, Excite, DoubleClick, CMGi, InfoSpace, etc... Which meant there was ample opportunity for young companies with cheap business plans to work smarter & harder and emerge with amazing businesses - TACODA, Blue Lithium, Tribal Fusion, etc...
This time the problem younger companies will have is that Google, Yahoo, Microsoft and Platform-A, are not going anywhere, they are very large are profitable. Neither is Adify for that matter though we are in a mildly different space and I don't want this to be an Adify advertisement.
Last time the young companies profited because despite the capital market dislocation there was still a secular shift in spending for advertisers. Online grew quite quickly and the startups who survived were around to pickup those dollars. Very specifically from my own experience, ValueClick and Advertising.com are only the large companies they are today because DoubleClick Media and Engage effectively disappeared.
I think this downturn will hurt smaller companies much worse than last time. I am sure you're correct that VCs will continue to back their portfolio, from personal experience I know this is the type of thing you do with companies during downturns. I would be concerned that ad budgets will be harder to come by for new mediums like social applications, wireless, etc... not because demand will go away but because, in a downturn, smaller experimental budgets will mean a larger share of spend going to larger, already established players.
Russ
http://tinyurl.com/4arswk
I would offer a slightly different view of the outcome of the Web 2.0 orgy of ideas. I think this could be a more dire prediction than simply high volume bankruptcies (which is bad of course). Worse than the definitive nature of failure that results in bankruptcy is simply that ‘Nothing Happens.’ My predictions is that we are going to go through the ‘Chapter of Nothingness.’ No exits, no meaningful venture funding for emerging ideas, erosion of equitable A to B Series financing terms. This will result in trapped talent and capital in neutral to bad ideas with no hope of a material exit. My friend Caterina Fake said it best: The majority of Web 2.0 companies are ‘All Satellite, No Planet.’ My advice to any startup in this market is to find way to transform into a planet and do it quickly. The Chapter of Nothingness is going to be far more painful than the quick market spike of ideas during the Web 1.0 crash. In this market correction, many will look back and realize that they were actually out of business long before they continued development for year(s) and round(s) of angel financing later.
shouldn't that be the goal of every business, regardless of market cycles-- only raise money when you need to?
Specifically, I was the co-founder of a technology start-up in the financial management space in Europe, started in 2003 and sold in 2007 with 100 000 paying customers and for a good price. My partner and I have an idea we wish to pursue but both of us are still recovering from the last ride (along with some family issues I won't go into here).
It just doesn't work to hire a CEO and hope they will make a success of it. We tried that once but the CEO we hired was really only in it for the up-side (he had nothing to lose) and as soon as the first real hurdle arrived, he jumped ship. We need someone willing to give it everything, someone who doesn't see walls, only hurdles. We could provide initial funding, coaching and heavy involvement in designing the system, but the entrepreneur / CEO has to run with it.
So where does someone start looking?
I think this is good advice regardless of a downturn market or not. Figure out how to get to where you need to go so that the money comes to you and not the other way around. Work with people who are hungry and do it in that other 40 hrs a week that's not your FT job.
My view is that there is no better time to be in a start-up and to be "pre-revenue" than when revenue is hard to come by, when hungry talent easy to come by, and when large incumbent potential competitors are drained and distracted. While it may be harder to come by financing in those times, it is more likely to come from smart money, which will pay off in the long-term anyway.
For all ventures, it's time to dig deeper into using our social capital (networks and relationships) to get done what we need to get done. It's also worth seeing if we can push our business to 'open' up more - becoming more permeable, iterative, and emergent - and leveraging the community and other resources to create the value that we are uniquely trying to orchestrate. The open-source and social change worlds have some great lessons for us in creating huge value with limited financial resources.
I believe people need to differentiate,
"Great entrepreneurs build value and market-share in down markets."
That is a comment of a person who is starting a business.
The majority of the comments who worry about the money are having their dreams of money destroyed, they are depressed about a dream of money, not the dream of a great business.
Mark McGuire (flywheelblog.com)
Fred: I am curious about this comment form your post. Certainly i can see how this would apply in most typical funding scenario's but the question i have is; What percentage of the "late stage start-ups" out there are close to breaking even? Obviously you can't speak for all start-ups, but i think most of us can agree that there is a LARGE percentage of businesses out there who are operating sans a sustainable financial model. At what point to VC's cut their losses and start funding start-ups that actually HAVE a plan to make money? Seems to me if most stick with the above philosophy their ONLY hope is to sell that company (which is a whole different ball of depressing-wax in a down economy). If not, i would think you guys would be just throwing good money after bad.
Any thoughts?
been around for five years and are very close to profitability on double
digit millions in annual revenues. They needed one more round to get there.
I think there are literally hundreds of companies that fit this example.
companies in positions like that of meetup. However, i would probably
also say that for every meetup, there are probably 2-3 others (give or
take) that are not close profitability. It's those companies that i
wonder when VC's say enough is enough--let's put a viable business
model in place, or let's move on.
In his post the other day Calacanis talked about building leaner, more
focused and more profitable businesses in these times of financial
uncertainty (a sentiment you echoed here). However, i can't help but
wonder if on the flip side, it doesn't also make some sense to seek
out early stage companies that are building their businesses with
these goals already in the forefront? To me i would think that an
early stage start-up with a solid plan of revenue would take less
time, money and VC resources to reach a level of profitability equal
to that a meetup. Am i wrong in my logic? If so, forgive me but i am
new to the web start up world and this angle of funding.
Thanks in advance.
Best,
-A
we invest in and it will continue to be
But my point is that early stage investments will not have the same wind at
their sails they've had in the past four years
It doesn't change how we will invest, but it likely will change how quickly
we'll generate returns
So a few smart later stage investments is a good compliment for us and we've
been doing that since the start of the year
sharing your insights. Hopefully you'll give us a look soon (us being
Urban Revurb). :) if not, i'll have to find another app like
tumbltape so i can continue to have an excuse to send you random
emails shamelessly promoting my company.
On another topic, i am digging the disqus features. Especially being
able to follow/reply to threads via my email. So much more convenient
to both track and fire off responses.
Cheers,
Alex
In my mind all the elements from moving from "2.0" to "3.0" are not in place yet. There is still a lot of work to be done to turn all this social network data into valuable assets. Maybe a few years of quiet execution will lead to some new breakthroughs that create the next Google or facebook.
>1% of all companies who seek money get it. That's not even ALL start-ups; just the ones seeking money. I don't understand why people look at funded start-ups as any bell-weathers for what the entire start-up community is doing. Most companies get funded b/c they have good contacts, a leader who's been there before (prior success) or has another personal connection. VERY few companies walk in off the street and ever get funded.
Yet if you talk to all the hopefuls at all the various silicon valley events, you'd think that's the only way any company ever makes it is by getting VC funds. Most companies don't. And most start-ups eventually fail. I guess it's the dream that's sold that keeps them coming back and trying. But I wish language like this was tempered down b/c you're right Fred, the ones who are funded right now, again less than 1% of all companies who sought funding overall, aren't the ones who need to worry. It's everyone else.
I've always said thank god for technology and innovation - without it, where would the US be right now?
People should already be aware of this information. Even beforehand, business models around manufacturing and energy ( including 2.0 sites that use energy from companies who might increase prices for their server use ) were getting shredded by the 100 dollar barrel.
If people were not aware, and that somehow the 10 steps were going to save people who read it, then those people were most likely going to fail anyway. Or they were saved from information that should already be known.
The percentages are always malleable: Who comes up with 90%? Not all startups are funded by VCs, and not all VCs publicize where their money is going ( except for bigger firms ).
Calacanis is a great innovator, but in terms of analyzing, is mediocre at best, and haughty at worse. Don't ask Jordan about the future of the NBA, because he has no clue. Let the innovators innovate; if you start listening to their percentages and "sky is blue" logic, no one will get anywhere with creating a successful business.
This motivates me to write a book. Because people go nuts over simple logic.