Now, a lot of what I am writing in this article is opinion and conjecture, but it will be truthful and honest, and will cover what you really need to know before you go head over heals into a tech startup venture. Unlike a lot of the books out there by experts like Guy Kawasaki and Sheryl Sandberg and books like Lean Startup, what I am going to say is the truth and it will hurt, but you will be better for it.
Just because you have been successful does not mean you are an expert, have THE knowledge or know everything. In fact, success sometimes leave people with a feeling they know too much, which can lead to their downfall the next time around. I have been working slowly on a book called RoadMap for quite a while and I can’t seem to get past the negative, destructive paths that happen for tech startups. It is just not pretty. The potential for disaster and failure is quite high, not low.
Here is the real truth, and it may take you a lifetime of trying and failing at tech startups to come to a lot of the same conclusions. First off, let’s go through the first reality check. If you look at who a large percentage of america’s tech force work for, you will conclude it is Walmart, Amazon, Apple, Google, Comcast, Verizon, Interactive Corp and Facebook. And’s that because they have built what we call barriers to entry as well as barriers to exit. These are walled in worlds where they are now in control of 90% of tech and e-commerce and trust me they will do everything in their power to keep it that way, including eliminating your ability to get critical mass in a market, creating tech that won’t let you compete, coming up with new and innovative ways to stop you in your tracks. That is what they are good at, being anti-competitive. They are not our friends, fellow tech startups, they are the enemy! The good news is they used to be IBM, DEC, Microsoft, Dell and HP. Every dinosaur has its day in the sun.
The current hegemony of Internet, Ecom and Telcos will try to control the future! In fact, we are in the most anti-competitive period of american tech life since the robber baron’s period of 1880 to 1895. It goes with the 1% controlling 99% of the wealth. Take our phones for instance, how did we get to the point where 2 companies control all the cellphones…in fact it is really 1, Samsung if you look at the data is 80% market share. Until we put some power behind anti-competitive behavior, we will all have sh_tty cable, phones that are $1000 and less than stellar car interiors. You name it, they don’t give a cr_p about real innovation. In fact they don’t care about you or me, just getting more market share and keeping you and I out. You see that is where tech startups prosper, with a real market, with real market entry. But market entry is becoming elusive. And what I see more and more often is just cannibalization, where startups just mimic startups and eat each other’s lunches, while the real good meal is being taken by a group of 10,000 pound gorilla. We may love Apple, but if you want to succeed as a tech startup, just give them the finger! You need to take it away from them to be them.
As far as cutting the Comcast cord. I had someone ask me recently if I watch “live TV”. I said yes. He told me you are in minority. Now the old telecoms are asking to be able to reduce our ability to use the Internet the same as paying customers by eliminating equal access. Hell no. And as far as tech opportunities on the Internet, can somebody tell me where there is a real opportunity for growth that is not crypto-bull. In fact it is more difficult, more competitive and the bigger guys are going to get bigger as the Macy’s, Office Depots, Best Buys and other old timers fall like dominoes. Not sure if you know that Amazon is 60% of total eCommerce sales and growing. Basically we will all be working for Amazon in the near future if they get to 85% of eCommerce and it is possible. Have you worked in their back-end? It is the embodiment of anti-competitiveness. All signs may appear that we are entering a good period for tech startups, but I differ. I think it will be a rather difficult period, especially if the economy goes bust with high inflation. Hopefully we have a couple good years before that day.
Let’s talk about capital raising for tech. Well, right there the truth is that 80% of capital raised for tech startups is in Silicon Valley. 10% in NYC and the final 5% is global, Chicago and Austin. So for instance living in Florida, Georgia, Idaho or any state or city out of these parameters and the money is scarce. It may be there for a seed round. I have had 2 offers under $30k in my past from angels, but when it comes to $1 to $10 million you have to produce and not just produce but be the best in breed that needs to appear to be a billion dollar opportunity. It’s that risk everything market, but who wants to do that? Yes, would be nice to be a billionaire, but I’d be happy to make a couple of millions or a couple hundred thousand on a venture. Billion dollar opportunities are a rare commodity that generally only gets backed in Silicon Valley, less NYC. So in general take the capital raise off the table.
Without previous tech startup knowledge for many who jump in the game, they will probably have to fail a few times to learn how to succeed. In fact, one big time success can ruin a tech startup founder, who then thinks he knows something, when in fact he or she is subject to all the same problems of starting the first time, that timing and luck are everything in tech startups as opposed to knowledge and skill-sets. I have seen a 100 great developers with great skill-sets who will never understand the market.
Our Tech Startup Age is another problem for most of us. Tech Startup Age is a reference to how long we have been doing tech startups. If you were in corporate america for 35 years and just got out, you may only be a 1 year old or a newborn when it comes to tech startups!
I happen to be in Boca Raton, where the average age of tech startup founders can be in their 40s, 50s and sometime their 70s. It is not that we are old, it’s that we are just not that attune to what the world needs, especially in consumer products, especially if we are serving a market of 20 to 23 year olds. Need to be closer to 24 to figure that out. I try to steer older startup tech teams to focus on B2B, and what they know. All that said, knowledge is power and hopefully with age, better decisions can be made. But being honest again. I have not seen this. I have seen quite the opposite, with marketing strategies that seem to come from the 1970s, to bad disco designed websites and thinking that you need to raise $500k, when you just needed to hire a Fiverr person for $1000 for a prototype. You can tell when they get the language wrong and say things like I like Twitters, think Instagram is stupid or think Wix and Weebly are fine for hard core tech websites. The thought that a lawyer for the startup needs to be paid $30k and other costs that can be contained to a lower amount in the beginning are a hard lesson to learn. Maybe the 2nd time around you can do it better! Sometimes we are just outclassed, out-maneuvered and don’t know what we are doing or up against.
The current tech highway trend is another thing to be weary of. You need to be ahead of the curve, but like a surfer you need to know when the wave is going to break and get tossed against a reef. You need to know when you are jumping in too late in the game. For instance, crypto/ICOs is already old news and marijuana was like 4 years ago, dude! Uber and Lyft have already happened. The trend you need to be jumping on is not here yet. It’s a train coming down the track so slowly nobody sees or hears it! That takes real natural talent to figure out! To be able to close your eyes and see the next Uber! Not an easy thing to do. I give a lot of credit to people who can be Nostradamus in the tech world. And some of these people end up failing because their concept never comes to fruition or it comes too late when they are broke and the tech then takes off. I hate when that happens! I personally see a near future where you can create cars on call in a lot near homes, and then you can have your lot of self-driving cars as part of a monthly service fee, so you don’t need a car. It comes to you when you need it. It is a future service that will be there soon.
But the biggest failure I have run into several times has to do with people. People fail because they fail to work together and figure things out. They get greedy and make irrational decisions without working as a team. They lose respect for other team members and take advantage of the situation. They can be outright jerks that destroy a startup before it gets going.
Wish I could write an article about how easy and wonderful it is to be in a startup. But that is not the real world. It is more of a minefield of potential problems you need to resolve one after another as you get more focused. Albeit, it is an exciting journey, if you like roller-coasters. It is more about getting others to do their job than it is about focusing on your job. Some are great at it, I mean manipulating and leading others… I will be the first to tell you that I am not the greatest at startups. I have been in them. I have co-founded several. I have even sold off some. But all of that still leaves all of us around for years in the tech startup community still at a loss. We don’t know what’s next, even if we do. We don’t know what will happen economically. We don’t know who will be elected politically. We don’t understand the family and other issues we will hit like hurdles as we try to get our tech startup business off the ground.
All I can say is have courage, because that is probably more important than any other part of a tech startup. And we have a saying, you can be unsuccessful in a many tech startups many times, but it just takes one amazing startup to be successful overall. So, don’t give up. I mean give up early when necessary and move on to the new startup so you can get aligned properly. Don’t give up the day job, unless you have to. Don’t give up the night job. Don’t give up the dream. Don’t just do it. Take your time. But value that time. Just accept the pain and trouble. But most important is listening to others. I have tried to convey to startups my opinion. Take that anyway you want. I am not an expert. Nobody is. Your success if your own making.
If you are in south Florida on Tuesday, Sept 11, 2018, we are running a tech startup pitch event with networking at Cendyn Spaces. Here is the link. Will see you there!