Note to readers: Hello world is a program developers run to check if a newly installed programming language is working alright. Startups and tech companies are continuously launching new software to run the real world. This column will attempt to be the "Hello World" for the real world.
There’s a viral post going around these days in the startup echo chambers. It’s a screenshot of a spreadsheet with four columns. Startup name, revenue, expense, and loss. The screenshot is usually accompanied by commentary from the kind of people one should avoid at parties.
I like to call these people Uncles with Strong Opinions (USOs). The USOs will do anything to be heard. They secretly aspire to be influencers. Or perhaps they are halfway there and don’t seem to be able to make progress unless they provocate. I suspect their kind date back all the way back to the missing link.
The first two paragraphs of this column, are to my regret, ad-hominem attacks — the lowest form of argument if one were to apply Paul Graham’s hierarchy of disagreement. To redeem myself, I will try to level up a little in the hierarchy and refute the central point, present some counter-arguments and contradictions.
The central point seems to be this question: how can investors put money into companies that are making such big losses? Many commentators already know the answer. But they willfully ignore it. These are not traditional investors by any stretch of the imagination.
People who are backing early-stage companies to the tune of millions are not in the business of buying government bonds or mutual funds. They are venture capitalists.
High Risks, High Rewards
After more than two decades of startups, since we are still arguing the basics, I’ll repeat this one more time: venture capitalists finance high-risk startups and have high rates of failure. When they win, they win big. This is how it works. Period.
So what are the Uso’s trying to say? That venture capitalist should invest in early-stage companies as they’d invest in retirement savings? Are we trying to apply the idea of good and bad to venture capital now?
Now to talk about the spreadsheet itself. The sheet offers us no context. It tells us nothing about when the company was founded. How many users it has acquired. What rate is it growing at or what are the founders playing at. Without any of this and an intimate and nuanced understanding of these startups, it is meaningless to comment on any company, leave alone the entire startup ecosystem.
To be sure, I’m not arguing against criticism. The kind of nuanced writing that some media companies have embarked on is quite needed. I’m only arguing against flimsy criticisms and throwaway comments that at best feeds confirmation bias and the need to signal. If you’re an aspiring founder, or you work at a startup, ignore them. Startups are all about building for the future. Not the present or the past.