Roger Ehrenberg of Information Arbitrage Capital recently wrote a great post entitled: For the Good of the NYC Venture Scene I’d like to See…
Roger’s a great dude and I think he made some excellent points. Here’s my take, or at least part of it…
NYC needs a new narrative. (And yes, I think the narrative itself is quite important.)
The central question to this narrative is: Who’s the hero of the startup universe? Is it the entrepreneur, or is it the investor?
My first heroes were Fred Wilson and Chris Dixon. They were so smart and they had these great blogs that let me tap into their brains and absorb knowledge. It was great to have that kind of access. Like a lot of peeps in NYC, I quickly became a fanboy. (Still am, actually.)
Over time, I realized that this VC-centric narrative had a pernicious side-effect: Because they were my heroes, I started to think that getting on Fred Wilson/Chris Dixon’s radar was the coolest thing I could possibly do. And more generally, instead of focusing on solving customer problems and creating a kickass product, my main goal––my raison de etre––started to become getting investors to know and like me.
I think the same thing happens to a lot of entrepreneurs. And I think it’s a bad thing. In the entrepreneurial ecosystem, I think there’s a general overemphasis on the role and importance of investors. The reasons for this are perfectly understandable: Investors have an incentive to self-promote and build a strong personal brand. Founders don’t, or at least they typically don’t appreciate the ROI.
The result is that the newbie coming into the startup scene gets lots of exposure to the the mind and (virtual) conduct of investors and very little exposure to the thinking and lifestyle of individual entrepreneurs. This is reinforced when journalists (who face the same discovery problem as everyone else) end up filling their startup-related articles with quotes from VCs.
This does not mean that VCs and journos are bad people. Hardly.
But it makes people want to be VCs, not entrepreneurs. And that is bad.
The goal of my rants is to get people to think a little differently about the problem and maybe, just maybe, start to see entrepreneurs and themselves in a different light. I want my rants to serve as a countervailing influence to the VC-centric mindset that inevitably rubs off on us all, the best included. And really without entrepreneurs, there is no startup scene. Period.
Venture capital is like baby food––it’s something that helps startups grow. It feeds startups and founders. But because of the self-promotion/incentive problem I described earlier is compounded by the fact that the demand for startup capital almost always exceeds the supply of it, people end up focusing on and worshipping the people who control it––they make the venture capitalists themselves the focus of the startup universe.
For some startups, VCs really are their customers. Until recently, this was Twitter…and Tumblr…and, yeah, lots of folks. Some startups can even exit without making a dime of revenue, so maybe this is not 100% a bad thing.
However, generally speaking, having investors as your customers is a bad thing. A healthy village, a healthy startup ecosystem, a healthy New York is one in which the most ambitious people WANT TO START COMPANIES that change the world, disrupt huge markets, and alter how we live as human beings.
In a healthy startup scene, the founder is the hero. Maybe this will be Dennis Crowley’s next act. Maybe Avner Ronen will step up to the plate. Maybe….it’ll be someone else. Regardless, we’re not there yet. This is bad. I want to change that.
I believe that a big part of the way you get there is to change the narrative. It’s important. Or at least it was for me.
UPDATE: Seems like there confusion as to what I’m advocating for, so I’ll clarify. I’m NOT saying that Fred or Chris (whose blog personality is a lot more investor than entrepreneur) should go away or stop doing what they’re doing…at all. They are good dudes doing great things and yes, calling attention to the scene, which is good. It’s not at all a zero-sum game. What I am calling for is not “take Fred/Chris down a notch,” but rather “bump entrepreneurs up in the hierarchy.”
Hi There,
I wanna make something VERY clear here: Entrepreneurial populism is NOT the same as and should not be equated with “Entrepreneur as victim.” My goal with this blog is to empower entrepreneurs as a class, not to disempower them with some sort of bullshit victim narrative. But a big part of that means creating awareness of and pride around the entrepreneurial identity. Narratives matter. Identity matters. And the more entrepreneurs think of themselves as engaging in a heroic act rather than beggars at the VC table, the better off the ecosystem is for everyone on this side of the table.
And you’re right, the true champions find a way no matter what. But I believe that the true champions also have a duty to look out for and help everyone else. We are all weak, all vulnerable, all naive at some stage in our development. I know I was. And probably will be again in the future. Having someone who outspokenly represents our interests without conflicts of interest is, i hope, a valuable service. I try to do that. Don’t always succeed, but I try.
Anywho, I really don’t want to push a victimization narrative. That is the opposite of my goal.
Cheers!
-Matt
FW is awesome but you’re a freakin’ idiot if you don’t think his fame is due to the fact that he writes checks and had some success and has a bunch of high profile startups in his portfolio. Same thing for CD. If he was a guy with interesting ideas but no Founders Collective or past successes, he’d be another random blogger with an opinion. And remember, opinions are like a$$holes – everyone has one.
Fanboy idiocy always amazes me.
It’s easy to be arm-chair quarterback but a $100M is no joke. It’s not 4sq or anyone’s responsibility to take up the mantle for NY or anyone.
I love the way folks talk about FB or Twitter or Google but it’s worth remembering that those are rare almost lightning in a bottle cases, e.g., they happen very very very rarely. There are hundreds of thousands of businesses started globally every year and there is one of these (at most) per year. Not good odds from a risk:reward perspective.
And now to digress…
As an entrepreneur, I appreciate you stirring the pot and like the idea of removing information asymmetry. But the “entrepreneurial populism”/”entrepreneur as victim” credo I see more and more is distressing and counterproductive (here and elsewhere). Great entrepreneurs are supposed to be smart, agile, etc etc and will find a way. I’m not sure real entrepreneurs need all the sticking up for. This stuff, of course, works well on readers who fall into the wantrapreneur bucket and who’d rather blame their deficiencies of product, personality, vision, etc on a system, city, narrative, etc.
Spencer Fry is a founder who has a great blog, so is Matt Mireles :-).
YES!!!!
Ok, so that’s not exactly what I wrote, but it’s what I should have wrote and what I’d LOVE to see. You nailed it.
After reading the post, and all the comments, it sounds like no one wants FW and CD to stop doing what they are doing. Everyone just wants more entrepreneurs to step up and start contributing to the conversation. FW and CDs blogs are great, as they provide a perspective that I find valuable (from a startups view).
But even more valuable, to me at least, are the views from guys like Eric Reis http://www.startuplessonslearned.com/ , Andrew Chen http://andrewchenblog.com/ , Steve Blank http://steveblank.com/ and Mark Suster (Ent turned VC) http://www.bothsidesofthetable.com/
Reading about “in the trenches” experiences I find more valuable that a VCs perspective on similar subject matter (but i’ll still read the VCs entries).
So Matt, are you just asking more entrepreneurs to step up and start blogging from their sidelines?
True dat. And just so we’re 100% clear on this, I DO NOT GRUDGE FRED WILSON OR CHRIS DIXON FOR BEING BALLERS IN THE BLOGOSPHERE. I just think that their baller status needs to be complemented some high-profile entrepreneurs.
I don’t disagree that VCs can be an important factor, its just that in SV that seems to be the goal: To get venture backed. This is a really odd behavior (trained into the startup culture by the VCs). Venture isn’t the only fertilizer out there, in essence (and true outside of tech companies as well) any sort of access to capital can catapult growth.
I overall agree with the post: VCs are good, but not god-like. Admire the entrepreneurs who understand their markets, make a great product, executes their business model well and can successfully scale (with or with out outside money) their businesses.
Agree re: $100, have feeling they will end up being offered a more bubbly number like $250. Either way, I am saying it would make entrepreneurs in SA more visible. Would it be even better if the company is valued at $1B+ in a year or two? Sure. But RIGHT NOW the narrative would improve if we had a $250+ exit.
occasionally the media gets on a hype wave and has fun pumping something up (and then popping their own balloon, to the dismay of the participants), but really the imbalance corrects via *successful startups*
Do you think FW is admired and respected as much as he is because he is a VC or because he is the best individual tech/startup blogger on the planet? I think it is the latter. Similarly, with CD (who is both an entrepreneur and VC) – just one year ago few people had really heard of Chris (not to say he wasn’t the Man, but he was definitely a less visible man), but he went on a tear and wrote a ridiculous number of interesting and insightful blog posts that changed his standing in NY startup land.
In today’s world people need to own and nurture their digital identity, and those who excel by sharing smart and interesting shit will attract the largest and most vibrant followings. This is not dissimilar to what you’ve done with The Metamorphosis.
That said, the VC blogger has one big advantage – the VC has uniquely broad perspective being able to observe the eco-system from 30,000 feet, identify patterns and trends, meet lots of innovative and brilliant entrepreneurs, dive into many cutting edge ideas, and extrapolate macro (and sometimes micro) lessons broadly applicable to many. In fact, any VC that doesn’t naturally have the ability to intuit these trends and lessons will probably suck at being a VC.
Actually, I completely disagree with Roger on 4Sq selling to Yahoo. NFW. 4Sq should aspire to grow into a huge business, IPO and dominate the world. Not sell for a measly $100mil to the company where startups go to die. Zuck got famous for turning down a $1bil offer from Yahoo, not for taking it.
Generally speaking, non venture-backed businesses are smaller businesses. Obviously, folks like Bloomberg can tweak this, but a startup ecosystem to grow into a robust environment, we need VCs. They’re like fertilizer. Yes, plants can grow without them, but with them (esp the right one), crop yield can really explode.
This is like a chicken-and-egg argument and I don’t totally get the point. We don’t have an entrepreneurial narrative because we have so few major exits in NYC. I think Roger’s point that it would be nice if 4SQ sells out to Yahoo is well-taken — it would give us that narrative we’re missing.
More to the point and more nefariously, New Yorkers have also always been good at profiting on the backs of others. The entire finance industry is about doing this. VCs happen to be the best of the bunch, but some are still vultures. Being close to the money is a good way to make money yourself, with less risk. My bet is that in 100 years access to money will be a lot easier and require fewer middlemen, thus giving back to both ultimate investors and entrepreneurs the huge chunk middlemen eat right now (middlemen from VCs to Hedge Funds).
Agreed that funding occurs as a distinct event in a way that companies do not. and I also agree that the existing imbalance is completely understandable given NYCs history. I also think that regardless of how it started, the imbalance needs correcting.
To be clear, I don’t think it’s a zero-sum game..at all.
And yes, I do understand that VC-worship is not confined to NYC. But in the valley, the real god figures are entrepreneurs like Steve Jobs, Larry/Sergey and Zuck. Hell, the famous Mike Moritz (sp?) of Sequoia just wrote a book on Steve Jobs.
I completely agree that investors & entrepreneurs exist in a symbiotic relationship. Most def. But in terms of mindshare, there’s an imbalance in the status quo that favors VCs. This is my point.
My experience in New York is that the entrepreneur just doesn’t rely as much on VC: Instead they have (gasp) actual business models that make money. Something I think San Fran’s scene has the propensity to overlook or just leave to the VCs to figure out.
I think NYC needs an epicenter: Governor’s Island http://takrupp.nomadlife.org/2010/04/starting-movement-mini-silicon-valley.aspx#comments
I’m of very mixed feelings on this post Matt. As entrepreneurs, we have building to do. We don’t need more hype or froth (although I do think some hype about NYC is good for recruiting). We have to prove our success, and *then* we have a great narrative.
There is more to talk about in terms of actual accomplishments on the rise of seed funding in NYC than the rise of really successful consumer application startups. I’ll note that there are quite a few very successful non-consumer startups in NYC that the media finds boring to write about.
I disagree with the statement that founders don’t have an incentive to promote. Those entrepreneurs who could pull it off have always used celebrity as a marketing tool. If you couldn’t get the press to write about your product, you’d use the founder-narrative angle.
I also think it’s great that VCs are more outspoken these days; there is considerably more transparency about their world than when I started in this business in 1994.
The media (and everyone else) kissing up to “money” is nothing new at all. The big discrepancy you see in the NYC coverage versus Valley coverage is natural given the relative immaturity of the NYC startup scene.
You’re honest with people so I’ll be honest with you.
I agree with your point that entrepreneur role models are important, and more important than VC role models. I think New York needs more.
But, let me get this straight:
– People in NY worship VCs too much, and a proof of that is Chris Dixon. Um, Chris is an entrepreneur. He’s also an investor and worked in VC like 70 years ago, but he’s an entrepreneur.
Sure, Fred Wilson may be the most visible person of the NY ecosystem depending on how you track it, but I think that’s a function of Fred being Fred, not that NYers worship VCs too much. If John Doerr had been putting his pen to paper every morning for the world for like 8 years as Fred has done, you’d bet the most visible person in Silicon Valley would be a VC. Conversely, if say Kevin Ryan blogged as much as Fred does, Kevin would be just as visible if not more. For example, someone like Scott Heiferman who blogs much less is much less visible outside New York but just as “worshipped” inside.
– Didn’t you say you were moving your company to Silicon Valley? Hell-oooo VC worship land! To be sure there is entrepreneur worship in the Valley (obviously) but it’s also the most VC-worshipping area on Earth.
I’d say New York worships *the hustler* more than any other town on the planet. The entrepreneur, but not the Silicon Valley geeky entrepreneur, the feet on the ground entrepreneur. People like, well, you. New York also worships money and power, and so that includes VCs, but I don’t think too visible VCs is top 10 on the list of New York’s problems. Fred’s visibility might be unhealthy in some metaphysical sense because it highlights VCs rather than entrepreneurs but I’d say the spotlight he puts on the NY scene every day has been a tremendous boon to the city’s ecosystem, and so the net impact is hugely positive.
I also don’t like the way you’re implying that this is a zero sum game. Do we need entrepreneurs to be as visible and beloved and worshipped as Fred Wilson? Sure. But it doesn’t mean Fred needs to be less visible, it just means we need more entrepreneur role models or, rather, more VISIBLE entrepreneur role models. But to me that doesn’t imply taking VCs down a peg. It’s not a zero sum game.
I’m really tired of people pitting entrepreneurs against VCs as if they’re sides in a war, even though they’re symbiotic partners in an ecosystem where they need each other.
Agreed! This is not an argument that Chris or Fred should shut down their blogs and go home. Hardly. Like I said, I’m a fanboy of both and think they’re good dudes. But there’s a systemic imbalance if they’re the most famous people in NYC tech. That’s all I’m saying.
Chris Dixon runs a consumer web startup & Fred Wilson actively invests in them. So their high profiles not only help with deal flow, but also help them promote their portfolio. It’s not a bad thing for some entrepreneurs to aspire to have that reach.
You cant leave NYC then…… 😉