There was a time when I was at the cutting edge of our industry.
I got in on Ruby on Rails, and the Javascript revival, at nearly the ground floor, and worked with some of the biggest people in the PHP community before that. Because I wrote and taught and talked, I was moderately famous inside these communities, well-connected, and a regular in green rooms at industry conferences big & small.
All this means I had the unparalleled opportunity to become friends or friendly acquaintances with the people who founded — or joined in the single digits — companies like 37signals, GitHub, Shopify, Odeo, Twitter, Peepcode, Kickstarter, Harvest, ENTP, Gilt, Couch, SimpleGeo, LivingSocial, Stikkit/I Want Sandy, Scribd, Quora, and Flickr… to name just a few.
My connections to these people gave me, in some cases, a front-row seat to the founding & growth of their startups. Sometimes the death of their startups, too.
I even did some early consulting work for some of them.
But let’s pause a moment.
This story isn’t about building up my image, here. Whooooa, look at me, I’m a well-connected superstar, rubbing shoulders with dot com millionaires! Fat chance. I know you don’t give a shit about that… nor should you.
I certainly don’t look around at the people I know, and have known, and feel “privileged to know them” because they’re famous (or, in some cases, rich). I feel lucky because many of them are awesome people.
But what makes me feel especially lucky is that, thanks to my proximity, I’ve had an unparalleled chance to lurk & learn. I’ve learned so much by just watching things play out.
And sadly, a lot of what I’ve learned about venture-backed startups has been sadness and despair.
This is why I engage in such pro-bootstrapping saber-rattling. This is the reason why I believe what I believe so strongly. Not because I’ve been burned, not because of sour grapes, but because I’ve had one depressing behind-the-scenes look after another.
(Note: a small handful of the companies I named in my list are actually awesome, and inspirations to me. You can guess which ones.)
Exhibit A: Founders, Post-Acquisition
Here’s an example:
A few years ago, I met a designer I admired at SXSW. He’s not super-famous and you might not know his name, but I knew and loved his work, and he’d designed and created an amazing web app… which he sold to Google.
(NOTE: This app is not named in my list above.)
The sale was not terribly long before the conference, but long enough that the app had dropped off the face of the internet.
I said to him, “Hey, congrats on the sale! When can I start using insertapphere? I was on the beta list forever but not early enough to get an invite!”
He gave me some PR spin story about integration yadda yadda. It was clearly a party line and it was equally clear that he didn’t believe it.
Because the fact was this: Google had shut his app down, to cannibalize its parts, and they were taking forever even to do that. His previously healthy, well-loved, popular baby was dead. And allegedly the arms and legs of the murdered baby were going to be grafted, Frankenstein-style, onto an existing app… some day… but for now and the foreseeable future, they were on ice. Waiting.
He had that wan, worn-thin quality of a person trying to put a good face on things.
Lemme tell you: nobody drinks like a person who believed he’d be biting into the delicious fruit of victory, only to have it turn to ash in his mouth.
And this, my friends, this is a story of how shitty things are when they go right.
Here’s another:
Exhibit B: Investors/Trusted Advisors
This is a story about a startup you’ve definitely heard of (but again, not on my list above).
In the year before that last story, back when I was a wage slave, I worked for a firm which hired me out as a consultant. I worked on some interesting projects, including one of those fancy stealth startups so popular in the mid-aughts.
One of the investors was, and is, a big shot in the tech world: Marc Andreesen.
Being a web nerd, I nearly squee’d my pants at the prospect of meeting & working with the big guy. (Even if only via teleconferences and IRC meetings.) How exciting!!
What a disappointment.
As a developer working closely with the founders, I was shocked at the general ignorance of the team, him included. (Ignorance about technical possibilities, and a total pie-in-the-sky fantasy about users.) The optimistic team player that I was (was!), I tried to put on a good face. Hey, they were the experts, right? They were the ones with the money, right? Maybe I was wrong.
But I wasn’t wrong.
It was no surprise to me when this regrettable startup launched and everybody was all “uhh… okay… what is it?” Cue the sound of a fuse fizzling out, and desperate pivoting.
But 6 years later — just last fall! — surprise, surprise, this “startup” finally, finally sold.
Now, this startup sold for $150 million, which sounds good, right? But according to TechCrunch, that’s only 26% more than the Series C, D, & E rounds added together. After 6 years! But hey, that’s a profit, right? Maybe it’s not a 10x return… or even a 2x return… or even a 1.5x return… but still, the investors didn’t lose money, right?
Perhaps.
Then again… this startup also received Series A & B rounds but the amounts are secret. So perhaps it was sold at a total loss.
Just another outwardly awesome story, which on closer inspection turns out to be nothing but a shallow façade.
A story about the real results delivered by one half (Andreesen) of one of the most respected and prominent VC firms (Andreesen-Horowitz).
This project was my first exposure to the thick, creamy layer of bombast and other people’s money slathered on to disguise idiocy and incompetence, like icing on a lopsided cake.
Sadly, it’s become a theme.
Exhibit C: Early Stage Employees
Last one:
I have friends who work in some of the sexiest San Francisco startups, a veritable Who’s Who. Some of them are so early that they have significant shares, either vested or nearly so.
None, none of them are planning to stick around for the long term. (A few say they are, but that’s just putting a good face on it, like I tried to do in Exhibit B. But as their friend, hearing their stories, believe me, the end is in sight.)
Most of these stories I can’t tell or even hint at because these folks haven’t shared their intentions to quit with their employers. Plus in some cases, there’s vesting at stake, blah blah blah.
But there’s one story I can share:
An extremely talented developer friend of mine recently moved from Europe to San Francisco to work at a popular, well-funded startup.
My friend is truly an expert in his field. More importantly, as a contract developer who has products of his own, he’s skilled at speccing, planning, curating, finishing, shipping and selling and supporting… the kinds of skills any startup should, in a sane world, bend over backwards to acquire and retain.
Which is exactly why I felt the need to warn him about the kind of work culture he was likely to find, based on what I’d seen and heard over & over.
My warnings fell on deaf ears. I’m pretty sure he thought I was just being a zealot. I’m definitely biased. 
(Although my bias comes from experience, and not the other way around!)
My friend was therefore shocked, shocked, to find out how badly managed this startup was:
- Products shipped, partially and late, with no intention of supporting them after a month. (A waste of so much time & effort! Utterly demoralizing!)
- A toxic culture of overwork, which nevertheless failed to produce output.
- A complete lack of planning and accountability.
- Intense politicking even inside a tiny team (a team which should, by all rights, be too tiny to support political feuds!).
- A boss who seemed determined to prevent him from doing his best work.
- Bullshit piled on bullshit.
It drove him crazy. As a person who was used to doing great work, he just couldn’t take it. The money was amazing (even I was shocked at his salary!) but he gave it all up because it was killing him inside. He quit and moved back to Europe.
It’s tempting, I know, to say to yourself, “Wellll, that sounds like an extreme case.” But my massive amounts of anecdata says otherwise.
As a well-connected lurker, I’ve seen and heard much, much worse — about even better funded, more popular, more “successful” startups.
Conclusions?
I chose these particular stories because they are in the past, and well past, and can’t hurt anyone, even if you sleuth out who I’m talking about. All of the information is out there, too, if you dig — I’m betraying no secrets.
Nevertheless, even this tiny slice of what I’ve seen & felt & experienced & heard paints a pretty clear picture on the three levels of this business: founder, venture capitalist, early employee.
There’s only one conclusion we can draw:
98% of what we read in the tech press is boosterism.
People who make money off startups have a vested interesting making you believe that you, potential future founder, could be shiny & happy & rich. People who have had their startups acquired want to believe that they are shiny & happy & rich.
But the smiles are so often pasted on.
Think about it:
Have you ever read a blog post announcing an acquisition where the founders wrote, “We didn’t want to sell, but we ran out of cash”? How about “They’re going to rip us up and use us for a purpose entirely opposite of what we intended”? Or even, “We’re sorry, this sucks”?
No, of course not. Not only would such honesty almost surely jeopardize their acquisition relationship, not only would it potentially expose them to legal action… it would make them look ungrateful and petty and spoiled.
So just from this little thought experiment alone, it’s pretty obvious why acquisition announcements must blow sunshine up our collective asses. Everyone must be excited. Everyone must say things will get better and better.
We’ve got acquisitions covered. What about VC investments, then?
It’s clear that this Must Blow Sunshine Rule must be equally true when it comes to discussing what it’s really like to work with venture capitalists in general, and individual VCs in specific.
The downsides are almost never discussed publicly — not because there aren’t downsides, but because they can’t be discussed.
The Must Blow Sunshine Rule is even true, to a slightly lesser degree, for employees of startups: If you trash talk your company, you can be fired, and if you’re fired, your options stop vesting. Plus, who would want to hire you then?
All this boils down to this:
The only people who know what it’s really like are the people who are in it, and the people who are close to people who are in it. And those people, too — the close ones — aren’t talking, because they want to protect their friends (and their future selves).
Which means that unless you’re in the thick of it, or well-connected, all you get is the shiny happy icing.
It sure looks good.
But incompetent and malign investors, miserable acquisitions, shitty jobs… these are the rule, not the exception. But from the outside, you’d never know it.
Under the shiny exterior, the cake is crumbling and lumpy and tastes like old socks.
And thanks to the conspiracy of silence, you won’t find that out that til you start chowing down.
Youp. It’d be plain stupid to expect to expect just the good things from anything. But one could find a place where pros outweigh the cons, and that’s the place we all could think about while being approached from the back.
Super sad examples. Trying to make a living doing good work on the internet makes me want to become a farmer. I realized recently that it’s been a year since I started working on my project (weekend/evenings). When you’re working on something you love and are super excited about, the last thing you want to do is work on somebody else’s project (ie contracting, consulting, 9-5). This is why venture funding is so appealing, it promises the chance to live outside of that tension.
Tony, I agree – the appeal of just working on what you love is why VC is so intoxicating. That, and of course, it feels like a mandate. And of course the big dollar signs. But the fact is that there’s no such thing as free lunch, or free money without strings. Big, freaking, irritating, death-heralding strings.
There’s a better way, which is what I promote: create products which create value, and charge for them.
It’s easier, in the end, to boot, because the skills you learn getting the money (finding out what customers want, selling it to them) will make you more and more money in the end. They feed back into what you’re doing.
The skills it takes to get investment, OTOH, are nothing like the skills required to start and run the business itself, or generate revenue.
You totally nailed it. When I sold my previous company back in the end of the dot-com days it was definitely leading towards a “have to sell soon because we’ve got all this money in, and just fucking eyeballs to show for it” – revenue was so uncool. The company that we sold to was a great group, well-funded, who promptly went through a major change of direction that slanted our piece of things in a way that didn’t exactly excite us.
We almost had an out as they then tried something different with their main product, and tried to sell us off to someone else, but before we could finalize that they changed their mind again and we were valuable again.
As soon as the “golden handcuffs” cash we negotiated into the deal came about, I was so happy to get out of there (the majority stock part of the deal of course ended up being worth nothing).
Now, being on the ‘wrong’ side of 40, it’s more about trying to find meaningful work that actually makes a difference in peoples’ lives (e.g. the blog post by Jenny you tweeted about yesterday and her 20 readers who didn’t suicide.. puts things in perspective), while also knowing enough about how the ‘game’ works that I’m not going to kill myself (so to speak) in the process.
Thanks for your help Amy!.
Wow. Only meant to skim this, but I ended up reading the whole thing.
I’ve heard whispers of this sort of thing before– especially the unhappy acquisitions.
Brenda Laurel’s company from the 90′s, Purple Moon, is one I know. Her and her team spent years researching what makes little girls tick, in an effort to get them CD-Rom games that would make them as computer savvy as their male counterparts. (There’s an old TED talk about their research.) I was young enough to be completely obsessed with said CD-Rom games. But despite the website and games being wildly popular, for a cashflow reason or some other, they were forced to sell at a loss to Mattel. You could say Barbie ate Purple Moon, as her stream of (mindless) CD-Rom games came out later. Sad story.
Anyway, thanks for sharing.
Check out her book ‘Utopian Entrepreneur’ for more about this.
Yup.
I’ve watched two startups collapse from the inside. In one case the CEO went to prison for fraud, and in both cases I spent more time trying to get permission to do my job than I did producing anything worthwhile. Two “spin-off” projects that never spun from their corporate masters weren’t any better. Weirdly, though, I still love this software game.
I’m currently working on my Micro-ISV. I’m also looking at potentially getting into (very early) another, more traditional startup…maybe, I tell myself, if I help create the culture this time, it won’t suck.
FWIW I’ve also tried the corporate software route, and if anything it’s worse as far as job satisfaction goes.
Thanks for all the inspiration, by the way. In case nobody’s mentioned it to you today, you rock.
Let me be the dissenting voice. There is no right way or wrong way, there is my way and your way.
I think this is a great article in that it’s doing it’s part to provide a more balanced view of what startups and tech companies are really like. Far too often, for the reasons you highlighted above, we only get the glamorous sides of stories. We only hear about the successes, so thank you for telling the other side.
Where I get concerned though is when you say in the comments “There’s a better way, which is what I promote: create products which create value, and charge for them.”
That might be better in some circumstances but certainly not all. Outside capital has a critical and necessary purpose in the innovation ecosystem. Not every great contribution to the world can be bootstrapped. Raising money is not a de facto admission of weakness or failure.
Or maybe you think building something like a project management tool which can be monetized on day one is better than something like Tesla Motors?
Hey Brennan, when you found the next Tesla Motors, I’ll take your opinion seriously. Til then…
It’s so refreshing to hear someone speak plainly. Thank you! I’m always glad after I drop-by here.
I got approached a few months ago from a San Francisco startup. They needed a UX designer badly because they couldn’t get funded without one although they had already developed their product (I bet you’ve seen this case too).
I have to admit, their excitement was amusing (I don’t mean this in a sarcastic way, it really was nice to hear how excited they were). But yeah, things weren’t adding up.
My conclusion to all this is either 1) I need to learn how to program or 2) I need to find a good partner who programs.
You will never regret learning to program! It’s so much easier these days, too. Rails is a fantastic place to start. Do it, do it, do it!!
Awesome. I’ve been wondering for awhile whether I should start with Rails or PHP. Learning to program is the one thing I keep wishing I did a long time ago and keep putting off. I need to just get on it. Maybe this summer!
Thanks for the push.