Why I hate startup-mania

August 27, 2012 | Filed under: business

I read a lot about ‘startups’, and see the term used everywhere. it’s especially common for tech or internet companies, where people seem to use ‘startup’ as an interchangeable term for company.
The obsession with startups implies that new, young, unproven businesses are where all the value is. The accepted business model seems to be that a business is a ‘startup’ for a year or so, then gets acquired Entrepreneurs often talk about their ‘exit strategy’.
I’m very old fashioned in this respect because I believe that your exit strategy should be retirement. In other words, you should build your business to last. Your five or ten year plan should envisage your business still existing. Maybe bigger, maybe much bigger, but not bought out by some megacorp.

This implication that startups are sexy, but established businesses are dull encourages incredibly short-term thinking. People don’t care if their business has a firm foundation or if it makes a profit, or will ever be sustainable. They just need to keep paying the bills long enough for some big company to buy them out, then they don’t care what happens.
The rumor is that people working at onlive knew they were losing money but thought it would be ok because they could raise more money or get bought out.
It never occurs to people to build long term sustainable businesses that produce profitable products.

7 Responses to “Why I hate startup-mania”

  1. Grim says:

    I’m not sure how relevant it is to gaming companies, but in the wider tech industry you either get bought out by a bigger company or your venture capital runs out as the gigantic corporations run you out of business. The venture capital that most startups fund themselves with is probably the driving factor for wanting to get bought out. They borrow heavily, need to repay it back quickly and, as you’ve said before, being profitable right at the start of your business is *hard*. It can take years to be hugely profitable, meanwhile the venture capitalist wants a significant return on their investment.

  2. Thesper says:

    I think there could be a selection bias at work here. People running the live fast and sell quick type of company are going to be out there shouting about themselves all day.

    The long-termists are going to be staying quiet, getting on with it and being far less visible, bar the occasional slightly grumpy blog post :P. I imagine there’s a lot of them out there, they just make less noise than startup-mania types.

  3. Andy Brice says:

    Long term sustainable businesses aren’t as sexy for journalists to write about as high risk, here-today-gone-tomorrow start-ups. So we don’t hear much about them.

    Similarly the news is filled with stories about vain, mouthy, shallow ‘celebrities’, rather than stories of real substance.

    I guess the media are just us what (they think) we want.

  4. jd says:

    A lot of the time a startup’s goal isn’t to create a real product. It’s a fancy resume to attract attention of large tech companies. Then the large company acquires the startup to get the engineers. The sale price of the company is just a sign on bonus.

    Some venture capitalists noticed this was happening and started funding the start ups. The goal is to keep them going long enough to get acquired. The venture capitalists get a huge payout for very little investment and the engineers get jobs at Google.

    see Y combinator.

  5. hexagonstar says:

    The problem with all this startup bullsh*t is that it eventually kills diversity and competition on a grand scale. I’d love to see a law put in place that prohibits companies from buying other companies off.

  6. EddNorris says:

    Well said; so thank you.

    I would also add that an issue of companies which aim to produce something merely good enough to get bought out based on showing promise end up delivering superficial, inferior products which can saturate a market and make for lower visibility of those who’s products truly aim to deliver the best they can muster.

    -EDD

  7. CGmascot says:

    Good one and I gather very much on point.

    But for gaming companies.. Happy to say I haven’t seen this going on around new gaming companies, though mind you what I’ve seen isn’t much. They really seem quite driven to succeed and keep their company theirs, or at least good slice of it and creative freedom. At best it seems a very flexible partnership with the venture capital people.

    I’m glad new companies get positive startup-attention and support when the goal is to make something real and their own. Pushing towards diversity and creativity by supporting many new and clever things is great.

    But the term startup bugs me. It is used too much to my liking, too much for sex appeal, and is also used beyond the point when companies have succeeded. Rest I have would be a rant so I’ll leave it that: bugs me how the word is thrown around to create buzz.