Are we in a startup bubble?
Living in London, working with an early-stage startup, learning every day about new projects and ideas, hearing about startups acquired by big companies (which now seem “preferring” to acquire startups instead of developing their new products internally) for undisclosed deals, I’m asking myself whether we’re in a startup bubble.
If you read the news, everyone is talking about startups and millennials becoming rich all of a sudden, unicorns, and millions of startups being valued millions of dollars releasing apps for everything.
But what’s true? Is just the fact startups are trendy or you can actually become a millionaire?
Do you remember the bubble there was at the beginning of 2000 with the first dotcom companies?
Are we living the same?
I’ve recently been to an event where David Murray, “the grumpy entrepreneur” was, in fact, analyzing the current situation and I think it was very insightful.
David is actually an entrepreneur surviving the first bubble in the USA, he went bankrupt with Commerce One, a startup he joined at the age of 24, where he also had shares for $22 billion.
I really appreciate his honest approach during all the evening, telling us his story and sharing what he learnt, ‘keeping him out of hot water now’ (something that never happen with a lot of entrepreneurs I met, just keen to sell your idea and never admitting something they did wasn’t actually very good).
I met some amazing guys with great projects during the last year when I decided I couldn’t work for a corporate anymore, but really I also met some people running startups having no clues about what they were supposed to do (click here to understand what I’m talking about)
I hope they’ll have a look at the Grumpy’s suggestions 😉
- Be careful with your money. Between 1997 and 2001 a lot of VCs got burnt, companies without a product could reach $1 billion evaluation very quickly. Investors wanted to jump on the rollercoaster without really understanding how to evaluate those companies. One company spent 16 million dollars on its launch party!
Investors are much smarter now.
- Don’t use the word unicorn! Even Google says they’re mythical creatures and these are which will have to go public very soon. Have you ever thought they can go public at a valuation less than the last private investment round? Start thinking of it. So, you’ll be prepared when people will start panicking.
- Early stage entrepreneurs: stop being arrogant. You need to be confident and have a little bit of arrogant to bring the business forward. But David saw the same arrogance level at the beginning of 2000 when people really think they were like Jesus Christ, and he was one of them.
- Also, respect other people’s money. People starting to make some revenue think their company is worth £40-50 million, but it’s not the case. You’ll see when you’ll try to raise.
- Running a startup is like singing at X-Factor. Everyone thinks it’s very easy and they’re able to do it. But not man, it’s pretty hard and you need to have the skills to do it. You can’t just quit your job ’cause tech is the right place where to be and hire some smart people who’ll do the job.
- Cash is key: review your business plan if it says you’ll get money at the end of the year. You might want to rethink that strategy, companies exist ’cause they make money.
- Investors are supportive even when things are not happening as you were expecting. Talk to them and have them onboard, they’ll help you out. And if you’ve been offered an exit, even a modest one, go for it!
What do you think? Do you agree or have a different idea?
David shared a lot of more suggestions, but you can watch the video on YouTube and take notes. 😉