Ten + One Ways to Grievously Damage Your High-Growth Tech Startup and Silicon Valley in the Process

Ten + one ways to grievously damage your high-growth tech startup, and Silicon Valley in the process:

  1. Only hire, and only train/motivate/incent your managers to hire — don’t optimize efficiency, don’t do performance management, don’t fire.
  2. Founders, sell too much of your own personal stock too quickly, alienating your employees and questioning your long-term commitment.
  3. Let private stock sales by employees get out of hand: create hit-and-run culture and take on burdens of being public before going public.
  4. Dilute the s*** out of cap table: be sloppy and undisciplined w/stock grants to early employees, plant morale land mine for later employees.
  5. Maximize absolute valuation of each growth round: make later rounds harder and harder to achieve, until you trigger a disastrous down round.
  6. Let non-SV investors suck you into terrible structural terms on growth rounds: guarantee massive trauma if anything goes slightly wrong.
  7. Go public too soon, before you’re a fortress, before you can withstand all the assaults: ending in stock price death spiral and train wreck.
  8. Pour huge money into overly glorious new headquarters, signaling to employees “we’ve made it, we’re amazing”, then repeat two years later.
  9. Confuse conference circuit and party scene with actual work. Encourage alcohol and drugs, party culture in company, value ballers over nerds.
  10. Refuse to take HR seriously: allow terrible internal manager and employee behavior to catalyze into catastrophic ethical and legal crisis.
  11. And the one that will actually kill you: Assume more cash is always available at higher and higher valuations, forever.

Source: Tweets – 0,1,2,3,4,5,6,7,8,9,10,11

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An Answer to Critics Who Say that Silicon Valley Isn’t Building/Funding the Right Things

One persistent canard from would-be SV critics is “Silicon Valley isn’t building/funding the right things, aka solutions to big problems.” There are six logical problems with the false choice of “make trivial apps for 20-something SF hipsters” vs “do things that matter”.

First, “make trivial apps” vs “do things that matter” are not actually in conflict; there’s plenty of room and plenty of money to do both.

Second, it’s often hard to tell which is which up front. Almost all big world-changers were dismissed by critics as trivial at first.

Third, observer bias: Only read consumer tech blogs, only go to consumer tech conferences, think SV only works on consumer tech. Founders of non-consumer-tech startups routinely find same pundits mounting criticism have little interest in hearing about other domains. This is exacerbated by the SF-centric consumer tech party scene–other domains in SV don’t have the same party culture, just nerds at work. New arrivals to SV get sucked into SF party scene, and never make it to the South Bay industrial parks where everything else is happening.

Fourth, battling cynical critiques: Founders who articulate the big vision for changing the world get called arrogant and vainglorious. Both criticisms are leveled with no cognitive dissonance: Founders are either not pursuing big ideas, or are out of control egomaniacs if they are.

Fifth, subtext often that communication tech/apps in particular somehow aren’t important or don’t matter, vs energy, education, etc. I think this is 100% incorrect: Communication tech/apps including the Internet are the foundation for everything else we’ll do for 100 years. Why? Communication is the foundation of collaborative work, which is how all the important problems get solved. People working together.

Sixth: Anyone who thinks SV can be doing more/better/different, come join us and participate in building new things, products, companies! Jump in, the water’s warm! SV draws talent from all over the world and all walks of life; nothing preventing any critic from contributing. As my old boss Jim Barksdale used to say, “We have plenty of uniforms your size.” Many opportunities to contribute and make a difference! And, of course, tech startup ecosystem now expanding worldwide. Opportunities to contribute from anywhere abound, linked via Internet.

Source: Tweets – 1,2,3,4,5,6,7,8,9,10,11,12,13,14,15,16,17

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“Halt and Catch Fire” Captures the Emotional Intensity of Tech Startups

“Halt And Catch Fire” takes flak from critics for being melodramatic, yet it captures the real emotional intensity of actual tech startups well. Joe, Cameron, Gordon, and Bos are all accurate archetypes. I know dozens of each. They must come together to do great things. Can’t alone.

Tonight’s episode was the best since the pilot. Without spoiling it, the key is that both Cameron and Gordon are right- real tension at heart of many startups. Again without spoiling it, the final question asked by Cameron’s new program is still at the heart of our industry 30 years later.

The show also shows why founders often don’t start a 2nd company, or sometimes even talk to former partners after a company is over. It’s too intense. Finally, show is dead on about the overwhelming market power of IBM at that time. Seeds of collapse had already been planted but no one knew.

Source: Tweets – 1,2,3,4,5,6

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The Reverse Rules of New Technology

Cleaned-up tweetstorm on “the reverse rules of new technology” — expressed ironically! — and labeled as such 🙂

One thing we know about new gadgets: They can be judged based on their first versions since that’s what they’ll look like forever. #irony

Each new technology arrives into the world with the perfect universal use case pre-identified. If it doesn’t, it flops and dies forever. #irony

Any new technology needs immediate widespread cultural acceptance. If it’s just used by nerds early on, it’ll never go mainstream. #irony

New technology products must be immediately cash-flow profitable; otherwise you have clear evidence the idea was stupid from the start. #irony

Any new tech product that isn’t immediately affordable for everyone will never decline in price and will just exacerbate inequality. #irony

Any new tech must immediately provide immense utility to the world or shame on you for not “solving big problems”. #irony HT @commagere

Source – Tweets: 1,2,3,4,5,6,7

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Tweetstorm Addendum to Unbundling Series

Late night tweetstorm addendum to earlier series on unbundling and rebundling: Younger followers asked me to expand on DEC/Sun/Microsoft unbundling: older history, therefore useful to study as precedent for our time.

Once upon a time (1950s-1960s), businesses mostly bought computers from IBM, and IBM also bundled in all the software & services you’d need. IBM bundled offerings were extremely expensive, while demand for computers spread to departments and smaller businesses who had less money. So DEC unbundled the computer itself from the total bundle and sold it for less money to customers who could then write their own software.

But a DEC computer itself was a bundle of proprietary components: VAX hardware, VMS operating system, RDB database, etc. In the 80’s, Sun came along & sold a similar power computer to DEC’s for 1/4 the cost w/unbundled components: Unix OS + Motorola chips.

DEC responded by going upmarket and becoming more like IBM; Sun and other Unix workstation vendors chewed through their market + grew it more. Critical point: At the point when DEC started to tip over, its integrated offering was as close to perfect as our industry will ever see.

Ask people who were working then (like me) and they’ll tell you to this day that they miss VAX/VMS and how productive they could be on it. Meanwhile Microsoft and Intel came along and fully implemented the unbundled low-cost computer, first PCs and then Windows-based servers.

Sun responded to Microsoft/Intel by rebundling: Rebuilding itself in DEC’s image with Sparc chip, Solaris OS — proprietary HW+SW stack. Again, Sun got close to perfection as an integrated system when it unbundled Microsoft+Intel and Linux+Intel went broad and forced the sale of the company.

Picking up thread with Microsoft: Microsoft has spent last 15 years rebundling, rebuilding itself in DEC’s image much like Sun. Now + HW! Once again, bundled Microsoft stack very close to perfect just as it comes under attack from next unbundling wave: mobile + cloud.

Fascinating twist: Under new leadership, Microsoft 2014 now committed to unbundling — full app + cloud support for iOS, Android, Linux! Microsoft is taking new unbundling strategy offensively vs new titans who are bundling as fast as possible! Apple, Google, Amazon, Oracle.

The point? I don’t know much about what our industry will look like in 50 years, but I’m quite confident these same dynamics will apply.

Source: Tweets – 1,2,3,4,5,6,7,8,9,10,11,12,13,14,15,16,17,18

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The Flip Side of Unbundling

The flip side of unbundling: Later on, the unbundlers tend to try to rebundle in the image of whatever they unbundled. So Yahoo adds an ISP, and Google adds email/IM/sports-scores/stock-quotes. Twitter changes its user profile page to look more like Facebook 🙂

Sun unbundled DEC with commodity components, then re-bundled into a proprietary computing stack just like DEC w/Solaris, Sparc, etc. Microsoft likewise unbundled DEC minicomputers w/PC OS + tools, then rebundled into DEC-like integrated stack now including hardware (!).

Paraphrasing Harvey Dent: “You either die a hero or you live long enough to see yourself become the company you first competed with.” And then sometimes the rebundlers realize what they’re doing and try to reverse course. E.g. Microsoft building apps for iOS & Android. And thus the cycle of life repeats with yet more unbundling :-).

Source: Tweets – 1,2,3,4,5,6,7,8

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Unbundling Tech

A story of unbundling in the tech industry: 20 years of consumer Internet evolution.

Once upon a time there was AOL, which was a completely integrated Internet access/information/communication service. Then Yahoo came along and unbundled the information/communication parts like email/IM/sports-scores/stock-quotes from the access service. One of the things you could do on Yahoo was search, then Google came along and unbundled that.

You can search for anything on Google, including people; Facebook came along with a much better way to just search for people. Three things you can do on Facebook are messaging, photo sharing, and status updates; therefore Whatsapp, Instagram, and Twitter. And yes, Yo unbundles the creation & existence of a message from the contents of a message, unbundling Whatsapp and Twitter :-).

Ev Williams (@ev) is the modern genius of this concept–playing out in our industry continuously since the 1950’s. The part people often miss is that you can get extremely powerful second/third order effects at each step with his pattern. The entrepreneurs generally have a pretty good sense of this when they’re doing it, but it doesn’t become clear to others until later. This is a pattern what we love to fund: unbundle X from Y, but then use the liberation of X as leverage to do amazing new things with X. And the howls of press and analyst outrage at the apparent stupidity of each unbundling are very helpful for keeping valuations down :-).

Source: Tweets – 1,2,3,4,5,6,7,8,9,10,11,12

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