W. Edwards Demings
Time to bust up the sour grapes crowd and shouts of outrage. I posted my disdain for the meme that praising startups that raise funding is somehow wrong. I agree that some of the celebrating and reporting is over the top and it does distract from real important matters such as building a profitable and sustainable business. But let’s get out of the echo chamber for a second and realize that no one in Middle America* gives two shits about any of this.
They do not read TechCrunch or BusinessInsider. They are not hooked into fifty different local, social, gamified picture taking apps. They still watch shows and movies on a thing called a TV. They are not hip to the latest Apple rumors. And oh my lord, they are still using PC’s like a bunch of savage cave people. And you know what they care even less about, startup funding announcements.
Much of this current kerfuffle started with the Bloomberg TV show about TechStars. The final show featured the demo day where applause seemed abundant for startups mentioning the closing of big funding rounds, but silence when one startup, RedRover, mentioned they were already profitable. For the record, I was there and that is not really how I remembered that day, so there must have been some slick editing to create that bit of inception.
What were people expecting though? It is a room full of investors that are looking for things to invest in. It is part game, part business, part image. Of course they are going to applaud when a startup knocks it out of the ballpark on a funding round because it is an accomplishment that not many startups reach. These startups are shooting for the moon to become billion dollar companies, and that is what investors want to get with. So do we really think investors would get excited about a startup that is profitable booking $1 million in business?
Like I said the other day, there are many paths startups can take. Some will make money and become solid businesses, but are not going to be the next big thing and return 10X in an investment. These are what people refer to as “lifestyle businesses”. They are not bad companies at all and we need a lot more of those in our economy if the US is to ever get back on track. The thing is that they do not make great investments.
Then there are other startups that are going to drink the rocket fuel and become massive hits. That is what gets investors excited. That is why they are applauding at demo day events, whether it is TechStars, 500Startups, or Y-Combinator. Investors want to get involved in the big hits and startups that raise big rounds from notable investors are a major signal that tells investors that those particular startups could be mega successful. This is social proof at its worst, but you are not going to change human nature.
Some will say it is unfair and the attention takes away from other solid businesses and startups. Yes, they are completely correct in that assessment. It is terribly unfair that such news takes up so much bandwidth in tech circles. Funding announcements are as vapid as baby bump announcements. But you know what, that is business and you either get with the game, or you get out.
If this stuff gets under your skin, stop listening. Remove all your feeds from the tech websites and blogs. Stop talking to other people in the tech ecosystem. Do not attend anymore tech events. But here is an even better suggestion; build the next great bootstrapped tech company like a Microsoft or SAS. Build a product that people can use every day and makes people and businesses in Middle America care about your company. Be the front page story on the New York Times and become part of the conversation happening in government halls and corporate boardrooms. Then you can shove it down the throats of the very people that ignored your ascent to the top. But by then, you probably will be too busy and successful to care about how a little tech blog owned by AOL ignored your story so many years ago.
* Middle America - This is not a geographical reference describing the land between the two US coasts, but rather a demographic sector describing the majority of Americans that are not tech fanatical, early adopters. I much prefer this term than “the normals”, but if you have a better suggestion, offer it up.