A few days ago I read this line in The Hustle newsletter: “Lyft raised another $600m in a Series I round this week.” When I read the letter for the Series, I blinked and read it again. Clearly I’m not the only one to whom that sounded a bit crazy, because the next sentence in the article started: “That’s ‘I’ as in “ice cream…” Yes, my friends, that’s NINE rounds of funding.
One imagines the founders’ stake in the company is down to pocket change and Dorito crumbs at this point. Are they even profitable yet? Who knows! But, y’know, all in the name of catching up to Uber ….
Then yesterday in the same newsletter I read about Domo, a data analytics startup, which, in the last two years has had net losses of $359.6 million (USD, presumably), and has raised $883 million.
Driven by cash flow desperation they posted an IPO last week, and Domo is now valued at $511 million, which is a whopping 23 per cent of their former target valuation of $2.2 billion. Guess that didn’t really work out as planned ….
Oh, but we’re not done yet. Then I read this eyebrow-raising (but not really) piece on the rise of the HelloFresh meal service company and how it has managed to claw its way to the top (expensively and bloodily).
A lot of HelloFresh management’s actions and behaviours are directly tied, at least as the article lays out, to pressures from its funders to achieve stratospheric growth and results.
Seriously, techsphere. What the hell? When did the work of building businesses become this circus of bad behaviour and bleeding billions? (I am aware that these companies are based in other countries, but don’t fool yourself that we don’t get a little “aspirational” sometimes.)
Let’s try a little role-playing for a moment. Pretend that your best friend has a startup idea. They’re just getting things off the ground, and they need some money. So they get some seed capital from friends and family, including you. Lots of excitement, no huge commitments from anyone yet.
They work really hard, and hire a couple people who also work really hard, but things aren’t growing as fast as they’d like. That money doesn’t last forever, so they need more to keep the lights on and keep slogging away. If they go under, no one gets their investment back.
So they ask you again. Do you pony up? If you did, what would convince you, and what terms would you require?
Repeat. Repeat. Repeat. Repeat. Repeat. Repeat. Repeat. (That’s a total of nine rounds.)
Now, ignoring the likely tatters of your friendship by this point, and assuming you are not a (fantastically wealthy) lunatic, do you really think that you would be willing to give your friend a cent on that ninth ask?
Yeah, didn’t think so. But, how else are you ever going to see your money again? Is it just me, or does this look more like gambling addiction? Just let me roll the dice one more time ....
It gets even more depressing when you add it up and realize it’s gambling with the kind of money that could provide free education and healthcare to, oh, an entire country. How did it become considered normal, let alone de rigueur, that to build a company you had to get your hands on a lot of other people’s money? And keep taking more until you ... win …?
How did we come to this assumption that if your company isn’t worth a billion dollars within a year or two of opening its doors that building it isn’t worth your – or anyone else’s – time? Somehow I suspect this isn’t how Forbes 500 companies were originally built.
Makes you wonder about these companies that are hoovering up hundreds of millions of dollars to stay afloat, and where they’ll be in 10 years. Let alone 100 years. (Side note, the six-month retention rate for HelloFresh subscribers is apparently a scant 20 per cent.)
Switching gears a bit, let us ponder cooking. You see, those who know anything about cooking know the benefits of “low and slow.” That’s how you get the best BBQ. Not too much heat, and take your time. Sous vide works similarly. And the best bread is the result of a long ferment, ideally leavened with a starter.
Tech could learn something from foodies in this, I think. Great food requires the best ingredients, great recipes, talented and experienced cooks, attention, and time. So too, I would argue, do ideas that we want to turn into successful companies that actually offer something useful.
Has an addiction to FOMO and trends made it seem like success has to come right now or it never will? Or The Big One is going to snap California off the North American continent any day now and send Silicon Valley sinking beneath the waves, Atlantis-style, so venture firms want their ROI and they want it to go.
Or … maybe a lot of these ideas are crap and people want to make bank and get out before anyone pipes up that the emperor has no clothes.
You miss things when you rush too much. Important things. Trying experiments, making mistakes, learning from them. Respecting others and treating people well starts to seem like an unaffordable luxury.
When you’re gambling with what you worked your butt off for, you’d better believe you’re going to be careful and responsible in making decisions, and will take your time doing so.
I dunno about you, but burning through a billion dollars, or raising nine rounds of funding in six years, or treating your employees so badly they physically threaten you, aren’t claims that would actually impress me on a resume.
Now, on the other hand, bootstrapping and making it through a recession without laying off anyone, being profitable since year one, or having single-digit staff turnover rates over the course of a decade – let’s have coffee.
We can have a tech industry that’s basically the contents of a grease-stained bag from a drive thru window. But you don’t want to know what embracing that will do to you long-term.
Taking things low and slow, on the other hand? That’s how you get craftsmanship.
M-Theory is an opinion column by Melanie Baker. Opinions expressed are those of the author and do not necessarily reflect the views of Communitech. Melle can be reached on Twitter at @melle or by email at me@melle.ca.
