startup gold rush

Is The Startup Gold Rush Over?

According to TechCrunch, the startup “gold rush” is over.

Pretty funny stuff. As if there ever actually was a “real” gold rush, in the sense that anyone could just show up, buy some equipment and start panning for gold. The startup media going on and on about how easy it was to get money – how founders with a little more than an idea on a napkin would be able to get $2m to finance a sketchy idea.

It’s all hokum. There was never a “startup gold rush” in the first place. Sure, there were hordes of ambitious entrepreneurs storming the Bay Area. Sure, there were stories of untold riches. Sure, there were an infinitesimal few who did get funded, did well, and became “internet millionaires” or even billionaires. But the sad reality is that those riches were for the very few.

Let me backtrack a bit. Here are some points to ponder:

  1. What is “news”? “News” reports on things that very rarely happen. In fact, they wouldn’t be “news” if they happened all the time. How often do we hear about how sunny a day it is here in the Bay Area in the summer? Never. It’s not “news.” So whenever you hear “news” about this or that unicorn, or this or that startup becoming a millionaire or a billionaire, it really hardly ever happens. If you really think about it, if most people who come to the Bay Area and open up a startup with passion, skill, and demand are successful, then it would never be reported. The reason that it’s reported at all is that it’s so, very, very rare.
  2. IMHO, it has NEVER been easy for anyone to get funding from anyone at any time. Even those people with connections have trouble getting even a tiny trickle of cash. Despite the fact that there are more billionaires per capita around here than almost anywhere (I didn’t fact-check that, but it feels true) and more money than ever sloshing around in funds, so little of this money trickles out that it’s almost criminal. So many more startups could be funded with the spare change these guys use to buy their 2nd, 3rd, and 4th cars; it’s not funny. In fact, I’d bet if they loosen the purse strings just a little, we really might see successful startups so common that they would no longer be “news.”
  3. If you really need a ton of money to gain traction for your startup, maybe it is missing the most important piece of startup nirvana anyway, and that is DEMAND. Are there enough people out there really willing to pay for what you are trying to sell? You may have the most amazing startup idea under the sun, but if you are having trouble finding customers because no one is willing to pay you enough to cover the expenses, then do you really have a viable business? Sure, the idea might be awesome – but if no one is willing to pay for it…

The reality is that it has never been easy to do a startup. It has never been easy to run a business. It has never been easy to be an entrepreneur. So many pontificators make the case that the big window for being a successful startup in the Bay Area is closed. I’d argue that that window was only open a crack anyway, and now, it may be a percentage point or two smaller. It’s never been easy to be a successful entrepreneur, whatever the climate.

But none of that matters. The truth is: if your business provides something people need, or desperately want, and you can sell that thing, whether it’s a payroll system or cupcakes, for more than you pay for it, you will succeed. You don’t need millions of VC money. You don’t need to put all your money into growth. You simply don’t need it.

That window has only ever been open a crack. You have to design your startup to get through it. Just like Luke expertly piloting his X-Wing to precisely drop those charges to destroy the Death Star at the right moment, you need to precisely pilot your startup to be in the right place at the right time; the Force is not required.

The startup gold rush of the last ten years is over. Sorry. Those hordes of ambitious entrepreneurs still stampeding to the Bay Area in the hopes of building their Minimum Viable Product, getting into Y Combinator, and growing their app into the Next Big Thing–they’re already too late. That era is behind us. It was a good run, even a legendary one, but it is over. Time for the new new thing.

Source: After The Gold Rush | TechCrunch